Summary
- Janet Yellen's 2007 prediction of a soft landing for the economy is compared to current financial market conditions.
- Central banks globally have rapidly increased interest rates from historic lows.
- The value of older US Treasury bonds has significantly decreased as yields rise.
- Speculations arise about the causes of surging interest rates, including Japan and China's actions.
- The US national debt has grown to nearly $33.5 trillion despite the absence of a recession.
- Long-duration US bond market has experienced substantial losses since March 2020.
- Concerns about the hidden challenges in the US bond market compared to the stock market.
- Barclays analysts predict a continued decline in global bond values.
- S&P 500 is seen as a deflating bubble, with a limited number of tech stocks propping it up.
- Announcement of upcoming exclusive silver and gold bullion product releases by SD Bullion with the Scottsdale Mint.
The Economy and Interest Rates
"The most likely outcome is that the economy will move forward toward a soft landing." -Janet Yellen, then San Francisco fiat Federal Reserve President in 2007
Let us gaze into our chaotic present day financial market plumbing to see if this current day's soft landing narrative will again turn out to be mere fantasy shifting into a global financial crisis.
Having lifted interest rates off their 5,000 year low levels, the Federal Reserve and central banks around the world have produced one of the fastest interest rate climbs in recorded history.
Impact On US Treasury Bonds
This chart shows 10 yr US Treasury bond yields and the higher they go the less valuable the older lower interest rate version. And I am not talking a little loss, peak to trough many 10 yr and 30 yr loans to the US government are down by nearly -50% in current market issued the last 3+ years.
Interest rates were climbing so high and so fast this week, it led to many bond market analysts speculating that perhaps the week's screaming higher rates were a cause of Japan selling Treasuries to intervene with its collapsing fiat yen value about to surpass the key 150 yen to $1 fiat USD level.
Others suggested it was China selling more US Treasuries and instead using those proceeds to buy energy like natural gas, crude oil, and other precious commodities like silver bullion which saw massive spikes in premiums paid in China this week as buyers bought the silver spot price dip.
US National Debt and Economic Concerns
Perhaps screaming US interest rates this week have something to do with the fact that the US debt increased by over $310 billion this week alone with the US national debt now nearly $33.5 trillion.
And these massive debt piling deficits are currently happening without an admitted recession, yet.
The national debt is now ballooning past GDP growth and there is no sign of this trend slowing down any time soon.
To put some of the current long duration US bond market losses into context. Since March 2020, the 10 yr Treasury bonds have lost near -46% and the 30 yr bond has lost -53% in value.
The US bond market is many fold larger than the US stock market but since the stock market has yet to begin its eventual coming cascade in real value terms, many normal investors in the world are unaware of how bad things are getting underneath typical retail investment markets.
Challenges in the Bond Market and S&P 500
Here is a chart illustrating how this long duration bond crash 2020s compares with the 2008 stock market crash in blue.
Bank balance sheets are still stuffed to the gills with losing long dated US treasuries and that problem, while seemingly currently paused, is still waiting out there to be dealt with fully.
This week, word got around that Barclay's analysts believe that global bonds are doomed to keep falling in value only and unless a slump in stocks revives the appeal of failing fixed income values.
The S&P 500 closed this week just over 4,300 and still has the look of deflating bubble with a mere 7 tech stocks keeping it still buoyant for now.
Gold Bullion and Economic Predictions
On a longer look divided by gold bullion, later this decade I fully expect to see us revisit and eventually surpass the 2011 low levels.
A coming rollover in overpriced home values versus median incomes will likely be coming along too.
Home prices in bullion are poised to return back towards and perhaps beyond their 2011 low levels especially if you consider what happens if CNBC Rick Santelli's call for early 1980's like interest rate levels are coming for us into the coming decade of the 2030s.
Stay tuned to the end of this week's SD Bullion Market Update as we have an exciting announcement of exclusive silver and gold bullion product releases coming to SD Bullion with the Scottsdale Mint.
Silver and Gold Spot Prices Rebound After Initial Decline
The silver and gold spot price markets sold off to start the week only to bounce back slightly to close the week.
The spot silver price finished at $21.59 oz bid while the spot gold price closed at $1,833 oz bid.
The spot gold silver ratio finished the week up again slightly to 85.
When we look at where spot prices currently are versus their 200-day moving averages, we can see that gold - silver - and platinum are all currently priced well below their respective averages. In bullion bull markets buying bullion is dollar cost averaging lower during these kinds of spot price dips generally pays off over the long term.
Central Banks and Gold Bullion
CTAs, or commodity trading advisors, mimic unsecured western world gold ETF sellers by having some of their lowest positions since 2018 being collectively sharply net short at the moment collectively.
Gold particularly is about as oversold as it got in early 2018. Gold followed that spot price dip with a +75% rally in spot price in just over the two years that followed.
Central banks continue to buy gold bullion often over underperforming long duration bonds and admitted sovereign gold bullion buying data for last August illustrated that phenomenon mostly in eastern nations like China.
Yet some central banks are already stating they are moving to buy 10X's more bullion than they did in August 2023 in this month of October into next month November 2023.
Russia's Finance Ministry allocated nearly 400 billion rubles (US$ 4 billion) to purchase gold bullion between now and 7th November.
This is a 10 fold increase on the US$ 400 million which the Ministry allocated during last August 2023 to buy gold.
Central banks are certainly buying mass gold bullion on this spot price selloff as Russia alone is aiming to buy nearly 70 metric tonnes alone over this admitted current month-long increase in allocation.
Commander Series Release: A Scottsdale Mint Exclusive
Finally, we have a special announcement of a new product line we are launching this coming Monday. Last evening our SD Bullion CEO and the founder of the Scottsdale Mint were on the Bullion Pros channel with Yankee Stacking and Silver Dragons to give further details. The video's full link is the show notes below but here is a brief highlight of the coming product series.
That is all for this week's SD Bullion Market Update.
As always, to you out there. Take great care of yourselves and those you love.
