Markets For The Week Ending Friday
June 14th 2008 19:25
The yield on the 2-year Treasury note jumped 27.08% this week to a yield of 3.05%! While the 10-year Treasury yield moved up 8.38% to 4.27%, the 30-year Treasury yield hardly moved, up 3.01% to 4.79%. Bottomline: the curve flattened.
Since April 30th when it appeared that all treasury yields were going lower (see Long Bond Could Trade At 4% And Below!) in spite of bad news on inflation, which caused some head scratching on my part, the whole yield curve has moved up. I reversed my call in Long Bond Update! Yields have rocketed higher as they should with inflation higher and the biggest gains in yield are in the short end. The yields at the time were 2-year 2.35%, 10-year 3.78% and 30-year 4.49%.
So if yields are moving up reflecting inflation why did Gold take such a thumping?
Gold for the week was down $25.90 or 2.88%. That does not make sense in light of higher yields, higher oil prices and coming crop shortages. The Gold Bug Index (HUI) was down 7.72% and, frankly, the weekly chart looks like one big top. Breaking the last major low of 384.53 would be negative in the short term.
There is another possibility. Oil could be near a short-term top, and Gold is moving down in anticipation. The US Dollar is another factor. It had a decent week up 2.42% to 74.13. I can see it only going at most to 76 and so far is in a bearish decline that began back in 2002, at 120. That’s a whopping 38% decline!
One more thing. This week we saw foreign money trying to buy the Chrysler Building, the Flat Iron Building and Anheuser-Busch Companies (for $46.3 Billion by InBev brewers of Stella Artois and Beck's). If we are going to send our paper backed by promises out of the country, where they accumulate, you have to expect foreigners will want to move out of dollars if they see the currency falling. What better thing to do, but buy assets in our country for a song.
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