"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, April 17, 2013

Global Interest Rates Plunging

Further evidence that the reflation schemes of the Western Central Bank are apparently failing can be seen in the collapsing yield across the global bond markets.

News out of Europe this morning that March Auto Sales fell to a TWENTY YEAR LOW has shaken the confidence of investors in the demi-gods manning the turrets of the Central Bank towers. It seems as if even the mighty German economy, which has heretofore been the stalwart among the European economies is not immune from weakness.

Dow Jones is reporting that the Swedish Central Bank just cut that nation's growth outlook for 2014. The Bank of Canada lowered its forecast for this year. Remember, it was just yesterday that we received the projections from the IMF detailing their prognosis for global growth by revising it lower as well.

The result - a mass exodus out of stocks (for the time being) and back into the "safety" of sovereign debt. Investors figure that the Central Banks will be there to mop up any excess supply of bonds in effect watching their backs for them.

Need some evidence? Look at the chart below. The yield on the Ten Year Treasury note has hit a FOUR MONTH LOW in today's session. It was over 2% a little over a month ago and is now down below 1.7%.

This is what has Fed governor Bullard so concerned. These guys can read what is happening. It is also why copper and crude oil, two key economic barometers continue to plunge.

What will the Central Banks do if they current bond buying programs still cannot generate enough consumers/businesses to borrow and spend????

By the way,  I laid out the data in this format because this type of chart tends to cut through the "noise" and give a cleaner view of the larger trend.


  1. "What will the Central Banks do if they current bond buying programs still cannot generate enough consumers/businesses to borrow and spend????"

    The only thing they know how to do: print more. When that doesn't work, they'll print even more. The cyclic will continue until confidence is lost in fiat currency.

  2. Most important battle is the dollar to save i.e TBonds.
    They'll sacrifice first the safe havens such as gold. Done.
    Then if need be stock markets.
    Copper looks bad.
    I' about to short if it is to follow gold and silver's krach.
    SP next, Under 1540?

  3. About 12 months ago I started researching this in depth. I ran across Chris Martenson's web site and listened to a few of his interviews. This is essentially how he said it would play out:

    -QE would continue with reduced incremental gains
    -More and more agressive attempts to reinflate would occur, often coordinated among the central banks across the globe.
    -Deflation would eventually hit.
    -Once it hit hard, a massive global concerted attempt at re-inflation would be attempted
    -They would lose control of this and inflation, huge inflation, would occur along with the massive debasement that gold bugs are concerned about.

    So far I have to say that I am pretty impressed with his call. We seem to be at that deflation stage now, after continuing rounds of ineffective QE. The question will be whether Ben et al will understand the futility (and risk) of their actions and throw in the towel, or shoot the moon with the uber-attempt to revive the global economy.

  4. By the way Dan,

    I love your site and analysis. You are IMO the best technical trader out there for gold. Please keep posting!

  5. Excellent interview(s) well worth the time.
    Bare through the lady's thoughts on what caused the take down - except for that, she is very sharp..... gotta remember she has a high level job so sugar coating comes with the territory.


  6. "She's an Angel of The First Degree"... maybe a little rough around the edges but that's easy to overlook!


  7. Pretty much out of control now. I dont know what it will take but a trade above 1540 will get it to 1600 in minutes. A trade tonight from 1360 to 1347 in 1 tick is not price discovery, its insanity.

  8. just my point of view again:

    I live in Germany.
    As i mentioned a few days ago i dreamed of shorting the indices.
    but first choice was not the DOW as the states have a PPT and we over here have NOT.so i did not so far but if i would have it would already be in positive area.
    so the move down of the DAX was more violent.
    if this is the break down started is not clear.
    maybe it is just a correction and we will see new highs.

    if the data is looked more precise it shows as you mentioned the automotive sector is in a mess.
    France gets more and more in trouble (Automotive is here big, too) and if that gets visible for the rest and will not be put aside then good night.
    SPAIN,ITALY and FRANCE cannot be bailed out by germany.
    that will be game over for the eurozone.

    i see a possibility for a deflation or lets better say price adjustment hit.
    i mean the debt has gone higher and so spending and borrowing together with economic groth could solve this.
    but sorry i do not see recovery.
    things get more worse.

    so i think so we might see a stocks crash.
    moving money out in cash and bonds.
    that would give the government the opportunity for an easy haircut like cyprus.

    and then it turns to hyper inflation.

    i can only give the advice seek god on your own and ask him.
    he is almight and he is NOT out of control.

    i dreamed during nights a couple of things before they fulfill.

    that was the silver crash in 2011
    also i dreamed before the gold crash hit the paper market.

    a very important thing is:
    markets can longer stay irrational then you can stay solvent.
    sometimes it makes more sense to wait a little bit longer until the the direction gets more and more clear.

  9. yeah, that's why I love trading in the end.
    You can think about this for hours, have a big headache and still be sure of nothing.
    As we said, even Sinclair made a wrong call on the bottom of the correction at 1550.
    So let's just Watch prices day after day and try to do the best with that.
    Here is a chart.
    1300 could be a serious support zone.
    Projection of range at 1305.
    Fibo 50% at 1335.
    So the market dropping at 1320 stopped in the middle of this support zone.
    I'm waiting to see on friday night where this weekly candle will end : above or below the median of the red fork, around 1420 $.
    If we regain 1420 $, I'll see more reasons to think that the raid is over.

  10. Advantageously, the write-up is in reality the freshest topic on this associated concern. I fit in together with your conclusions and will eagerly appear forward to your upcoming updates. Just saying thanks is not going to just be adequate, for the exceptional clarity in your writing. I will straight grab your rss feed to stay informed of any updates.
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  11. Thanks again Dan! What a gift to have the insights of the best gold traders available to the common folk. It bears repeating that your warnings and insights into to the falling commodity complex have helped us little people immensely.

    Apropos of the ongoing discussions about gold miners not making money and not generating free cash flow, there is an interesting graphic in ZH today on the major oil producers: essentially BP, CVX, COP, etc. need oil over $100 to be cash flow neutral after divvies and and capex. Not so different than the miners.

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  13. It's good to have so many recognize, we have moved away from technical trading to more of a physical market, less determined by algos and charts and formulas.
    Supply, demand, tradition and geopolitics constitute today's gold barometer as enhanced fundamentals outshine any other asset and reflect a better future. What better time to have mine supply eroded, repressed and stereotyped? When has there ever been unleashed so much global government largesse and debauchery? How often through history have populations been so distracted and inured to systemic decay and procrastination?
    Human culture, economies and rebuilding opportunities, all hang in the balance, and as gold balances exchanges after defining on WHAT basis by it's benchmark, reference standarding, the natural progression of events unfolds.


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