An Interesting Development For Gold and All Other Markets

34
Thu, Aug 11, 2016 - 3:47pm

Over the past two weeks, ZeroHedge has chronicled another dramatic rise in the TED Spread. What does this mean and what might this portend for gold? Hmmm...those are excellent questions.

The latest post from ZH on this issue was published this morning and I strongly encourage you to review it before you go any further: https://www.zerohedge.com/news/2016-08-11/libor-blows-out-fresh-6-year-h...

And what is the TED Spread? Here's a very simple and straightforward explanation from Wikipedia:

To simplify it even further...a higher TED Spread has, in the past, often been an indicator of short-term funding stress or credit risk. Again, from Wikipedia, this:

Here's a long-term chart of the TED Spread which shows the highs listed in the information above:

Obviously, spreads at present pale in comparison to historical extremes. However, note that we are currently seeing the highest spreads since early 2012 and, when you look at the three-year chart, the trend becomes a little more interesting:

So now the point of this post...

Have a look at this one-year chart of the TED Spread and be sure to note the dates we've placed upon it, December 31, March 30 and June 8:

Now have a look at a one-year chart of the S&P 500 with the same dates noted:

On balance, the two charts above make some sense when taken together. If the TED Spread is a measure of funding stress or credit risk, then it would follow that peaks in the spread would coincide with short-term peaks in the stock market. Historically we've seen this, too, with stock market drops in 1987, 2000, and 2008 that coincided with TED Spread peaks. As this situation resolves itself, a "flight to safety" during equity corrections leads to bond buying, which leads to lower interest rates, which ultimately leads to a return to tighter and smaller TED Spreads. So, could the current spike in the TED Spread be a precursor to another stock market drop. Yes, it certainly could. In fact, the chances range from possible to likely.

However, I'd like to point out something else that, for us, is far more important. Remember, the most likely way for the TED Spread to come "back into whack" is through falling interest rates. And, as we all know, falling interest rates prompt investors and HFT trading machines to bid up paper gold. So, when we look at the one-year chart of gold with the same December 31, March 30 and June 8 dates placed upon it, what do we see?

Look, this is not meant as some sort of forecast for higher gold prices over the next few days and, from a historical perspective, TED Spreads are still not all that high. However, there should be no discounting of the fact that the most recent TED Spread peaks led to temporary but stout equity market declines and sharp run-ups in the price of gold. For what it's worth, I'd be sure to keep an eye on the TED Spread as we go through August. If it and the stock market peak and begin to roll over, don't be surprised if gold (and silver) suddenly surge to new 2016 highs.

TF

www.tfmetalsreport.com/subscribe

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  34 Comments

Dyna mo hum
Aug 11, 2016 - 4:06pm

WELL

WELL WELL

ancientone
Aug 11, 2016 - 4:10pm

Deuce

Maybe..It is..Never tried this before

Antony von Clearwell
Aug 11, 2016 - 4:15pm

Lost

We've lost 20 silver.....

Today we've lost the battle. It's not the individual battles that count, it's the outcome of the 'war' that decides the winner.

We've lost 20 silver.......

Marcrward
Aug 11, 2016 - 4:35pm

4th

Damn, thought this was an old posto made public.

Antony, every battle is won before it is fought and GUS is in an economic battle with China over fiat and money... I think we know who will win this battle.

indiana rod
Aug 11, 2016 - 4:41pm

The Silver Bull Market

In the June,2001 issue of Past Present Futures (no longer in print),it said the double bottom low at $3.51 on Feb. 22,1993, in silver were "lows which will not be seen in our lifetime."

He was preaching to the choir. Since I'm usually early, I owned Bema Gold in the 1990s. so it wasn't hard to make me a silver bull.

He went on to say, "It has been three generations since we have experienced a decline of the magnitude we are seeing in the silver market. I believe it is reasonable to suggest that the final low in silver will be the equivalent to the precious metals that the 1932 low was to the stock market."

indiana rod
Aug 11, 2016 - 4:53pm

The Silver Bull Market

The same June, 2001 issue went on to say,"you can make a large amount of in one year's time trading in fast active markets, and some very large profits in one month's time,"

While he was talking about futures, in my brokerage account of silver miners, my broker told me today that I'm up 250% YTD. In my play money account, started with $1,500 this year, my balance as of last night was$25,402.44.

And the nice thing is this bull market of a lifetime is just beginning. Keith Neumeyer, CEO of First Majestic, said silver could go to $135.00/oz. (To match 1980 adjusted price it would be $144.00/oz,)

AlienEyes
Aug 11, 2016 - 5:09pm

indiana rod

You might want to tell your broker his math sucks.

Angry Chef
Aug 11, 2016 - 5:24pm

The Bullshittery of the DNC

The Bullshittery of the DNC - YouTube

This is great. Ha, ha, ha, ha, ha......

Markedtofuture Angry Chef
Aug 11, 2016 - 6:19pm

Re; Bullshittery of the DNC and All Presidents Related but One

From the comments section -

Trump and Clinton are Cousins -Related to 1st Duke of Lancaster

Video unavailable
Angry Chef
Aug 11, 2016 - 6:23pm

Christianity and the Nagasaki Bomb

Can somebody please send this to Leon Panetta. I understand he's a Jesuit.

https://www.informationclearinghouse.info/article45276.htm

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Key Economic Events Week of 6/10

6/11 8:30 ET Producer Price Index
6/12 8:30 ET Consumer Price Index
6/13 8:30 ET Import Price Index
6/14 8:30 ET Retail Sales
6/14 9:15 ET Cap Ute and Ind Prod
6/14 10:00 ET Business Inventories

Forum Discussion

by sierra skier, 3 hours 4 min ago
by Boggs, Aug 16, 2019 - 7:46pm
by Boggs, Aug 16, 2019 - 7:07pm
by NW VIEW, Aug 16, 2019 - 6:29pm