An Interesting Development For Gold and All Other Markets

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:

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.


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Dyna mo hum · Aug 11, 2016 - 4:06pm



ancientone · Aug 11, 2016 - 4:10pm


Maybe..It is..Never tried this before

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


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


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.

· Aug 11, 2016 - 6:37pm

Guys, help me out here

These threads are all devolving lately into political stuff. I've laid out some interesting theories in this post and I'd much prefer to see the ideas discussed, not just another rehash of Trump/Clinton election yingyang.

Please start threads in the forums whenever you have non-PM topics to get off your mind. It's very easy to do and it will keep homepage threads on-topic.

nadgeskaul · Aug 11, 2016 - 6:38pm

Fed Expectations

This may have more to do with short term interest rates and expected Fed action. The probability of rate hikes has increased substantially since the previous non farm payroll numbers were released. The TED spread is certainly indicating this via higher US rates and continued NIRP in Europe.

However, these peaks revert when terrible US economic data emerges post-BLSBS, so I anticipate the same.

All a concerted effort by Western central banks to steer markets in the desired path, dumping Euro bonds to create money movement, inflation, and higher demand for US treasuries, and the USD as consequence.

One giant, epic, global SCAM.

RickshawETF · Aug 11, 2016 - 6:49pm

top ten ?

Yes! Claimed the last spot . . .

indiana rod · Aug 11, 2016 - 7:16pm

Alien Eyes

I'm happy with my brokerage account of stocks. My play money account is options.

I still dream of my beautiful wife I lost 10 years ago.

Antony von Clearwell · Aug 11, 2016 - 8:01pm

New day, new battle

We regained 20 silver!

We regained 20 silver!!

trx16 · Aug 11, 2016 - 8:27pm

PPI and Retail Sales -Political Cartel rigging.

My hunch tells me these will come in Hot like the BLSBS. PPI maybe too hot and retail sales may come in surprisingly high above consensus. Just my guess. Listening this morning to the "adjusted earnings" of retailers posting earnings you would think everyone was shopping. Too bad all of the restructuring and layoffs to get to those adjusted earnings and revenue. - Expecting more seasonal adjustments. Why wouldn't they. Headlines are all that matters for these Algos. Hope I'm wrong here. 

AlienEyes · Aug 11, 2016 - 8:35pm

indiana rod

I hear you, rod. Been there and it is not good. sad

The math is still faulty.

Island Teal TF · Aug 11, 2016 - 8:56pm

re Guys, help me out here

TF - thank you.........

stingbee TF · Aug 11, 2016 - 9:13pm


Indeed... These political discussions dilute the essence of this thread. I'm sick of hearing about Trump and Hillary. Thank you.

stingbee trx16 · Aug 11, 2016 - 9:15pm

Retail Earnings

The sad part is that they are beating reduced earnings guidance and revenues. They are losing money in the big scheme of things. 

Mickey · Aug 11, 2016 - 10:31pm

w/o being political

at teh DNC were we not told the economy is good? And then Friday AM we saw GDP print at 1.2% vs 2.6% est.

1.2% is certainly good. Gooder than 0.0% (Animal House?)

Remember Bernankes' Perception Economic, and Sinclairs MOPE

How about Deception Economics.

once the masses realize we have been contracting since spring 2015, and that added debt is far more than stated (deceptive) deficits, and that corporate profits and tax payments have been declining, the stock and bond markets selloff and Pm's go into a different gear.

When, lord when wil the BS end and we can get started on the next phase already

hindsight101 Antony von Clearwell · Aug 11, 2016 - 10:57pm

We keep losing $20 silver it is going to be really hard to....l

move to new highs for the year.....TEDDY Bear spread or not.

AGAU · Aug 12, 2016 - 8:43am

what just happened

Some one turn the Ag Au charts upside down or what

ned braden AGAU · Aug 12, 2016 - 8:47am

@ indiana rod and AE

I cannot even imagine the pain you both have been through. My heart goes out to you.

Antony von Clearwell · Aug 12, 2016 - 8:49am

Now do the right thing

And fall through 100 alright...

forever20 · Aug 12, 2016 - 9:20am

very enlightening analysis @turd

very happy to have signed up a month ago, cheers

OOOBuck · Aug 12, 2016 - 10:12am

AG foaming?

Strikes me that AG is topped out in the 18.50 area. It's seen these levels before as a top back in Nov of 2012 but that was with silver at 32.50 and gold at 1735. I continue to hold a hefty position but plan on lightening up and moving funds to a few others. Anyone else thinking similarly?

stingbee · Aug 12, 2016 - 10:17am

Re: We Are Really Struck in A Range

Silver and Gold should be moving much higher, but were are stuck in a range. Gold seems to be shackled around $1260.00. It is pretty obvious that we are not going to see any big moves even with today's subdued economic activities. But, regardless, it appears paper money wants to chase risky assets for the time being and keep the indices at all time high. 

Frustrating...This is when you realize charts sometimes don't mean jack within an asset class that is against the establishment-Central Bankers. In real life, GOLD should have traded towards $1370 or higher, and Silver around $21.00 or higher. 

Boatboy OOOBuck · Aug 12, 2016 - 10:24am


Me too Exk is performing nicely I may move mome AG money there

infometron · Aug 12, 2016 - 11:07am

Jumped back in...

Jumped back into JNUG with half my dry powder at the same price I sold yesterday.

Just in time, hopefully as the flag pattern resolves to the upside...

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