Another period of sideways, with a few sharp turns along the way to keep traders on their toes. We basically stand where we were a month ago and we’re still waiting to see if we get a spring rally in resource stocks that lifts us above the March high for the Venture index. Admittedly, there isn’t a lot of “spring” left to work with and we all know how boring things can get as we exit May.
Like the last issue, I held this one for a few days hoping to see more news to report on and, like the last issue, not too much arrived. Things are warning up (weather wise). Summer exploration is beginning in the northern hemisphere so news should pick up. For the record, I did add a new company at the SD level and you can expect to see some new choices in these pages soon. I am waiting on technical data for a couple of stories I like. I need the data to cover them properly but I don’t expect it to change my basic opinion so odds are you see one of these in the next issue.
The editorial in this issue helps make the case for physical demand underpinning the gold market. I think a lot of the obvious sellers are out and the price has found a higher base than late 2013. There is always room for a Ukraine boost but I hope for both humanitarian and practical reasons people just buy the yellow stuff because they think it’s cheap.
For all the recent fear in the market after another flare up in the Ukraine its hard to complain about how the big indices are holding up. All are near their highs. That’s good but there are some strange cross-market correlations that make one wonder.
Take the Ten-Year Treasury Yield chart at top right. It displays the last year’s trading for TNX, the ETF that mirrors the yield on the US 10 year treasury bond. Late last year the yield climbed consistently as the US Fed continued to threaten a start to the QE taper. It reached a high of 3% just before year end after the Fed made good on its promise. So far so good.
I noted at the start of the year that I expected the yield could rise to the 3.5-4.0% range by year end. Not at all a scary prospect. Slowly increasing yields is exactly what should be expected as an economy improves.
A funny thing happened after the start of the year though. Instead of continuing to climb bond yields dropped back as weather spooked traders got defensive. Even as markets recovered through February bond traders appear unmoved. Yields have stayed in a tight range well below their late 2013 highs.
What are we to make of this? It would be easy to blame Ukraine but the timing is wrong. Bond traders have steadfastly refused to generate the bear market that was universally expected last year. Indeed, long dated bonds have outperformed equities by a wide margin so far this year.
For the rest of this article, click here: http://www.miningmarkets.ca/news/bipolar-markets-eric-coffin-on-the-macro-view-for-metals/1003044442/rq0wMrp3vyWrlxu0q82vM20/?ref=enews_NM&utm_source=NM&utm_medium=email&utm_campaign=NM-EN05052014