Gold sets a new all-time high … the government’s spending problem is helping … Bitcoin tops $69,000 … keep an eye on the 10-year Treasury yield
As I write Tuesday at lunch, gold has just pushed to a new all-time high.
It trades $2,137, just a hair above its prior all-time high of $2,135.
Now, let’s be clear…
Gold has let us down several times in recent quarters. We’ve been anticipating its next big breakout but time and again, it has fizzled. However, we remain confident that it’s a matter of “when, not if”. Especially, considering this CNBC headline from last Friday:
The U.S. national debt is rising by $1 trillion about every 100 days
From the article:
The debt load of the U.S. is growing at a quicker clip in recent months, increasing about $1 trillion nearly every 100 days.
The nation’s debt permanently crossed over to $34 trillion on Jan. 4, after briefly crossing the mark on Dec. 29, according to data from the U.S. Department of the Treasury. It reached $33 trillion on Sept. 15, 2023, and $32 trillion on June 15, 2023, hitting this accelerated pace.
Before that, the $1 trillion move higher from $31 trillion took about eight months.
This acceleration is no surprise to regular Digest readers. We’ve spilled a great deal of ink highlighting the parabolic shape of our government’s debt load.
This will not end well.
It is critically important to have your wealth invested in assets like gold, high-quality stocks, and real estate that are better able to float atop the wave of dollar debasement. Though the chunk of cash you have in that 5% savings account feels safe, thanks to our government’s spending problems, that’s the least safe place for it in the long-term.
Here’s how Bank of America’s investment strategist Michael Hartnett put it in a note to clients:
Little wonder ‘debt debasement’ trades closing in on all-time highs, i.e. gold $2077/oz, bitcoin $67734.
But U.S. debt has been a problem for a long time and gold hasn’t had its breakout moment
So, why should we expect anything different anytime soon?
Simple – rate cuts.
When interest rates fall, gold prices usually rise. This happens when many conservative investors begin rotating out of bonds because they no longer offer the same high yields as before.
We don’t know when they’re coming (futures traders currently expect it will be June), or how many we’ll get in 2024, but rate cuts will likely begin within the next several months. When they do, they should be the match that ignites the long-awaited gold boom.
Factor in how Wall Street often likes to “buy the rumor, sell the news,” and that helps explain why gold is climbing today. When the Fed actually cuts rates, it could be a profit-taking moment – though we believe its longer-term influence for gold will be very bullish.
If you’re looking for the easiest way to play gold and/or gold miners, check out GLD, which is the SPDR Gold Trust and GDX, which is the VanEck Gold Miners ETF.
GLD is engineered to reflect the price of gold bullion. GDX holds top gold miners, including Newmont, Barrick Gold, Agnico Eagle Mines, and Wheaton Precious Metals.
We can’t have a Digest covering U.S. debt levels without mentioning Bitcoin, which is on the verge of setting its own all-time high
As I write, Bitcoin momentarily hit an all-time high earlier today (just above $69,000), but is now pulling back, trading around $65,000.
As we’ve been covering here in the Digest, the gains are part of the run-up to Bitcoin’s next halving event, which is likely to happen in late-April.
Bitcoin is up about 70% since January 23rd. But for investors who haven’t taken part in these gains, the question is now “is it too late?”
Let’s go to our crypto expert Luke Lango for his answer in the latest issue of Ultimate Crypto:
The crypto markets went parabolic [last] week, with Bitcoin surging close to its all-time highs from late 2021, as investors embraced a more “risk-on” mentality in the face of favorable economic data and strong stock earnings reports.
Despite the strong performance, we’ve been fielding a lot of questions this week from folks concerned that this may be the “top” for cryptos in this Fourth Boom Cycle.
It isn’t – we think this Fourth Crypto Boom Cycle is just getting started.
Specifically, we’ve identified five big reasons why we’re not even close to a top in this crypto boom cycle. They include:
- No signs of a retail frenzy… yet.
- Second halves of boom cycles are always bigger than the first halves, and we’re still in the first half of this cycle.
- Bitcoin ETF flows have remained very strong, indicating sustained strong institutional interest in cryptos.
- Bitcoin dominance remains too high for a “top”.
- Economic improvements on the horizon suggests further strength ahead for cryptos
Let’s zero in on the one reason you’re likely wondering about the most – the retail frenzy.
Despite the jump in Bitcoin’s price, we’re nowhere close to seeing the same type of mania from retail investors that usually signifies Bitcoin peaks. That suggests plenty more room for a blow-off top.
Here’s Luke with more:
Crypto boom cycle tops are always marked by overly euphoric investor sentiment and unsustainably frenetic retail interest… We aren’t seeing either of these dynamics right now.
Most of the crypto investors we talk to are still hesitant and cautious these days. There isn’t much blind euphoria or greed out there right now.
Simultaneously, no one is really talking about cryptos much, either, outside of crypto circles. Search interest in Bitcoin remains very subdued relative to previous boom cycle peaks.
Therefore, we conclude that there simply isn’t enough of a retail frenzy yet to warrant a “top” in this boom cycle. Rather, we’re still far from a top.
If you subscribe to Ultimate Crypto, click here to log in and read the rest of Luke’s analysis. If you’d like to learn more about joining Luke in Ultimate Crypto as a subscriber, click here.
One variable that could help or hurt the potential gold/Bitcoin breakouts…
The 10-year Treasury yield.
For any newer Digest readers, the 10-year Treasury yield is the most important number in the investment markets.
The higher it climbs, the more pressure it puts on most stock prices because a higher yield means a higher discount rate, and that lowers stocks’ current valuations.
A higher 10-year treasury yield also hurts stocks because it entices some investors to pull their money out of stocks to benefit from this generous “risk free” higher yield. This puts downward pressure on stock prices. The same dynamic impacts gold and Bitcoin similarly.
As I write, the 10-year Treasury yield trades at 4.15%, which is a welcome relief from roughly two weeks ago when it hit 4.33%.
The question is where the 10-year Treasury yield will go next.
Whether its gold, Bitcoin, or simply high-quality stocks, we want this 10-year Treasury yield to continue falling – or at least, not rise substantially from here.
Let’s go to Luke from his Daily Notes in Innovation Investor:
The 10-year Treasury yield is technically at a very important level wherein the move in yields this week could determine where yields go over the next few weeks or even months.
That is, the 10-year Treasury yield keeps getting rejected at major resistance at 4.33%. If it keeps failing there and makes a big move lower this week, that would confirm the multi-month downtrend in yields and would suggest that yields will move lower into the summer.
If the 10-year breaks above 4.33% this week, that would break the multi-month downtrend and would suggest that yields could technically move higher into the summer.
Given this week’s economic reports include a big ISM Services Report and even bigger Jobs Report, the move in yields this week will also be very fundamentally-rooted. We therefore think that the “tale of the tape” this week will boil down to yields.
We’re watching the 10-year very closely here.
Wrapping up, gold and Bitcoin are on the move higher today, and both could be sitting at all-time highs by the time you read this.
Better still, with animal spirits rising in the market and our government unable to slow its spiraling debt situation, it appears that plenty more gains are on the way…as long as the 10-year Treasury yield stays in check.
We’ll keep you updated here in the Digest.
Have a good evening,
Jeff Remsburg
