The Russians are dumping US Treasuries and buying gold.
As we reported earlier this week, the three largest holders of US Treasuries are not in a buying mood. In fact, they’re selling. The Japanese disposed of $12.3 billion in US debt. Meanwhile, Chinese Treasury holdings fell by $5.8 billion. The Federal Reserve has shed about $70 billion in US bonds since launching its tightening program last fall. So far, individual and institutional investors have picked up the slack.
Lost in the latest data about Treasury holdings was the fact that Russia dumped nearly half of its US debt in April. But even as it divests itself from US bonds, Russia’s total reserves have grown as the country adds to its gold holdings.
In his most recent podcast, Peter Schiff hit a number of subjects including oil prices, bond prices, Bitcoin, the dollar and tariffs. Peter said he thinks we’re seeing a lot of movement in a number of markets that are counter to the long-term trends. For instance, oil dropped late last week, but he expects it’s long-term trend to continue upward. The dollar has picked up strength, but the broader trend is toward a weaker dollar. And bond yields fell, but the overall trajectory for interest rates is up.
The US government has hit borrowing levels not seen since the peak of the financial crisis.
The US Treasury’s net borrowing totaled $488 billion from January through March, according to a statement released Monday. That was $47 billion more than the department’s estimate. It was also a record for first quarter borrowing, according to Bloomberg.
He’s been dubbed the “Bond King,” but Jeffery Gundlach isn’t particularly bullish on bonds right now – at least not US government bonds. And he’s certainly not bullish on stocks. Gundlach has his eyes on gold.
Gundlach heads DoubleLine Capital, overseeing some $119 billion in assets. During a speech at the 2018 Sohn Investment Conference last week, he said an “explosive, potential energy” of a huge “head-and-shoulders bottom” base was signaling a move of $1,000 in gold prices.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
Stock markets had another bad day Tuesday. The Dow Jones fell over 400 points as the 10-year Treasury yield broke through 3%. Several “marquee” companies warned of higher costs, including Google-parent Alphabet and Caterpillar.
In his latest podcast, Peter Schiff said he thinks the correction is over.
Not the downward move. That is not the correction. This is the bear market. The upward move was the correction. It was the first correction in this young bear market that technically is not a bear market yet because we’re not down 20%. But that’s only a matter of time before the people call the bear market what it is.”
Last week, Peter Schiff said we may well be in the calm before the economic storm. In his latest podcast, he said the storm may be on the horizon. But most people are still oblivious, including the Federal Reserve.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
There are some troubling signs for the economy in the bond market. Yield curves are going flat.
On Wednesday, the yield curve from 5 to 30 year bonds flattened to as little as 29 basis points. That represents the narrowest spread since 2007. The yield curve between 2-year and 10-year Treasuries also narrowed, touching 41 basis points, also the smallest gap since before the financial crisis. Investors extending to 10 years from 7 pick up just 4.3 basis points, less than a quarter of what they got a year ago, according to Bloomberg.
So, what does this mean?
In his latest podcast, Peter Schiff said we are basically enjoying the calm before the storm right now.
With the US missile strike in Syria, rumblings of a trade war and a generally weak dollar, gold briefly flirted with $1,365 last week. But the anticipation of Federal Reserve rate hikes continues to create strong headwinds against the yellow metal. Last week, the Fed released its March FOMC minutes and most analysts interpreted them as “hawkish.” In fact, many people now think the Fed will nudge rates up again in June, leaving six months to get in the much-anticipated third hike of the year and possibly even get in a fourth.
