Longer Duration Treasuries, Gold And Silver Parting Ways Since The Fed's Rate Announcement

Since the Federal Reserve’s FOMC interest rate announcement on September 18, 2024, where the Fed announced things were going so well that they needed to cut interest rates by 0.5%, gold, silver and Treasury bonds have decided to part company.

Since the Fed announcement, digital claims for silver and gold are up 4.5% and 3.5% respectively while long-dated Treasuries of 20 year+ duration (approximated by the TLT Treasury Bond ETF) are down 2.5% - see Figure 1 below.

In short, the Market is buying gold and silver and selling long-dated claims for future delivery of fiat currency thereby increasing the interest rates for these bonds while the Fed has announced it is lowering short term interest rates.

While 6 trading days is a very short time and does not define a market, it is an interesting trend.

We have been told for decades that gold and silver don’t give a yield and should be shunned in comparison to government fiat currency denominated bonds.

Yet, the market is voting with its feet and doing the exact inverse.

Figure 1 - Gold (gold line) vs Silver (silver line) vs Long Dated Treasuries - TLT-NY ETF (red line) September 18 2024 to September 25, 2024.

If this very short trend continues, it would be a continuation of a trend in place since March 2022 when the Fed started to raise interest rates as can be seen in Figure 2 below.

Figure 2 - Gold (gold line) vs Silver (silver line) vs Long Dated 20 Year+ Treasuries - TLT-NY ETF (red line) February 2021 to September 25, 2024.

If this continues, the implication over the longer term is for higher interest rates and lower bond values and higher rates are problematic for our debt-dependent economies that have been thus structured by secular central bank policy.

An Estimate of the Scale of the Movement into Gold

The revaluation of the world’s gold that is currently underway is not trivial.

As a point of reference, it is estimated that a total of 6.8 billion (B) oz. of gold have been mined throughout history and that 95% (6.5B oz.) of that gold is still held.

At a current gold price of $2,660 /oz. this values total above-ground gold at $17.3 trillion (T).

For every 1% that the gold price is revalued higher, and this seems to be occurring with almost daily regularity, we are currently seeing an increase in value of $170B of the world’s gold.

There is a powerful move underway.

Best regards,

David Jensen