Gold Price to Decline Based on Bond Yield Moves…

I marked two very distinct periods – ones when gold formed multi-year cup-and-handle patterns. That was around the 2000 and around the 2015 bottoms.

In the second half of the pattern, we saw a rally in both: gold and bond yields (marked with the second rectangle). The rallies started from (approximately) a local low in gold and when bond yields topped, so did gold.

The really interesting thing is what happened in the areas marked with the third triangle. That’s when the price of gold soared while bond yields declined.

In the previous pattern, this continued until we saw a move back up in the yields. That, my friends, was the 2008 top that preceded profound declines in gold, stocks, and – most importantly – mining stocks.

What we see now is that bond yields are after a decline, and they just moved back up as gold topped.

Given the above-described analogy, the recent top was likely a really major top – one that marks the end of a medium-term upswing, and a clear sign that investors should prepare (or already be prepared) for a wild ride to lower price levels – especially in mining stocks.

Of course, this is not a signal that is likely to work in terms of days – it’s likely to have a critical impact in terms of months (and perhaps weeks). And it doesn’t invalidate some of the long-term opportunities in the precious metals market.

So, yes, looking at the moves in 2-year bond yields and how it impacted gold in the past doesn’t have to look so bullish as most people portray it. There is a bearish sign here as well – a quite profound one.

But wait, there’s more!

Bearish Signs Ahead

Price moves and price patterns are both important, but we all read the phrase that time is more important than price, right? When the time is right, the price will reverse – was the continuation of this quote.

With the above in mind, let’s turn back to the period that is usually viewed as bullish for gold.