Market analyst Jordan Roy-Byrne noted last week that gold and silver were in a downtrend and correction. According to the analyst, the fact that they are in a serious correction, not a bullish consolidation, refers to fundamentals that are not currently bullish. Jordan Roy-Byrne’s market analysis and assessments cryptocoin.com We have prepared for our readers.
“Gold has already made its discount”
Stating that the primary key driver for gold and precious metals is falling real interest rates, the analyst says, “the key word is falling”. Falling real interest rates (or real yields) increase the attractiveness of precious metals as money, while rising real interest rates do the opposite. The analyst makes the following statement:
One measure of real interest rates is the real Fed Funds rate (FFR). Subtract the FFR from the inflation rate. This is a somewhat belated indicator, but historically accurate.
Many charts like this are floating around Twitter’s gold bug, which should be a strong fundamental argument for buying gold, according to the analyst. Jordan Roy-Byrne, “Can you spot the problem?” to the question, “The real FFR has already exploded in the negative!” he replies. The analyst comments:
It is unlikely to continue falling and gold has already made its discount. Gold senses the approaching recovery in real interest rates.
According to the analyst, the fundamentals of gold are quite bullish.
The table below shows the actual 5-year return measured from the TIPS market. It is a real-time, market-based indicator of real returns. Reminding that gold peaked in 2011, the analyst states that this indicator did not bottom out until early 2013. In addition, the analyst states that the price of gold peaked in August 2020, but this indicator did not bottom out until a year later. (It tends to be inversely proportional to gold).
According to the analyst, if the US inflation rate drops from 6% to 3-4% and the Fed raises rates several times (a reasonable scenario), real interest rates will recover by a few percentage points. From this point of view, the analyst makes the following assessment:
The underlying weakness may be a reflection of the possibility of this or a similar outcome. From a 30,000-foot view, gold’s fundamentals are pretty bullish. Real interest rates must remain low and negative to contain the debt burden.
But according to Jordan Roy-Byrne, there will be periods when real interest rates rise again, and their current period will coincide with gold forming the arm of the super-bullish cup and currency model. The analyst makes the following predictions:
Gold’s “not rising” fundamentals and the downtrend in young and miners will allow you to buy incredible discounts in the coming months. Gold’s trajectory will reverse as the Fed raises interest rates.
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