Let’s start with gold. Here’s the 5 day chart:
For the first time since the summer of 2020, gold traded over $2,000 US per ounce. As you can see in the chart, gold did not hold that level, and closed trading on Friday at $1,976.90, relatively unchanged on the week.
The five-year chart is more instructive, as it shows the significant resistance band between $1,923 and $2,069:
Gold is up around 10% year to date (not surprisingly, given inflation and world events). Long-term gold looks great, and I hold gold stocks in my portfolio. A pause is likely in order in the short term, so gold can consolidate its gains before making the final push above $2,000.
I’m not selling at these levels, but I’m not buying either. I’ll wait for a pullback to increase my holdings.
Interest Rates
The Canadian 5-Year Government Bond yield has collapsed to 2.791%.
That’s roughly where it was at the start of the year, and also where it was back in the summer of 2022, and the spring of 2021. The 5-year bond yield is highly correlated to mortgage rates in Canada. You mortgage broker is currently charging around 4.4% for a 5-year fixed mortgage. That tells me that mortgage rates will fall in Canada, likely by a lot, over the next few months.
While that may sound like good news, it’s not, because rates are falling because the market is pricing in a recession (and perhaps bank failures).
I continue to have a significant percentage of my portfolio in bond ETFs. If interest rates continue to fall, bonds go up, so I’m collecting the high interest now, and will book the capital gain when I sell.
My gut feel is that we have one final pop up in the general market, and then the bear market resumes in earnest. It will be a brutal summer, but by the fall the bottom should be in, the Fed will be lowering interest rates, and we can get started on the next bull market. So, having cash for that is very important.
That’s the plan. We’ll see how it shakes out.
Gold, Bonds, Interest Rates
by JDH on March 25, 2023
Let’s start with gold. Here’s the 5 day chart:
For the first time since the summer of 2020, gold traded over $2,000 US per ounce. As you can see in the chart, gold did not hold that level, and closed trading on Friday at $1,976.90, relatively unchanged on the week.
The five-year chart is more instructive, as it shows the significant resistance band between $1,923 and $2,069:
Gold is up around 10% year to date (not surprisingly, given inflation and world events). Long-term gold looks great, and I hold gold stocks in my portfolio. A pause is likely in order in the short term, so gold can consolidate its gains before making the final push above $2,000.
I’m not selling at these levels, but I’m not buying either. I’ll wait for a pullback to increase my holdings.
Interest Rates
The Canadian 5-Year Government Bond yield has collapsed to 2.791%.
That’s roughly where it was at the start of the year, and also where it was back in the summer of 2022, and the spring of 2021. The 5-year bond yield is highly correlated to mortgage rates in Canada. You mortgage broker is currently charging around 4.4% for a 5-year fixed mortgage. That tells me that mortgage rates will fall in Canada, likely by a lot, over the next few months.
While that may sound like good news, it’s not, because rates are falling because the market is pricing in a recession (and perhaps bank failures).
I continue to have a significant percentage of my portfolio in bond ETFs. If interest rates continue to fall, bonds go up, so I’m collecting the high interest now, and will book the capital gain when I sell.
My gut feel is that we have one final pop up in the general market, and then the bear market resumes in earnest. It will be a brutal summer, but by the fall the bottom should be in, the Fed will be lowering interest rates, and we can get started on the next bull market. So, having cash for that is very important.
That’s the plan. We’ll see how it shakes out.