Bond Yields, Interest Rates, Gold, and Silver: John Lee, CFA’s Analysis

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mining investors which are retail American Centric whereas the metal investors are buying they’re from the indiia from the China from from the Russians and so they’re the different set of buyers uh eventually will converge when mining companies start delivering profit and dividends so that will have to call for $2,800 gold and around you know4 $50 silver that’s when the buy if you want to see you know watch John where am we going to see first Matic go back to 27 right you’re going to see 44 $50 silver and when when is barck and and and numans going to challenge whole High the UN toe $2,800 [Music] goal good morning John how are you I should say good afternoon to you where you’re at how are you doing fine how are you doing well uh as I was saying just off camera I had you on about a week ago and you talked about how uh bonds will start you’re very negative on bonds and the bond yields will start uh exploding and obviously that means the bond uh pric is going down and that’s exactly what’s happening talk to me about that what’s going on and uh let’s start working that out we haven’t seen nothing yet uh when I came on the show I said it’s a it’s it’s we’ve been waiting for the moment it’s a high confidence trade the 10 year was about 109.5 and now it’s is just under 10 108 so it’s corrected about 2% but year wi year wise 10 year was sitting on the 4.4 4.3 which is a 200 day strong 200 day support now that just in a week it’s come from 4.3 to about 4.7 so that is that is a sizable move in the bond in the year in the world with the bond in the Bondo World it hasn’t broken down yet to uh the lows uh that was uh I recalled about eight months ago so when and the twoe are still just an inch below 5% which is uh a very very strong resistance level um it’s matter of time and usually when things move they can move quite quickly and I would not be surprised if if the two-year takes out 5% and the 10 year is uh going to zom as 5% and the inverted yur will resume uh normaly because in the inflationary environment and people would demand higher interest to partk their money longer term so this anomaly would have to be resolved either through lowering of the uh through either lower short-term interest rate or much higher long-term interest rates and as you said and and you know my stats on that which is the latter um so now I don’t think really there’s really any discussion about well there’s still a mut discussion but it’s almost the uh the interest interest rate cut crowds are are are just giving up hope and I don’t see a red cut now uh on the horizon if anything you’ll be looking at a red hike probably right after the election um and it it appears that J pal is sort of losing confidence uh with the crowd and I would not be surprised um regardless of which president who that gets elected that Jay’s Jay stes are are somewhat numbered and the the prime candidate is this Neo Kari guy out of Minnesota uh Fair that’s just um that’s another bit of a grony I remember three years ago is that the Inc is still staying definitely low we can have a ban that interest can inflation can inflation can tip above slight bit it’s okay it’s transitory but now he’s the one that’s saying oh we got to see months of positive low inflation Data before contemplate a uh a interest rate cut so that’s he’s probably the prime candidate because he does what people tell him he does what the boss tell him to say and to do um and so that’s my prognosis yeah so the you flattening or going back to normal that’s interesting to me because we both know that an inverted yield curve signals recession when it starts to flatten down to go back to normal does that what exactly does that mean does that mean that recession is imminent or uh does that mean we’re going to become we’re in recession and going to be coming out talk to me about that um I don’t know who conjure up the idea that inverted y curve signals recession I don’t think there’s empiric evidence that points to that as I said what what would been told um in the last 40 years is uh things have changed the Paradox has been the Paradox the Paradox is broken you had you had a high you had a declining interest rate from 1980 up to J 2020 so that is a 20-year uh bull market on the uh Treasury and that’s a 20-y year 40-year bare Market of interest rates and now the interest rates is is um now the interest rate is heading up uh on both the short and the long um and I don’t look too much into the recession like what is the definition of recession okay it’s a GDP how do it calculate cons consecutive um negative growth of GDP a GT GDP in itself has all the different elements this this is economics and I think I P I I think was you I talked to uh I talked to on the show that you know I think by by many aspects of it the the economy cing in recession let’s talk about the Chinese calculation of GDP that’s entirely different manner so I don’t read too much about whether we’re in recession or not in recession but rather what you look at is the equity prices interest rates uh where the dollar where the dollar is yeah okay so then with um bond yields climbing that’s not good for stocks talk to me about that you’re right that bonds and stocks are competing for your Capital so in a in normal scenario which we’re not in in in in um in that yes if if the dollar is finite uh it has to choose between bonds and stocks and if B if the risk and free rate is 5% then stocks have to offer dividends in excess of 5% in order to attract investors when I was talking about on your show last time there is a copat uh which is there are some people that don’t play by the rules and what I mean by that is they are they control the printing press so either either you say that you either in a gentler way you can say they B quotequote borrow money of which they basically it’s a journal entry with the asset liabilities so so they take money and they’re Buy buy S&P in hundreds of billions of dollars on a daily basis either through the disguise of ETFs from uh from the vanguards and the black rocks and State Street or through what they call the plunge Protection Team which been talked about for long time these are not small fry quantities you’re talking hundreds of billions of dollars um tens of billions hundred of billion on a daily basis just through the volume that I track through sort of the Futures that been traded on on iCal support level right it just uh so or that’s a general way to put it Ure way to put it and on a m Blade with a put it they literally just print and they’re buying um and so you know this is not different from what’s happening in Turkey like when erdogan was when erdogan was uh elected president about six seven years ago the Turkish L has gone from like I believe it’s around 5 year 10 year at the time and now it’s 30 L and people said well you know we are we struggled to control inflation we should raise interest rates uh to dpen inflation and inflation is running increase inflation is the result of money printing so in the case of turkey is they are literally printing L uh to to the politicians and the back back door they’re just printing with not the Bandit with the Bandit and buying assets right buying the per in New York buy byy prchase stove buy purchase metal buying real estate buying stocks buying airplane and all these things are Dem moded the automated in US Dollars and that’s why you’re seeing the devaluation of the lur because that’s the only thing they can print so the guys are confing the printing price well they control the US dollar they’re raising interest rates uh and then they’re jacking up the dollar because um it’s a Bel L discussion Andy but they are also controlling the ones controlling the FED are controlling BJs ecbs and bcc’s so there are in my in my view uh the Bank of Canada Bank of Japan and well not so much Bank of Japan Bank of Canada and ECB and Boe are literally printing their National currencies to buy the dollar to prop up the dollar um while so that and then and the FED is ring interest rates so that they can have a stronger dollar as a backdrop while they’re printing to buy as a we talk about the keing analogy which you guys can refer to the last interview so the end result is these guys are not playing by the book meaning that if the interest rates at 5% and the NASDAQ is and S&P are breaking alltime High 10% is never deter that BR to buy because they don’t they don’t play by the rules right and it’s okay you got to pay 10% interest a year on your $3 trillion dollar of Deb okay kid it’s fine let just borrow another $200 billion to pay so this this idea of de implosion that coming hold to R it’s only it’s only applicable to the to the play by rules yeah yeah no guys that’s why I am not bearish of the equity Market you might see engineer correction just to cool down the temperature but the direction of the equity is oh how do I know that every time I short it in practicality every time I short I lose money so if something is a foot I cannot explain why and that’s the only reason I can come with having stocks go up in the rising industrial environment you Cap econic World in times of war and in in in divisions of the two largest economies in the world and apple is still trading you know trillions of dollars and just that’s the only conclusion I can come these people that are buying are not buying to make money they’re buying for control in Imports yeah you know I’m very sympathetic to that view um and the reason especially right now we got an election coming up and it’s just hard me to see the stock market tank um the the S&P tank with an election coming up but I guess what’s really interesting is this whole dynamic with not only stocks but with the dollar and the bond market which you’ve alluded to I had Simon hunt I don’t know if you’re familiar with him at his work on uh about two two weeks ago and he talk he’s he’s talking similar to what you’re talking about but really the question is and he said this is the question do they pick the dollar or do they pick the bond market on what to save and they can’t pick both and it looks like meaning what does it mean picked pick well okay so you can’t Pro how you g to prop up the bond market and how are you going to prop up the dollar at the same time I mean because wi you would you’d have to it’s either or right because you’d be printing money to buy bonds or stocks so there the the dollar would decrease right or you going to jack up interest rates to attract either domestic or foreign buyers of US dollars because the interest rate is so which one are you going to pick and so certainly is easier there is a Loosely there’s a loose correlation but it’s a correlation between the dollar the dollar and the year will look go negative because the the the higher because the Ys are higher certainly not certainly a lot easier certainly a lot easier to prop up the dollar if the interest rates are high because incentive to buy right um couple of things the politics are so polarized in the United States that people who don’t like the Republic they will still B they will bow for Democrats even if they’re hungry going on the street and so OB be the uh sort of the uh um the Char sort of the narrative is the politician like the politic so polarized that they can still get away with with with with the with just just talking points whether there on concrete actions to proper the economy yeah on the dollar and the bonds and that’s one conversation I actually wrote here is I want to share with you how the market Works um let’s talk the dollar the dollar Index is very very easy to uh to work with because the Sy when you talk about the D dollar Index is a bastet currencies and as I mention to you the guys behind the dollar is the same as that’s driving the all the national all the uh central banks so to to prop the dollars is it’s it’s very simple just have the B coming talking about potentially have you know that inflation are persisting and chance of rat cutting is being sh create that expectation there maybe rate hikes to Crow the people into the dollar rally and then they just need to nudge through the Futures Market in in in all the in ask all the other central banks to Brint their National currencies to buy the dollar that’s all you need to do on a temporary basis on a longterm basis um and secondly on the yield so how do you how do you calibrate the uh the treasury market by the managers that’s even easier if you want to if you want the yield to go up you can do what they call the quantitive using which is what the F’s been doing from 2010 to 2020 like if if uh if the if the government is running a deficit and it’s nobody bidding um the bonds which means the Y need to go up the bond prices need to go lower and and and then and then um so the guys the guys would you know make the bond cheaper right to entice investors and if the government’s agenda at that time is to continue the de bench to try to maximize the opo opo dosage to try to re hook down that then they would just monetize the debt the fat can buy it so the fat has got hundreds of billions maybe trillions so that’s how you propop up the treasury and if they want to smash the treasury you can drain liquidity two ways the opposite so the government is easy the government just do deposit spending right continue to issue bonds to drain liquidity from the market when I say drain liquidity is once your money your your dollars your your money your deposit is exchanged for bonds then your money is part so that is liquidity taken out of the market so the the government just as yesterday the government had a very low uh interest uh in fiveyear bond treasury auction and that’s what caused the treasury prices to go down interest rate to spy again this engineer and he because it if the B if the government wanted low interest rates and high TR low interest rate to stimulate the economy they could have easily done that by calling the B to come in monetize the right easy but as I mentioned one more time the era of low interest is over it is one one of the very few occasions where the what the government wants the manager wants the action action that the government wants and the fundamentals of the market is align in the treasury which is they want the treasury to go down they want the interest to go up so that you could owe nothing and be happy and the bed if you to watch the language is scaling bank they have all stopped in in purchasing bonds they’re selling their bonds there’s holding so what’s happening what that means is The Fad is also helping the government in draining liquidity draining the money draining deposit from the market from The Ordinary People because when the fat is sell in the bonds you end up withh holding a paper right and your money is g to the B the B just will just disappear just be barbaren that’s just the asset of the fat so so as as I mention to you the difference between low precious medals and and and shorting treasury fundamentally you are the right trap because the treasury is where zero at the end of the day they don’t they’re not worth anything and similarly uh The Meadows going to should be a lot higher but the difference I favorite treasury over the medals is the medals un cartels are the opposite ends right the cartel on the prices go down whereas in treasury now the cartels and and and the fundamental both are dictate lower interest a higher interest and lower Treasury and that’s what I’m saying that the the yields can to go a lot higher and treasury hasn’t crashed yet when when when the twoyear if you track go uh pick over 5% that’s when hell gonna break loose you just gonna see that 10 year Zoom pass 5% to 6% so that will represent probably a 10 to 20% correction in the yields and that will be a big big deal y really funny is I’m still I don’t watch a lot of Television anymore because that’s just crowd your judgment right but you’re still seeing the uh the economists they’re the worst Bunch right they’re reading they’re just we don’t know we have to wait until the next next time the inflation number come out to see whether there’s going to be a r or rate high or economy there may recession maybe not this is just this is just storytelling and there’s been plenty of times the B come in um even the CPI number right like they cannot control a dayto day but they would revise upward downward so all this is hardw and you have the guys that used to listen to as as you know as gospel the like of of double line Capital um Richard G gunlock Jeffrey gunlock right he’s talking about all this fancy chartings and numbers and leading laging haors he’s saying there’s going to be two R cops this year on CNBC Just Deadly raw is this I’m very clear very very strong conviction you were saying yeah well okay so you alluded to that uh to what I’m about to ask is what does this mean for my listeners what does this mean for the metals market then um how does this play out and also with the metal stocks because it seems like in a typical well I don’t want to say seem it seems typically this would be negative for medals but yet metals have been they’ve been extremely strong here really since last October and I would even argue much longer since I mean gold probably last few years and now it looks like the gold and silver equities have really broken out since February so yeah what does this mean for all of that uh there’s a shortterm and long-term answer um give me both the I think first of all the Ys is coming the Ys is going up the dollar the managers want the dollar to go up and the reason is it’s much easier to deal with white currency there’s several currencies right but but the Aussie dollar and Canadian dollar which are commodity currencies and also uh bo which has at least some resemblance of some governance en normaly so there’s there’s inclination for uh the dollar to head down in fact but so the manager is trying to pump the dollar and that’s why I faor shorting yields rather than loaning the dollar or shorting uh the other currencies now on the medals the medals are very under pressed and that’s why you’re not seeing the M the mining companies making money um the LI of silver mining companies still even though they might gone up double from their low from the start of the year but they’re still 70% from the high and and uh um we’re entering so I think the short answer in the medium term is we’re entering into a traditionally low seasonality and and that the managers are determined to uh rally the dollar and interest is going to go higher so these are the headwinds for gold and silver in the next three to six months uh and then and then same with we also talked about you show why the mining Shares are are not doing uh are are are not going going crazy with Nal are alltime high and yet mining Shares are still 40% of what they were 80% what they were as I mentioned to you is a depleting business Reserve that were there 15 years ago they’re not there anymore the M that the the money equities are are managed are manipulated shortage just like the medals because they don’t want they don’t want people to see you know some particularities of why the shares going up right and then and then and then um and the third is the metal prices are just not the mining companies are not delivering dividends and the third is that the metal investors are different from the mining investors which are retail American Centric whereas the metal investors that are buying they’re from the indiaia from the China from from the Russ and so there that different set of buyers uh eventually will converge when mining companies start delivering profit and dividends so that will have to call for $2,800 gold and around you know4 $50 silver that’s when the fire if you want to see you know what John where am we goingon to see first maist go back to 27 right you’re gonna see 4450 silver and when when is the barracks and and and Newman’s going to challenge alltime High you going to see $2,800 goal uh in the short term I am a little bit different if you if you have a time Horizon of 3 to five years I think it’s still great time to buy the metals and the shares um but you have to be able to withstand uh correction for gold is around 2050 that’s the 200 day moving average and maybe potentially briefly below that and 200 the 50-day moving average is around 2330 which is what we are seeing right now so it’s sitting there on the edge maybe B it over and if it does it could go back to 2050 in a hurry silver the 200 day moving average is around 20 I believe I Rec call it’s around 25 24 25 and the 200 day is don’t call me on it I I have to look up I think it’s around 23 so the downside for silver is a little more it’s for gold technically speaking um and but but but then silver it’s got a 30-day critical resist used to be critical resistant which is on a support of $30 right the Jud still out I would not I would not be doubling down and and taking out lab you should buy right now um because War been the caution I would rather buy silver let’s call Silver for a minute I would rather buy silver on break count of 33 than to be buying here 31 because if you go down below 30 you can see 26 in a hurry in like two or three days yeah the challenging trading silver I as I am trading is very very difficult because when silver breaks out you got to be on the P because he could go for5 in like two days right then can also do a fake breakout sometimes the manager would purposely uh uh stage fake Breakout by actually buying silver to create that breakout to try to maximize the uh the uh the squeeze and then that would then sett down there’s no follow through so it’s very very difficult thing to time um breakout unfortunately um and and everybody’s that time Horizon is very very different too here’s so one I would say if if gold managed to go just break down below 5 day moving average to 23 30 and head down to 200 day of of of 20 2050 2100 I would brace gold at 2100 with two head with with my arms I would I would just like I did with treasure what very very short treaser because technically it’s on the 200 moving average on the bull market um and then with silver as I said I will also be racing with two arms if silver were to ever go back in $25 to $24 range which is a possible I would assign it be a maybe maybe a 30% probability um and then another 30% probability oping around these levels around 30 to 28 $30 is a resistance but they try to stake it down just to induce additional sell and G May Spike up very very difficult Market to trade for silver um my my takeaway is I will not go I will not go I not pledge all for the technical traders for the fundamental Traders with 3 to five year Horizon is still great buying because gold is only 10 15% from Ral level and silver is broken out of 30 and yet to be seeing what’s going to happen I think we’ll be quite happy with that with that with a two-year time of rising uh besides that real estate market I would be leverage uh I would go I think the 7% yeld I think the markets right now is probably seven seven and a half or thir year it’s still a good still a good uh place to uh I when I first bought my home in 1994 it was 8% right and I was going back to that so it’s still try to uh I would not sell my primary all thing instent glue and and better be me you know in the in my bunkers I don’t see it that way but but I would the leverage like I right now I used to own over a dozen real estate so I I’m selling down right now um I person population is decreasing uh and the birth rate is dropping and and the mobility of money and spec speculating by investors globally is is not as big appetite interest rates are rising so I just don’t real estate is a good place to be rather I want physicals that’s another thing I would recommend you want physicals because you never know how digital curency is gonna pan out and you should you don’t want to be imprisoned in the voucher system yeah no I would I would agree with all that in fact um I would not be it’s funny because my family wanted to upgrade our our living quarters and uh our mortgage rate our mortgage would double and just because of our interest rates are my home interest rates about 3% and yeah it just doesn’t make any sense you know we’ll just stick it out in a mon so yeah but interesting too if if silver were to get to 24 $25 ra and gold did to hit about two grand 2100 two grand I I would mortgage that close to buy more so yes I mean you’re a young kid righty well I’m your age I’m your age I still do it so it’s just sometimes it’s not about amount of money it’s the stress level what you’re passionate about and true you know there I think there’s always some point of diminish and return yeah squeeze the extra Penny to you know by by doing a lot more work right and well if you to do that you’d look like me you’d lose all your hair well let’s send on that John I want to thank you so much for coming on the Fly um I really do appreciate that and I’d love to have you on again as things play out um shoot me an email or I’ll shoot you an email John I need you on and uh we’ll talk some physical Andy for the first time in 10 years I’m buy I started buying physical 2005 I reloaded at 2015 and I’m buying physical again not because I’m making I want to make money but I can stash it away um you know there are times where there was they were they were shoving the network ATM in Las Vegas and the sharing electricity in Pakistan you can go like who knows how the scenar is going to pan out right you want some physicals yeah um you this is a very fragile world you know if your phone doesn’t work if your internet doesn’t work if the bank doesn’t work look the if airplane can disappear in the middle of nowhere your like Circ Banks can say your money it’s that your banks are not working it’s not it’s not just some black SW you got to prepare for that and so buy some physical and then not not just speculate make money just like sleep well I think that is some here for the last 20 years I’ve never regretted it I I am not going to say you know what you know like my my my condo in Vancouver has gone up uh three turn in price but yeah my my medals are only double right I don’t look at that way at all and I man guys some physicals and when you buy physicals buy coins because with coins you can only coins it’s like analogy is it’s like you’re buying Steel versus buying Rolex right it’s not orology but when you buy new mathmatics you’re also getting that premium on top of the medals so you’re GNA see the spread continue to widen especially now with the new Medics American Eagles um Maple Leaves uh karant Australian uh Australian the gold coins I like the maps because they’re 99% to e which is 95% grab all you grab all you can before you can’t do that anymore with your digital currency you’re you’re your currency is not good to buy it from the kit codes they’re gonna throttle make a lot easier for them to throttle it so watch out for that yeah well thank you so much John appreciate you having on and let’s shat again yes have good weekend coming coming soon see you byebye

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Comments (15)

  • @issenvan1050 June 5, 2024 Reply

    Will gold & silver bifurcate at some point?

  • @issenvan1050 June 5, 2024 Reply

    How about GDXU?

  • @issenvan1050 June 5, 2024 Reply

    Would oil prices hurt the miners a lot?

  • @issenvan1050 June 5, 2024 Reply

    How does QE make the yields go up?

  • @issenvan1050 June 5, 2024 Reply

    Can DXY & gold go up together?

  • @issenvan1050 June 5, 2024 Reply

    I guess he means “paradigm” when he says “paradox.”

  • @issenvan1050 June 5, 2024 Reply

    So true about Kashkari!

  • @issenvan1050 June 5, 2024 Reply

    Inflation is yesterday’s story. The real threat is an economic downturn now. The YC will un-invert, but not w/ higher yields, due to lower yields, instead.

  • @issenvan1050 June 5, 2024 Reply

    How should silver behave during a recession?

  • @JoseCJou June 5, 2024 Reply

    Good analysis!! However:
    Honest question, English is my second language, and I missed bits and pieces of the interview due to Lee's speed at speaking and not focusing enough on the pronunciation. (IMHO)
    It is just me? Or you guys understand everything fine?
    Again, english is my second language so thats plays a important role anyway.

  • @rudeawakening3833 June 5, 2024 Reply

    Chen Lin is calling for $50.00 silver by June !!!

  • @Coco-yw9nf June 5, 2024 Reply

    All I need AGAIN to go to 8.44.i am happy.

  • @SilverElephantMiningCorp June 5, 2024 Reply

    Great discussion once again! Thank you Andy for bringing on Mr. Lee.

  • @alyssa2155 June 5, 2024 Reply

    get bob moraity back on your channel

  • @jaylinn416 June 5, 2024 Reply

    John Lee is an exciting analyst. A deep thinker. One just has to listen through his accent…

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