Looking For A Sign Gold Has Bottomed? I Have One.

Today’s action is different. And different is good.

Since March, gold has struggled with rising oil prices, rising bond yields or rising rate hike expectatons.

But here we are with the 30-year long bond on the verge of a major breakout, and rate hike expectations rising, yet the price of gold and silver are up anyway.

30-year Long Bond vs Gold

CME October 2026 Rate Hike Expectations

Unfortunately, I do not have a chart of rate hike expections over time.

However, since March, rate hike expectations have been rising. And generally, that’s not good for gold unless the market perceives the Fed is increasingly behind the curve.

The sobering fact is the market thinks there is an 84 percent chance of at least one hike by the election.

There’s a 38.9 percent chance of multiple hikes.

Rising rate hike expectations are what’s really been troubling gold. Since July, gold hasn’t done much, but it has ignored those expectations.

Different Is Good

Technically Speaking

Technically speaking, gold needs to decisively clear 4300 to break the downtrend.

So while different is good, we do not yet have technical confirmation.

Fundamentally speaking, we have increasing deficits, rising inflation, and a stable reaction to expected rate hikes.

When Does Gold Do Well?

I discussed this on August 6, 2016. Please consider When Does Gold Do Well?

Gold Does Well in These Environments
Deflation
Hyperinflation
Stagflation
Decreasing faith that central banks have everything under control.
Rising credit stress and fear of defaults
Gold Does Poorly in These Environments
Disinflation (1980 to 2000 is a perfect example. There was inflation every step of the way but gold got clobbered).
Increasing faith in central banks’ ability to keep things under control (Mario Draghi’s “Whatever it takes” speech triggered a prime example)
Gold does worst in prolonged disinflation and in periods that have rising faith in central banks.
I suppose one could condense this all down to increasing or decreasing faith that central banks to have everything under control.

Gold Not an Inflation Hedge
As I have pointed out numerous times, and contrary to popular belief, gold is not an inflation hedge. Gold fell from $800 to $250 with inflation every step of the way.
Rather, gold is a measure of faith in central banks that everything is under control.

July 23, 2020: Gold Has Only One Resistance Point Left: The All-Time High

Gold does worst when faith in central banks is the highest. Greenspan’s great moderation is the best example. Greenspan was considered the great “Maestro” who could do no wrong.
That theory crashed to earth in the DotCom bust. We have now had 3 major economic bubbles in 20 years.
Gold vs Faith in Central Banks

December 22, 2025: Gold and Silver Surge to New Record Highs, What’s Going On?

Gold vs Faith in Central Banks
I created similar charts years ago and periodically update them. That above chart is recent enough to not type all those anecdotes again.