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Gold remains in a bullish big-picture consolidation but failed to break out as the Fed quelled banking issues, and the economy has avoided recession.

The market has discounted a soft landing as capital has moved out of Bonds and into equities.

Inflation expectations have begun to perk up mostly due to the rebound in Oil. 

Gold is struggling because the market has discounted a soft landing and inflation, but the kind associated with an economic rebound. Furthermore, real interest rates have moved to the highest level in nearly 15 years.

As we can see, inflation expectations and commodity prices have rebounded and are approaching their 2022 highs. Meanwhile, the 10-year yield is breaking out, which has started pulling the dollar higher. 

Gold and precious metals could struggle until the yield curve steepens above 0.00, signaling a bear steepener, which is bearish for the stock market. A bear steepener would likely result from a continued steady increase in inflation expectations and the 10-year yield reaching 5%. 

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The Gold market could be waiting for stagflation, which requires, in addition to inflation, rising unemployment and weak growth.

A continued rise in Oil and bond yields would eventually tip the economy into stagflation territory. The jobs market is already weakening, and note that the impact of Fed tightening (according to Apollo Global Management) will be the most severe in Q2 and Q3 2024.

Meanwhile, gold and silver stocks continue to struggle as metals prices have failed to break out and cost pressures remain. Sentiment has turned negative in recent months, and valuations have declined further.  

As I wrote last month, this is a time to research companies poised to benefit from the inevitable breakout and new bull market in Gold. Once stagflation hits in 2024, there is no turning back.  

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