While I was listening to Gwen Preston of Resource Maven speak at the New Orleans Investment Conference this afternoon it struck me how precious metals and gold mining shares have become a ping-pong ball tossed around by day-to-day movements in Treasury yields:
GDX (Daily) with US 10-year yield (above) and GDX/TNX correlation (below)
Gwen focused much of her presentation around expectations for Fed rate hikes and real interest rates, at one point stating "Gold will slide over the next 6-7 weeks due to expected Fed rate hike. But then gold will rally because gold overprices in the event (the rate hike)."
As sad as it is, she isn't far off with the above assertion and the chart above illustrates how strong the negative correlation has become between the 10-year UST yield and gold miners (GDX).
I will assert that the next real BUY signal for precious metals and precious metals mining shares will occur when this negative correlation between Treasury yields and the precious metals sector is broken decisively (and becomes a zero or even a positive correlation). What proves to be the catalyst to shift the current inter-market dynamic is anyone's guess, but a continued decline of the US dollar as the global reserve currency can't be far away from the top of the list.
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