Gold: Dubious Speculation
Benjamin Cowen examines gold’s seasonal behavior during midterm years and its relationship with long-term Treasury yields, the dollar, oil, and inflation. He concludes that gold’s recent weakness is consistent with historical patterns, but says the timing and size of its eventual low remain uncertain; he expects strength in gold relative to rising yields to signal that the long end of the yield curve is nearing a top.
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Benjamin Cowen says gold typically bottoms during the summer of midterm years, although the subsequent October-November low can be either higher or lower.
Cowen observes that gold bottomed shortly before the long-term yield curve peaked in both 2018 and 2022.
He says gold has not yet shown the strength that would historically suggest a top in the long end of the yield curve, and warns that gold could still move lower over the next few weeks.
Cowen argues that the 10-year yield’s current rise resembles its moves in 2018 and 2022, when it topped around October or November and gold bottomed shortly beforehand.
He explains that rising long-term yields and a stronger dollar generally pressure gold, while gold tends to recover when it begins to anticipate that yields are topping.
Gold’s Midterm Seasonality
Cowen introduces gold’s recent decline and explains that midterm-year lows often form in summer before retesting during October or November.
Gold Versus Treasury Yields
Historical comparisons with 2014, 2018, 2022, and 1974 show gold often bottoms shortly before the long end of the Treasury curve peaks.
Midterm Yield Curve Patterns
Cowen compares current ten-year yield behavior with prior midterm years, while cautioning that resilient stocks and changing technology make the pattern imperfect.
Yields, Stocks, And Growth
Rising yields and the dollar pressure gold, while stock-market reactions depend on whether yields peak because of inflation, growth concerns, or another regime shift.
Oil And Inflation Risks
Gold’s typical fourth-quarter weakness may continue as oil, Middle East uncertainty, and inflation expectations influence yields and determine whether the low becomes higher or lower.
Fed Policy And Neutral Rates
Cowen argues that the long end is rising not only because of energy prices but also because the Fed funds rate sits well below an estimated neutral rate.
Dollar Strength And Gold
A rising dollar and long-end yields remain bearish for gold, matching 2018 and 2022, while a divergence showing gold strength could signal an approaching yield peak.
Gold’s Potential Low
Cowen expects gold to carve out a higher or lower low from mid-September through October or possibly early November, followed by strength as yields decline.
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