The title was not meant as a play on words in reference to Operation Twist, but now that I think about it, maybe it should be. The Post-Twist financial world is far different than it was before the genius that is Ben Bernanke’s ‘bigger than yours or mine’ brain concocted a maniacal plan that would ‘sanitize inflation’ signals from the bond market and break the then highly elevated yield curve.*
So, why is today like early 2013 and why is there a twist to that view? Because two indicators have come together to point to economic stability (at least) in the US, with the twist being that other indicators are pointing to a potential unchaining of inflation this time, unlike the 2013 time frame, which was in the grips of global deflation (and Goldilocks in the US).
So gold bugs, don’t get too concerned just yet. The sector has been overdue for a correction and that is what it has been getting. Speaking of sanitizing things, over bullish gold sector sentiment has needed a good clean out. The 2013 signal immediately preceded the worst of the precious metals bear market, but the 2016 signal need not for reasons explained later in the article.
However, gung ho bugs should have a plan to moderate or alter their views on gold stocks because they are likely to be nothing special, fundamentally, in what unfolds going forward. In other words, you should tune out gold obsessives who want you to be enthralled with this sector above all others (or modify the types of precious metals stocks you invest in, which we often discuss in NFTRH).
This post was published at GoldSeek on 2 October 2016.