Ignore the Noise And Continue Accumulating Gold - ONE-TWENTY TWO: Trading Financial Markets

(This is an excerpt from an article I originally published on Seeking Alpha on July 1, 2013. Click here to read the entire piece.)

One of the scenarios I did not consider in my longstanding bullishness on gold is that the bond market might actually rise up AGAINST the wishes of the Federal Reserve. If the Fed actually loses control of the bond market, and increasingly this seems to be the case, I expect gold (GLD) to continue to lose its luster as the psychology of deflation transitions into an assumption that higher yields are finally on their way to pricing in future inflation (or inflation risks).

The recent surge in yields now appears to be part of an extended bottoming process

Source: The St. Louis Federal Reserve

TLT gets slammed - trading at levels last seen in September, 2011 — TLT gets slammed – trading at levels last seen in September, 2011

Source: FreeStockCharts.com

{snip}

Through all the blustering hype about bond tapering, Federal Reserve Chairman Ben Bernanke made clear in his last statements on monetary policy that the Fed still has the same rules for tightening policy it established back in 2011, and it has no intention of tightening policy anytime soon. The current economic recovery is not strong enough to warrant a tightening in policy. In fact, the Fed wants to keep monetary policy loose for some time even after a recovery appears to finally be firmly in place. {snip}

Fundamentally, I believe what has happened is much more a change in market psychology and sentiment than a real change in policy or economic growth. The likely implications of this change in psychology are tremendous for gold (and silver). {snip}

Having this singular focus means I am more pragmatic than dogmatic about my bullishness on gold. {snip}

We gold investors have had it relatively easy for many years now. Gold haters constantly called tops with every rally, and we would scoff and take great comfort in the next resumption of the rally. The broken clocks finally got it right in 2011 as gold made a “mini”-parabolic move to what now stands as a lasting high. {snip}