Chart Advisor: Gold Suggests No Rate Cuts

By C. Theodore Hicks II, CMT, CFP, CKA

1/ Gold Basing

2/ Ten Year Yield – Secular Trend Change

3/ 10-Year Consolidates? (Trend Pause)

4/ 10-Year and Inflation

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1/

Gold Basing

Chairman Powell and the FOMC will meet next week. As they conclude their two-day meeting, they will announce whether or not President Trump will get his Fed Funds rate cut. While I’m not in the business of making forecasts, I think President Trump might be disappointed.

If we look at Gold – using IAU as a proxy – it has been building a base since April. While it has not moved higher, it cannot seem to go lower either. Using history as our guide, this suggests that the markets do not believe the battle with inflation is over. A case can also be made that yesterday’s action began a move higher out of this base.

Past performance is not indicative of future results

2/

Ten Year Yield – Secular Trend Change

Chart 2 is showing the yield for the 10-year US Treasury dating back to 1965. The big red trendline is drawn just to illustrate that from 1980 to 2022 we were in a declining interest rate environment. I discuss this in my book, Evidence-Based Investing, when the 10-year yield crossed above that trendline, that was a secular trend change.

That has broad implications.

Past performance is not indicative of future results

3/

10-Year Consolidates? (Trend Pause)

While the 10-year yield has absolutely broken the secular bear-market trend for yields, I am not yet declaring that we are in a secular bull-market for yields. In other words, rates have risen but I’m not convinced that they will continue to rise. I need to see some more evidence.

Looking at our third chart for today, this is how I see it.

The bottom blue-gray rectangle illustrates what I thought could be an important support level. This is ~3.4%. But yields have not yet come down to that level. So, I no longer really think that’s a solid support area.

Past performance is not indicative of future results

The top blue-gray rectangle represents what I think could be an important resistance level.

However, the way yields have played out, I now view the green trend line as support and the red trend line as resistance. The way I’m reading this, this is a bullish pennant thereby implying that rates could very well go higher.

First a reminder that all chart patterns are suggestive, not predictive. Secondly, my team and I do not trade off patterns. However, they do help us see what could happen, so we are thinking in advance.

So, what’s the point?

4/

10-Year and Inflation

I am an avid reader. On average, I read about 40-50 books each year. At the moment, I’m finishing Ray Dalio’s latest book How Countries Go Broke: The Big Cycle. It is a good book … but you should buy mine first. 😉

In Chapter 10 (page 200 in the hard cover) of Dalio’s book, he shows a chart that I’ve tried to recreate below.

Past performance is not indicative of future results

The green line is again showing the 10-year yield. The red line is the 3-year average for the Rate of Change in the Consumer Price Index. Notice the relatively high correlation between the two.

When I look at all of this together, it leads me to believe that Chairman Powell will not lower interest rates just yet. I read some very smart economists – mainly those who do not put a (D) or an (R) behind their name – who say Powell should cut. Maybe they are right. I’m only an armchair economist who manages money for a living. This is just how I see it and whether I’m right or wrong has no impact on the trades we enter; it’s just not a part of our investment process.

So, I make no prediction but know that Powell and the Fed seem to believe that keeping rates higher for longer will help keep inflation from moving higher.  Ultimately, we want the economy to grow neither too fast nor too slow. We want that Goldilocks economy.

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Originally posted 22nd July 2025