The Most Important Macro Chart for Metals Right Now

Over the past few weeks, we’ve spent a lot of time talking about the internal dynamics of the precious metals market.

We’ve covered the extreme volatility event on January 29 that shook the entire precious metals complex. 

We’ve discussed how the miners have held up incredibly well despite that volatility, with several mining ETFs actually positive since that peak. 

And we’ve highlighted key intermarket ratios, like Gold miners relative to Gold, that are breaking out to multi-decade highs and signaling that the broader bull market likely still has legs.

But while internal market signals remain constructive, there’s another piece of the puzzle we can’t ignore.

The macro backdrop.

More specifically, the 2s10s spread, which is simply the difference between the 10-year Treasury yield and the 2-year Treasury yield.

For decades, this has been one of the most helpful indicators for understanding the liquidity environment behind Gold.

When this spread rises, it typically reflects easier financial conditions and expanding liquidity. When it falls, the opposite tends to be true: liquidity tightens and financial conditions become more restrictive.

In simple terms, when the curve steepens, money becomes easier. When it flattens, money becomes harder.

And Gold tends to know the difference.

In fact, the timing of the current Gold bull market lines up almost perfectly with the behavior of this spread.

Back on March 4, 2024, when we first started pounding the table on the precious metals trade, the 2s/10s spread had just put in a major bottom after a brutal multi-year decline. 

That inflection point marked a powerful shift in the liquidity cycle, and since then, the spread has been trending higher.

The result?

One of the strongest multi-year advances in Gold we’ve ever seen.

But trends don’t last forever, and lately the momentum behind that spread has started to fade.

Looking at the longer-term chart, the 2s/10s spread has clearly lost its upside thrust. 

The steepening move that fueled the early stages of this Gold bull market has stalled, and the curve is now rolling over.