The document discusses the deflationary fears in the market due to the ongoing China/US trade war, highlighting the performance of gold and bonds as safety assets amid stock market declines. It notes a significant risk associated with China potentially selling US bonds, which could trigger a bond market crash and revalue precious metals. The situation emphasizes the vulnerability of paper assets, particularly dollar-denominated securities, against deflationary pressures.

1. BREAKING NEWS
Home Weekly Market Analysis
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By Bullion Exchanges • on May 28, 2019 • in Weekly Market Analysis • Edit
DURING THE CHINA/UNITED
STATES TRADE WARS, THE
MARKET REFLECTED A
DEFLATIONARY FEAR
RESPONSE OVER THE PAST
TWO WEEKS.
A large number of currencies, gold, and bonds in the market have sold off
and remain all as safety assets. As precious metal investors, one essential
skill is to indicate deflation or inflation within the stock market. To observe,
let’s focus on how paper assets are performing compared to gold during a
declining stock market scenario.
1HR 1DAY 1WK 1MO
3MO 1YR MAX
17:23 00:04 06:45
1278
1281
1284
1287
Gold Silver Platinum
Palladium
»
WHAT’S GOING ON WITH CHINA
AND THE BONDS?
China and the Bond Bubble 4 HOURS AGO
LIVE GRAPHS
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2. The graph above shows a correlation in the stock market (S&P 500), a real
safety asset (gold), and a paper safety asset (US long-term bonds) since
May 1st, top in stocks.
Nearly two weeks ago, both bonds and gold rose in performance. View the
latest stock market analysis; the bonds outperformed gold.
This is an indication that the markets are more focused on deflation as the
primary threat, rather than inflation. The bonds should be the lesser
performing asset class during the inflationary period.
On the other hand, a high inflation period will not receive a bid for security
beside gold. The main problem is what investors worry about most: the
value of paper dollars.
What is worse than holding dollars now? The result of keeping promises for
dollars at a later date (bonds).
CHINA THREATENS TO SELL BONDS
Below is a recent Twitter post by Hu Xijin, editor of the official Communist
Chinese state-run newspaper, the Global Times.
Note the red circled words: Threat by China to sell US Bonds.
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3. A bond market crash is a trigger which results in a precious metals
revaluation.
To keep in mind that China is the #1 holder of US Treasuries, at over $1.1
trillion. China funds a significant portion of the American way of life, such
as commodity goods.
Here is the first threat to sell US paper to come out of anyone officially
associated with the Communist party.
Ironically, US Treasuries rose due to the fear of China, threatening to sell
them, which Mr. Xijin stated.
THE BOND BUBBLE?
This form of behavior shows us that the bond bubble – likely bigger than
the NASDAQ bubble of 1999, the crypto mania last year, and the South Sea
bubble of the late 1700’s combined – is still inflating.
A bursting of the bond bubble, a market which has been rising for 39-
years, is the focal point of our precious metals bull market thesis.
A signature of a long-term top appeared in the US bond market in 2016,
shown in blue. A signature does not guarantee a top, but it does set a
prerequisite for such.

4. MAINSTREAM DISBELIEF
Today, no one in the mainstream press believes that China could even
contemplate selling its US Treasury holdings.
Selling some of China’s Treasury holdings would threaten the value of the
rest of their holdings.
At some point, even the most irrational of investors will stop throwing
good money after bad. And this will be the day that the US bond bubble
begins to deflate.
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Tags: Bonds China gold price

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