The market is starting to choke on the massive size of US Treasury auctions. Auctions sizes are particularly large currently as Treasury refills its coffer after emptying most of the surplus during the close to the wire negotiations on the US debt limit. We're talking $500-600 billion in debt being auctioned off every week to pay off the expiring bonds that fund the soon to be $34 trillion debt, as well as to cover the monthly deficits. And with the US running $100-200 billion monthly deficits, that's an additional $25 billion or more in debt that needs to be raised every week.
On Wednesday demand for the 20 year bonds being auctioned off was underwhelming. So, interest rates went up, the US dollar index (DXY) responded by going higher, and that led the alogos to sell off gold and silver futures. The Wednesday dip in the price of gold and silver futures was reversed the next day.
In a more rational world, weak bond auctions would be a sign of trouble for the US dollar, and the prescious metal futures would go higher. And eventually, that will be the case. But for now, don't be surprised by dips in the price of gold and silver after weak US bond auctions.
While there are no long term bond auctions scheduled for the rest of 2023, there will be a heavy schedule next month. But with the enormous funding requirements, Treasury auctions can not be completely shut down for the rest of December. There will be 5 and 7 year note auctions next week (12/27 and 12/28), but these auctions are much less likely to lead to fireworks than long term bond auctions
