Gold: Back to $1,800s if US Yields Don’t Back Off?
Gold longs are having their best year since the pandemic. In seven of the past 10 months, futures of the yellow metal have peaked above the cherished $2,000-an-ounce mark. Even the spot price of bullion, which holds itself to a more rigorous standard, has attained $2,000 glory four times, last in October, after an earlier three-month run between March and May.
Having benefited from a bunch of drivers, from global recession fears to the ongoing Israel-Hamas war which have made it a choice haven for many, both the futures and spot price are firmly ensconced in upper $1,900 territory now. With just over 60 days left for the year’s close, gold’s fairytale run could be threatened by an old nemesis: US yields.
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The jaw-dropping selloff in US bonds — that has sent the yield on the benchmark 10-year Treasury note to 2007 highs of above 5% — has been both a boon and bane for gold.
On one end, the run-up yields has created such a high imbalance between the United States and the rest of the world that the resultant concerns of a global — if not at least, European — recession have sent risk-averse investors flocking to gold.
Those same investors sometimes see non-yielding gold as an asset to stay away from amid rising US federal deficits and the Federal Reserve's guidance that it will keep rates high until it is convinced that inflation is under control.
The Fed has another rate decision later today where it is not expected to make any change.
Notwithstanding that, the landscape for all asset valuations is deteriorating as the sell-off in Treasuries weighs across asset classes and increases borrowing costs for companies and consumers alike.
The Fed, in trying to
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