How gold acts as a barometer of economic stability
gold has always been fascinating. Its value is not merely measured in carats or purity but in its ability to provide a haven of stability in turbulent economic waters. Gold can act as a smart signal to understand if the economy is going well.
Even when the economy is always changing, gold stays strong. It is like a lighthouse that shows a good way for people who know how to see its signals.
But here’s the thing: just looking at gold by itself doesn’t give us the whole picture. It’s like having one puzzle piece but not the whole puzzle.
When we look at how gold connects to other financial things, it’s like finding hidden treasure. In this article, we will explore how gold links up with bond yields, crude oil, and the USD INR exchange rate.
Let us understand the effect of an increase in bond yields on the overall market. The 10-year US Government Bond Yield has surged to its highest level since 2007.
This significant increase in bond yields is driven by rising interest rates and further fueled by geopolitical risks.
Higher bond yields can lead to increased borrowing costs for businesses and individuals, potentially affecting consumer spending and economic growth. Higher bond yields can further put downward pressure on stock markets, as they make equities comparatively less attractive thereby leading to increased market volatility and market corrections.
The above figure displays the ratio chart of Gold (US$/OZ) to the United States 10-year Government Bonds Yield.
