Gold tumbles as the dollar and bond yields rise
Head of Commodity Strategy
Gold has tumbled through support at $1300/oz. This is in response to a continued rise in US bond yields and the dollar. The combination of US 10-year yields trading above 3% and with break-even yields still stuck below 2.2%, the real yield – which is important for gold – has climbed to 0.90%, an almost five-year high.
Adding to this, the negative impact of a renewed rise in the dollar, traders found the downside in gold to be in the direction of least resistance,
The continued rally in crude oil, which may not pause until $80/b is reached (Saudi Arabia’s target), has raised concern about rising inflation.
And this has increased the risk of another three US rate hikes this year to 40% while another rate hike has also been gathering some momentum.
The technical levels to look out for, apart from the potential risk of short covering on a swift return above $1305/oz, are now $1286/oz and below that, as low as $1262/oz. Geopolitical risks, which have helped drive crude oil to a four-year high, have so far provide limited support to gold given the immediate risk of rising yields and the stronger dollar. The S&P 500 is currently down by $22 after having rallied $100 during the previous seven sessions. An escalated sell-off in stocks may provide enough support to halt the sell-off above $1286/oz.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.