What is our trading focus?
XAUUSD - Spot gold
XAGUSD - Spot silver
XAUXAG - Gold-Silver ratio
GDX:xlon - VanEck Vectors Gold Miners UCITS ETF
IGLN:xlon - iShares Physical Gold ETC
ISLN:xlon - iShares Physical Silver ETC
Gold and silver trade a tad higher today after spending the past week consolidating around $1800 and $19. Its raising the question whether they are getting ready to continue their journey higher? Despite the potential headwind from optimism over a coronavirus vaccine, the foundation for a move higher is there. Not least due to a dollar punching at major support, U.S.-China tensions on the rise and real yields moving deeper into negative territory.
In our June 9 market update we highlighted the reasons why the potential introduction of yield-curve control by the U.S. Federal Reserve could end up being gold’s best friend. Yesterday Federal Reserve Governor Lael Brainard, an influential “dove” on the Fed’s board, warned that the U.S. economy appears to be slowing. While the Fed would need to carry out more analysis she gave a strong signal that yield-curve control was coming.
Some of the major moves in gold during the past decade often started with developments in the bond market. The real yield is the return an investor get on holding a bond position once the nominal yield has been reduced by the expected inflation during the life of the bond. Rising inflation expectations would normally increase the nominal yield as investors would want to be compensated for the lower real return.