Judging by the yield curve of U.S. Treasury bonds, the U.S. economy is likely approaching a pivotal moment. Long positions are accelerating in growth.
Despite continued strong selling pressure on gold, analysts have noted that the precious metal remains relatively stable amid the maximum rise in long-term U.S. bonds.
On Wednesday, the yield of 30-year bonds rose to a peak of 5%, the highest level since August 2007. At the same time, the 10-year bond yields is trading at 4.8%, which is a new 16-year high.
Despite this, gold manages to hold above the key level of $1,800 per ounce.
The rise in bond yields is creating a market environment similar to what was observed in previous recessionary periods. Events in the fourth quarter of 2023 are unfolding as a combination of events from 1987—when bond prices plummeted before the stock market crash, and 2008—when crude oil reached its peak. In 2008, the price of gold fell from $1,000 per ounce to $700, followed by rallies to $1,900.
Currently, the outflow of gold from ETFs is partly driven by the overwhelming strength of the U.S. government. And despite the potential for bond yields to continue rising, according to many analysts, it’s likely approaching a peak, especially as the U.S. labor market begins to cool down.
According to Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, markets will be sensitive to disappointing economic data ahead of Friday’s Non-Farm Payrolls report. In his view, bond yields will reach a peak, even though the Federal Reserve is expected to continue its restrictive monetary policy in the near future.
Some analysts believe that since gold prices are trading near their lowest levels since early March, the yellow metal may become an attractive purchase.
Investors should also note that higher bond yields could harm the U.S. economy, and weak economic growth and persistent inflation continue to create stagflationary conditions favorable for gold.
Growing debt and geopolitical instability may make U.S. bonds less attractive to foreign investors. Additionally, there is a risk that the Federal Reserve may lose control of yields and be forced to become the lender of last resort.
There is a possibility that before the Fed begins cutting rates, it will be forced to expand its balance sheet through new rounds of quantitative easing, which would be another positive for the precious metal.
At present, the Fed is grappling with growing economic risks, and in the near future, they are unlikely to bring inflation back to the 2% target level.
The material has been provided by InstaForex Company – www.instaforex.com
Judging by the yield curve of U.S. Treasury bonds, the U.S. economy is likely approaching a pivotal moment. Long positions are accelerating in growth.
Despite continued strong selling pressure on gold, analysts have noted that the precious metal remains relatively stable amid the maximum rise in long-term U.S. bonds.
On Wednesday, the yield of 30-year bonds rose to a peak of 5%, the highest level since August 2007. At the same time, the 10-year bond yields is trading at 4.8%, which is a new 16-year high.
Despite this, gold manages to hold above the key level of $1,800 per ounce.
The rise in bond yields is creating a market environment similar to what was observed in previous recessionary periods. Events in the fourth quarter of 2023 are unfolding as a combination of events from 1987—when bond prices plummeted before the stock market crash, and 2008—when crude oil reached its peak. In 2008, the price of gold fell from $1,000 per ounce to $700, followed by rallies to $1,900.
Currently, the outflow of gold from ETFs is partly driven by the overwhelming strength of the U.S. government. And despite the potential for bond yields to continue rising, according to many analysts, it’s likely approaching a peak, especially as the U.S. labor market begins to cool down.
According to Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, markets will be sensitive to disappointing economic data ahead of Friday’s Non-Farm Payrolls report. In his view, bond yields will reach a peak, even though the Federal Reserve is expected to continue its restrictive monetary policy in the near future.
Some analysts believe that since gold prices are trading near their lowest levels since early March, the yellow metal may become an attractive purchase.
Investors should also note that higher bond yields could harm the U.S. economy, and weak economic growth and persistent inflation continue to create stagflationary conditions favorable for gold.
Growing debt and geopolitical instability may make U.S. bonds less attractive to foreign investors. Additionally, there is a risk that the Federal Reserve may lose control of yields and be forced to become the lender of last resort.
There is a possibility that before the Fed begins cutting rates, it will be forced to expand its balance sheet through new rounds of quantitative easing, which would be another positive for the precious metal.
At present, the Fed is grappling with growing economic risks, and in the near future, they are unlikely to bring inflation back to the 2% target level.
The material has been provided by InstaForex Company – www.instaforex.com
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