GOLD PRICE FORECAST: PRECIOUS METALS SWINGING WITH REAL YIELDS
- Gold price motion has nudged barely greater since final week’s selloff
- Gold volatility seems largely pushed by current swings in actual yields
- Lengthy-term trend assist appears to have supplied some buoyancy
Gold worth motion has stabilized since final week’s sharp selloff. The dear metallic sank practically 7% from its year-to-date excessive of $1,963 and invalidated its breakout above $1,900. Surging Treasury yields, and corresponding US Dollar power, stand out as the first driver of current gold volatility.
GOLD PRICE CHART WITH 10-YEAR US REAL YIELD OVERLAID: DAILY TIME FRAME (JUN 2020 TO JAN 2021)
On the again of ‘excessive price ticket’ stimulus plans anticipated from president-elect Biden, nevertheless, future inflation expectations appear to be accelerating greater. That is seemingly serving to steer actual yields tick again decrease. To not point out, with Federal Reserve Chair Powell reiterating the central financial institution’s uber-accomodative stance at this time, coupled with strong demand for long-term Treasuries at auctions earlier this week, there’s potential for Treasury yields to face notable headwinds extra broadly.
| Change in | Longs | Shorts | OI |
| Daily | 2% | -4% | 1% |
| Weekly | 2% | -13% | 0% |
A situation the place Treasury yields battle to increase their sharp advance and inflation expectations proceed to rise may recharge the broader bullish gold thesis. That is contemplating the commonly robust inverse relationship between gold costs and the route of actual yields. That mentioned, one other leg greater in actual yields would seemingly weigh negatively on gold worth motion.
GOLD PRICE CHART: WEEKLY TIME FRAME (SEP 2019 TO JAN 2021)
Chart by @RichDvorakFX created utilizing TradingView
Turning to a weekly gold chart we are able to see that the most recent selloff discovered technical support close to its long-term bullish trendline connecting the March 2020 and November 2020 swing lows. Gold costs now look caught between $1,780-1,960 roughly highlighted by the mid-point and 23.6% Fibonacci retracement of final 12 months’s buying and selling vary. Breaching this decrease technical barrier could tee up a deeper pullback towards the $1,700-price mark, although the underside Bollinger Band may assist stymie potential promoting strain. Alternatively, eclipsing the November 2020 swing excessive may encourage gold bulls to set their sights again on all-time highs.
— Written by Rich Dvorak, Analyst for DailyFX.com
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