Categories: Precious Metals
Topics: Gold Stocks

Gold Near Record High Amid Falling Bond Yields

Gold is trying to do its thing. 

And not because of the de-dollarization stories that are dominating the wires of the interwebs, but because of the economic slowdown and the commensurate fall in bond yields that is now at hand. 

The yield on the US 10-year dropped to 3.25% last week, down from its peak of 4.33% back in October. It’s no coincidence that that peak coincided with the turnaround in gold prices.

The yield on the US 10-year dropped to 3.25% last week, it’s no coincidence that that peak coincided with the turnaround in gold prices.

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I would’ve liked to see a monthly and quarterly close above the key $2,000 per ounce level to really confirm gold’s bullishness, but it didn’t happen. Gold is still bullish even without it, but until we convincingly get north of $2,077 pullbacks to ~$1,950 are still in play. And if those pullbacks materialize, you should be using them to build or top off quality gold positions.

I’ve said for months we were heading toward a recession. That is now being born out by the data and evidenced in the bond market. 

Reuter’s summed up last week’s data thusly: 

The ADP National Employment report showed U.S. private employers hired far fewer workers than expected in March. That followed Tuesday's weak job openings data.

As well, the Institute for Supply Management's survey showed the services sector slowed more than expected last month on cooling demand, while a measure of prices paid by services businesses fell to a near three-year low.

Earlier this week data showed falling factory orders and soft manufacturing activity.

This has led to the widely watched Atlanta Fed’s GDPNow estimate for Q1 to be cut in half over the past few weeks, from a fantasy of 3.5% to a still overly optimistic 1.5%.

Atlanta Fed’s GDPNow estimate for Q1 to be cut in half over the past few weeks, from a fantasy of 3.5% to a still overly optimistic 1.5%.

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OPEC even decided to further cut production in the face of what it must see as coming recessionary demand destruction. And still, all oil could muster was getting to the top end of its one-month range near $80 per barrel. 

Expect more chop and broad market downside as spring blossoms, just in time for a June debt ceiling fight. 

And expect gold to continue doing its thing, with gold stocks providing leverage to near-record gold prices.

Gold Near Record High Amid Falling Bond Yields.

Nick Hodge

Nick Hodge
Publisher, Resource Stock Digest