U.S. yields are hurting the gold price
(Kitco News) - The U.S. 10-year yield vs gold chart has started to reach some interesting levels. The chart below is a relative chart measuring the U.S. 10-year yield in percentage terms vs the price of gold. As the chart moves up the performance of U.S. debt performs and vice versa. At the moment gold has been struggling as this alternative safe haven offers some fixed income return unlike just capital gains like gold.
Overnight in the financial markets, yields and the U.S. dollar moved higher as the risk-off trade commenced. You can see from the weekly chart below that the U.S. 10-year yield has outperformed gold significantly this year.
The weekly comparison chart below shows the pair breaking through the red congestion zone with ease but now they are resting at the 50% retracement area will it be as straightforward?
The green area represents a more normal historical level between 2013-18. This does not mean the price has to stop there was remember the market was in full QE mode back then. Now tapering is taking place yields are coming off suppressed lows. Over the coming months, this chart will be an interesting one to watch as gold still has a massive role as a safe haven, especially during risk-off events. But the attraction of higher yields is driving the dollar and the correlation is having a negative impact on the yellow metal.