There is a long running inverse relationship between gold and yields. As a non-interest bearing asset, gold becomes less attractive when yields, or real yields in-particular, go up.
Using the TIPS (Treasury Inflation-Protected Securities) and inverting the price (price and yields are inversely related), we get a proxy for real-yields. With this, we can look at the 10-year chart of gold prices vs yields and the inverse relationship becomes clear now-- rising real yields push gold prices down!
As gold is quoted in US dollar, the strengthening dollar has added salt to the wound, further weakening the price of gold.
On a shorter timeframe, the 1875 handle seems to be of a significant level, providing the previous levels of support and resistance.
With this support level breached last week and a retest this week, coupled with the rising yields and a strong US dollar, we see further downside for gold from here.
Entry at 1875, stop above 1960. Targets are 1762 and 1680.
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
Using the TIPS (Treasury Inflation-Protected Securities) and inverting the price (price and yields are inversely related), we get a proxy for real-yields. With this, we can look at the 10-year chart of gold prices vs yields and the inverse relationship becomes clear now-- rising real yields push gold prices down!
As gold is quoted in US dollar, the strengthening dollar has added salt to the wound, further weakening the price of gold.
On a shorter timeframe, the 1875 handle seems to be of a significant level, providing the previous levels of support and resistance.
With this support level breached last week and a retest this week, coupled with the rising yields and a strong US dollar, we see further downside for gold from here.
Entry at 1875, stop above 1960. Targets are 1762 and 1680.
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
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