Precious metals remain the standout movers so far this week | investingLive

The broader market reaction to what was happening with bonds/yields yesterday was a bit of a case of the straw that finally breaks the camel’s back. Long-end yields especially continue to surge globally and that is starting to take a toll on broader markets. The initial reaction was a rush to the dollar, with everything selling off. Now, I’m still unconvinced by that being the right play unless we do invite a much deeper correction in equities.

But at the time, we also saw gold back away from fresh record highs near $3,500 to $3,470 levels. I warned that the dip in gold might not last considering that what is happening with the bond market is actually favourable towards gold. And in US trading, we saw just that as gold rebounded strongly to reclaim fresh record highs above $3,500 where it sits now.

For some context as to why that is the case: The US yield curve continues to steepen post-Jackson Hole

I’d be keeping a very, very close eye on 30-year Treasury yields as it inches towards the 5% mark now. That’s going to be a defining level for what is happening globally, even if we do see UK and French long-end yields hit multi-year highs. And we might not have to wait long to test the waters here with the non-farm payrolls coming up on Friday.

Circling back to gold, the latest breakout here affords some breathing room for buyers to keep up the momentum. That especially after a modest period of consolidation since the end of May.

However, I reckon we might need confirmation from US data this week before the upside leg can be sustained. As US yields continue to rise, something’s gotta give eventually.

It is either we eventually get more coherent policy from the US administration or some additional confirmation that the economy is easing enough to pressure the Fed into cutting rates faster. Otherwise, this is a collision course that is bound to strike at the heart of how markets have been positioning themselves all through this year.

Besides gold, silver is also shining brightly this week in a push to $40.75 currently. Price is hovering at its highest levels since 2011 with little resistance standing in its way now. The 2011 high hit $49.81 with the previous surge in 1979/80 clipping $48.00. That will be the bigger target if and once silver establishes the next higher range from hereon.