Jump to content

Gold grapples with rising US yields: Navigating the market's triple top dilemma

Recommended Posts

The gold price has succumbed to US dollar strength of late with the Fed in focus and Treasury yields and real yields continue to elevate and might add to dollar demand.


bg_gold_bar_bullion.jpgSource: Bloomberg


Daniel McCarthy | Strategist, | Publication date: Monday 29 May 2023 

The gold price slid to a two-month low to start the week as concerns around the US debt ceiling appear to be subsiding at the same time that US yields are ticking higher.

Treasury yields have been steadily climbing throughout the last few weeks across the curve, but the most notable changes have been seen at the short end of the curve.

The benchmark 2-year bond made a run above 4.60% on Friday after having dipped to 3.66% earlier this month.

The 1-year note also made a 23-year high on Friday when it nudged 5.30%. It touched 4.03% in early March and the higher rate of return reflects the markets’ perception that the Federal Reserve is less likely to be cutting rates this year. Interest rate swaps and futures markets have kicked that concept into 2024.

The higher return from US dollar denominated debt seems to have broadly supported the ‘big dollar’.

It is making multi-month peaks against many currencies and the commodity complex is generally lower but silver managed to notch up a decent rally on Friday. Although it still finished down for last week and it is steady to start this week near US$ 23.30 an ounce.

Undermining the yellow metal is the rise in US real yields. The real yield is the nominal yield less the market-priced inflation rate derived from Treasury inflation-protected securities (TIPS) for the same tenor.

The widely watched US 10-year real yield is approaching 1.60%, a level not seen since the regional banking crisis unfolded back in March. When the inflation-adjusted return is rising, investors are left to ponder the outlook for non-interest-bearing commodities such as gold.

The US dollar has been on a steady run higher of late and the direction in the DXY (USD) Index might lead the precious metal on its next move. At the same time, gold volatility has been slipping and this may indicate that the market is at ease with the current pricing.

GC1 (gold futures), US 10-year real yield, DXY (USD) index, GVZ (gold volatility)


1-gold-price-dented-by-us-dollar-rally-wSource: TradingView

GC1 (gold front futures contract) technical analysis

Gold remains in an ascending trend channel that began in November last year but is currently testing the lower bound of that channel.

The early May high of 2085.4 eclipsed the March 2022 peak of 2078.8 but was unable to overcome the all-time high of 2089.2. This failure to break new ground to the upside has created a Triple Top which is an extension of a Double Top formation.

This has set up a potential resistance zone in the 20280 – 2090 area but a snap above those levels may indicate evolving bullishness. The next level of resistance could be at the upper ascending trend channel line that is currently near 2160.

On the downside, the price is at an interesting juncture with the ascending trend line being questioned. At the same time, there are two prior lows near that trend line as well as the 100-day Simple Moving Average (SMA).

A clean break below 1930 might see a bearish run unfold but if these levels hold, it may suggest that the overall bull run could continue. In this regard, the price action in the next few sessions might provide clues for medium-term direction.

Gold futures daily chart


2-gold-price-dented-by-us-dollar-rally-wSource: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 27/09/23 15:32
  • Posts

    • Hi buddy, from my experience m, you sounded like you're setting a life goal for yourself in the crypto trading journey while some only treat it as a side gain where they only trade to make some profits, but seeing your eagerness, I'll say you should take it slow and do some due research.  You can try copy trading, it seems people make a lot from it following experts' trades. Please ensure you do your research and don't just take words from people you meet online. Be consistent with your savings of profits and see how you'll grow.
    • Lam Research Corp., Elliott Wave Technical Analysis Lam Research Corp., (LRCX:NASDAQ): Daily Chart, 27 September 23 LRCX Stock Market Analysis: Looking for upside into wave {v} as we seem to be near the end of the correction into wave {iv}. We could find support on the base channel before turning higher.   LRCX Elliott Wave Count: Wave (c) of {iv}. LRCX Technical Indicators: Between 20 and 200EMA.   LRCX Trading Strategy: Looking for longs into wave {v}. TradingLounge Analyst: Alessio Barretta         Lam Research Corp., LRCX: 4-hour Chart, 27 September 23 Lam Research Corp., Elliott Wave Technical Analysis LRCX Stock Market Analysis: Looking for wave (c) to end within equality and 1.618 (c) vs.(a). We can also look at the current RSI divergence we are seeing.   LRCX Elliott Wave count:  Wave v of (c). LRCX Technical Indicators: Below al averages.   LRCX Trading Strategy: Looking for longs into wave {v} after upside confirmation.
    • AUDJPY Elliott Wave Analysis Trading Lounge Day  Chart, 27 September 23 Australian Dollar / Japanese Yen(AUDJPY) Day Chart AUDJPY Elliott Wave Technical Analysis Function: Counter Trend Mode: impulsive Structure: blue wave 3 of C Position:  black wave C Direction Next lower Degrees: wave (3 of C) continue Details: blue corrective wave 2 looking completed at 96.083.now blue wave 3 started and strong move expected . Wave Cancel invalid level:96.081   The AUD/JPY Elliott Wave Analysis on 27 September 23, examines the Day Chart of the Australian Dollar/Japanese Yen (AUD/JPY) currency pair. This analysis utilizes Elliott Wave theory to provide insights into potential market trends and price movements.   The analysis identifies its Function as "Counter Trend," indicating a focus on identifying and interpreting market movements that run contrary to the prevailing trend. In this context, "counter trend" suggests an emphasis on potential reversals or corrective movements within the market.   The Mode is characterized as "impulsive," which implies an anticipation of strong and directional price movement. Specifically, the analysis expects an impulsive wave sequence within the market, suggesting the potential for significant and decisive price shifts.   The Market Structure is described as "blue wave 3 of C." This highlights the importance of the third wave within a broader C-wave structure in the Elliott Wave sequence. It signifies that the analysis is centered on the development of this specific wave.   The Position specifies that the analysis pertains to "black wave C," indicating that the entire C-wave structure is of interest in the analysis. This means that the broader context of the C-wave is taken into consideration.   The Direction Next Lower Degrees points to "wave (3 of C) continue," signifying that the analysis is focused on the continuation of the third sub-wave within the larger C-wave structure.   In the Details section, it is observed that "blue corrective wave 2" is deemed to have completed its course at the level of 96.083. The market is now in the phase of "blue wave 3," and a strong price movement is expected as part of this impulsive phase. The "Wave Cancel invalid level" is specified as 96.081, serving as a reference point for risk management and potential trade entry points.   In summary, the AUD/JPY Elliott Wave Analysis on 27 September 23, suggests that the market is currently undergoing a counter-trend phase with an anticipated impulsive price movement in the form of "blue wave 3 of C." Traders are advised to closely monitor this wave for potential trading opportunities, with the specified invalid level serving as a reference for risk management within their trading strategies.
  • Create New...