The Gold Rush Heats Up as Sub-Zero Yields Spread

We Wouldn’t Buy Gold at These Levels, Says Legal & General’s Roe

It is important to emphasize that gold fever warms up as the sub-zero spreads. In this way, Ray Dalio cites gold as a paradise in the paradigm shift of the markets.

Gold is a soft yellow precious metal. It is one of the most used metals in jewelry stores because of its elementary composition and its rarity and because it is a difficult metal to find in nature and on earth since it abounds more in the interior of the mountains.

Now, the same one that was once mocked for its lack of performance and practical use, offers something that the growing stack of negative performance bonds does not offer: protection against inflation. Likewise, it has been said that a large door stop is made.

Thus, it should be noted that while the holders of promissory notes issued by sovereigns and companies observe how the real value of their savings fades amid the efforts of central bankers to boost growth, the attractiveness of one of the investment assetsOlder has become stronger.

Gold Popularity

Clearly, the popularity of gold has increased and it is also clear how closely it is linked to the downward spiral in yields.

For five years, the resistance above $ 1,350 per ounce was too much for them to overcome. Even so, that changed in June when it became clear that the Federal Reserve was heading for a round of interest rate cuts. Cash prices reached $ 1,453.09 on Friday, the highest level since May 2013 as global factory production slows and the market debates whether President Jerome Powell will reduce rates by up to 50 basis points in July. The metal traded close to $ 1,435, with silver rising more than 8% this week.

Similarly, it is appropriate that the properties to break the inflation of gold and the low opportunity cost when interest rates fall have never been as important as they are today.

And is that the inverse relationship between the price of bullion and expectations of real US rates, measured by the performance of five-year inflation-linked Treasury bonds, is the strongest ever. Thus, the correlation measured in 60 days reached -0.7 as the ingots increased.

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Source: Eddie van der Walt and Ranjeetha Pakiam | Bloomberg