June 10 2021
Today’s key event for the Gold market will be the release of the US CPI for May, the forecasts are for an increase of 0.4 MoM and 4.7% YoY.
Gold is always talked about as an inflation hedge, but I think that works only if you talk in terms of real interest rates. If the market ignores that equation and focuses on the possibility of US bond tapering coming later this year, Gold loses its attraction. We will have to judge whether future tapering or real interest rates matter more to gold traders.
The last few days has seen a drop in 10 year US Bond yields from pre NFP levels of 1.62% to 1.47% yesterday. However, Gold has also looked soft, which goes against conventional wisdom of lower US rates, higher Gold.
Is this drift lower caused by pre US CPI anxiety, position adjustment or a sign of things to come?
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