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. 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
