A Canary In The Gold Mine?
By Evariste Lefeuvre: Gold continues to drift downward, offering further proof that it is not a safe haven. The 1502 support is not far off, as the technical chart below suggests: a potential free fall down to 1283 should not be ruled out. Yet...The disconnect between UST 10-year real rates and gold prices continues to grow. With negative real rates at such a level, gold should stand at $1800/oz.
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In spite of the recent decline in 10-year breakeven inflation from 2.4% to 2.15%, real interest rates stand at their lowest level ever at -0.4%. This is due to the sharp retrenchment in yields of on-the-run treasury bonds (higher liquidity than TIIPS). In any case, such a divergence could provide a strong driving force for investors willing to play a rebound.Among other things, gold is driven mostly by the USD. As can be seen in theComplete Story »