A Lower Real Yield is Supporting Gold


Source: www.tradingview.com

The 10-year real yield is showing signs of reversal on its weekly timeframe. Last week's candle closed below the low of the previous week (green horizontal line) and we are assessing if a swing high has charted. In this regard, we note that the real yield's weekly RSI has dipped below 50 (green rectangle), which is on the bearish side of the oscillator. The longer it maintains below 50, the greater the likelihood of lower real yields.

Source: www.tradingview.com

One of the beneficiaries of the lower real yield has been the gold price. XAUUSD appreciated by 2.33% last week. Gold's RSI broke above its down sloping trendline at 1, with the precious metal moving decisively away and above its black 30-week EMA. Moreover, the EMA is moving upwards in support of gold's positive move.

This year gold has reasserted its inverse relationship with the real yield. Currently the precious metal has a -67% correlation coefficient to the 10-year real yield and given that the market is pricing in four rate cuts for 2024 (beginning in June), gold's potential upside cannot be overlooked.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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