Although gold remains in an uptrend on the daily charts, the yellow metal has backed off some $50 per ounce from its recent highs. The gold market has been bid up in recent months on increasing geopolitical risks and other factors considered bullish for the metal.
Not coincidentally, treasury yields have been rising in recent trade as the price of gold has been under some moderate pressure. Looking at the benchmark 10 year note, yields topped out shortly after the Trump election victory as the ten year hit a high around 2.6%. Yields today stand about 30 basis points lower, with the ten year yielding just under 2.3%.
A breakout in treasury yields either way could potentially set the tone for the gold market over the coming months. The question is: will such a breakout occur?
The FOMC meeting will be concluding this afternoon and the Fed is likely to stay the course regarding its pace of rate hikes. At this time, most analysts are still looking for another two hikes to take place this year, and for another two to be implemented next year.
This slow and incremental pace of rate hikes could potentially keep yields range bound for some time. That is, however, unless there is a major geopolitical or economic event that drives yields sharply lower.
What could potentially have such a major impact on interest rates?
How about increasing tensions or a military conflict with North Korea?
How about the demise of the European Union as it exists today?
How about a major economic recession in the U.S.?
The fact is, in our view, that there are more than enough global issues to keep rates suppressed for a long time yet.
And while we believe that gold can rise in spite of rising interest rates, gold may also potentially see significant price appreciation if rates remain low. In addition, any one of the aforementioned issues could potentially send massive capital inflows into perceived safe haven assets like gold and bonds.
With the current geopolitical landscape as tense as it is and rates likely to remain suppressed for a significant amount of time yet, the only question is:
What are you waiting for?
If you do not already have an allocation in physical gold, now may be the ideal time to get started. With the potential for a major stock market reversal seemingly increasing each day, and with the possibility of a major flight to quality by investors also appearing more likely, why wait?
Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our associates are here to answer any questions you may have, and can even show you how to buy and hold real, physical gold using your IRA account.
Although rates may remain low for a long time, gold can serve a very valuable purpose within a well-diversified portfolio regardless of where yields may be.
Don’t wait for the next major economic crises or for gold prices to rise substantially before taking action. Explore your options for physical gold ownership now. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: 10 year note benchmark, advantage gold, fomc, geopolitical risk, gold, rate hikes, treasury yields