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XAUUSD dropped as Yields Adjusted to Inflation ExpectationsThe XAUUSD dropped markedly yesterday as yields adjusted on the initial jobless claims and ADP beats. This is an interesting and potentially telling reaction. The yield adjustment likely came as inflation expectations were altered by the market. We also refer to the USDOLLAR which appreciated as the US10Y adjusted. It is often said the XAUUSD is a hedge against inflation but yesterday’s move was contrary to this. Therefore, as and when nominal yields make further adjustments we consider it prudent to look at the XAUUSD response relative to the USDOLLAR reaction to help with the analysis of direction.
FX:USDOLLAR
by FXCM
3
US YieldsOutlook The Fed started raising the fed funds rate beginning in December 2015 but lowered it again in 2019 and 2020. There are ongoing pressures to keep yields low. Economic uncertainty in the European Union, for example, can keep investors buying traditionally safe U.S. Treasuries. Foreign investors, China, Japan, and oil-producing countries need U.S. dollars to keep their economies functioning. The best way to collect dollars is by purchasing Treasury products. In the long-term, these factors can put upward pressure on Treasury yields: The largest foreign holder of U.S. Treasuries is Japan followed by China. China has threatened to purchase fewer Treasuries, even at higher interest rates. If this happens, it will indicate a loss of confidence in the strength of the U.S. economy. It would drive down the value of the dollar in the end. One way the United States can reduce its debt is by letting the value of the dollar decline. When foreign governments demand repayment of the face value of the bonds, it will be worth less in their own currency if the dollar's value is lower. The factors that motivated China, Japan, and oil-producing countries to buy Treasury bonds are changing. As their economies become stronger, they are using their current account surpluses to invest in their own country's infrastructure. They are not as reliant upon the safety of U.S. Treasuries and are starting to diversify away.
TVC:US10YShort
by MiWealth
The US Dollar further downtrend risks in RSI divergenceDivergence among many momentum and strength oscillators could make it harder for the US dollar to continue lower. The CFTC Commitment of traders report shows that net positions remain muted above 2500 net positions by non-commercial traders. This shows that speculators and hedge funds still remain bullish on the dollar. However, a few chief market strategists and advisors have come forward with a view of a lower US dollar but higher yields threaten this macro view.
TVC:DXYLong
by GrizzlyBearBee
2
Risk is high for tech stocks and goldThe Nasdaq is looking like it may test its support line soon. The index has been responding very negatively to any whiff of rising interest rates (falling prices) on bonds. Bond rates fell (and prices rose) for five weeks straight, but then they hit the 200-day EMA like a brick wall, broke their trend, and have been trading sideways the last two weeks. This week it's looking like yields might resume their uptrend again. Here is an ETF of long-term government bonds, so you can see what I mean about the 200-day EMA resistance and the risk of a rollover: If this falls, expect the Nasdaq to fall through its support line and perhaps to head downward to its 200-day EMA. Gold will drop as well. Note that gold has already perfectly hit the target I posted two months ago, and now looks ready for a pullback from resistance: Similarly, the USD is at a support level after a six-week slide: The market has a couple different ways to price in inflation. It can either sell the dollar (and buy gold and bonds), or it can sell gold and bonds (and buy the dollar). (If inflation gets really bad, the market could sell both bonds and the dollar at once. If that happens, it might be okay for gold and crypto but could be really bad for US stocks.) Right now we're alternating between these two tools. If the dollar finds support and gold finds resistance here, then the market will rotate to selling bonds, and yields will go up. That's consistent with the price action we're seeing in $TLT, with its rejection from the 200-day EMA. Bottom line: we might be poised at a negative inflection point right now for gold and tech stocks.
NASDAQ:QQQShort
by ChristopherCarrollSmith
9
Yields & Sector RotationI put this template together to track sector rotations based upon yield changes. Since August 2021 rates have incrementally risen on the 5,10, & 30 year treasuries (top pane). This provides support for value outperforming growth (second pane), illustrated by the Russell 1000 Value ETF outperforming the Russell 1000 Growth ETF. Finally, to visualize this effect on the sector front and aid in portfolio allocation in the future I show the top 2 value sectors (financials and industrials, traditionally) and the top 2 growth sectors (tech and healthcare, traditionally).Enjoy! @LamontyTrades on Twitter
TVC:US10YLong
by Vol_to_Valuation
1
GDX higher , can VOX Royalty benefitIn 2021 Vox set out ambitious corporate targets for the year with an aim to grow and acquire additional NAV-accretive royalties. By February Vox Royalty announced that it had agreed to acquire a Western Australian gold royalty portfolio from Gibb River Diamonds Ltd for A$325,000 in cash. With a total of 31 Australian royalties, Vox is now the second-largest publicly traded holder of royalty interests in Australia by royalty count, behind Franco Nevada Corporation.    Vox's gold royalty portfolio includes three advanced exploration gold royalties in Western Australia. The royalties include a 1% Net Smelter Return (NSR) royalty over the Bulgera Gold project operated by Norwest Mineral Ltd, a 1% NSR over the Comet Gold Project operated by Accelerate Resources Ltd, and a 1% NSR over the Mount Monger Gold Project operated by Accelerate and subject to a binding option agreement with Mt Monger Minerals Pty Ltd. The Bulgera Gold deposit has an estimated resource of 93,880 gold ounces at 1.0 g/t. With precious metals miners showing a positive reaction to the US10 year yields being capped under 1.7% currently, plus the weakening US dollar there is a real chance that producers ramp up production as prices of the yellow metal appreciate. $2k Gold seems to be the sweet spot for a lot of evaluations around the miners but there is sentiment building that the economy and monetary policy are going to be very supportive of traditional stores of wealth.
V
by TH_Analysis
XAUUSD - Gold - GLD analysisXAUUSD is moving higher on the back of the weakening US dollar. However, into the end of trading Friday, the US10 year yields started to rise, as traders sold Bonds and bought equities. The rising yields will keep the price of Gold capped, so during next week it is crucial that Bonds get bought, the US dollar gets continually sold, and that we get XAUUSD above 1850. Otherwise, the 3rd test of the descending trend line will be the first roadblock and Gold will come back into the $1700-$1800 trading range. There is also a double bottom now at $1680-$1690 so a good target for anyone looking to take liquidity. Targets to the upside include a measured move to $2250 US yields are key for the direction of gold as is the continuation of a weaker US dollar.
FX:XAUUSD
by TH_Analysis
Are bonds ready for a bounce?Bond have fallen a lot and quite fast. The sentiment is really stretched and most expect yields to rise more (bonds to fall lower). In my opinion there is quite a decent chance the bond bull market is over given that we had a massive blow off top in March 2020, but this doesn't mean that I don't see a potential bounce here or even bottom. Bonds hit key support, swept the lows before the big move up and are no showing signs of life. When I see so much debt, when I see slow growth and all the bad things going on around us... I don't think we'll get huge inflation any time soon. To me this is cyclical inflation after a supply shock rather than anything else. Many other yields are decreasing and spreads are the tightest they've been in years, so why would bonds go much lower? The Fed has failed to meet its inflation target for years, but they are going to make it now? We are also post the SLR cliff that could had been the 'sell the rumour buy the news event'
CBOT:UB1!Long
by BitcoinMacro
Inflation looks hot! Get ready to short tech if bonds break downWatch for bond breakdown as a Nasdaq sell signal Early this year, the Nasdaq had its weakest run in a long time as interest rates rose (and prices fell) on the 10-year US bond. (Note that bond rates and bond prices move in opposite directions.) Both tech and 10-year bonds have rallied a bit since March, but amid heightened inflation expectations this week, I've been watching like a hawk for interest rates to begin rising (and bonds to begin falling) once again. I'd expect to see tech begin another large correction should bonds fall through their uptrend support line, which they're testing right now: Signs that inflation is about to get hot: 1) Bloomberg and Arbor Data Science report more than 50% odds that headline CPI exceeds +2.5% year-over-year. That's the highest those odds have been in a long time. 2) Commodities like lumber and corn and copper continue to roar. Save your unpopped popcorn kernels, because corn futures are starting to look like a Tesla or Bitcoin chart: 3) According to Bank of America, "The number of mentions of ‘inflation’ during earnings calls also rose sharply, more than tripling YoY per company so far, the biggest jump in our history since 2004." According to CBS News, Procter & Gamble says it will raise prices in September. Other companies discussing price hikes include Kimberly Clark, Owens Corning, Mohawk Industries, Shake Shack, and McKesson. It's hard to deny that inflation is coming when companies are explicitly telling us that they will raise prices. Signs that rate hikes are coming as well: 1) Rates are rising all over the world, not only in developing nations like Turkey, but also in developed nations like Russia. Rising rates signal that inflation is expected, and rising rates abroad put some competitive pressure on US rates to rise as well. 2) U.S. economists think the Fed will start tapering monthly bond purchases later this year, earlier than they previously thought. In other words, to control inflation, the Fed may end its policy of "soft yield curve control." Financial conditions drive markets We've just lived through an unprecedented bull market due to never-before-seen loose financial conditions. However, the bonanza may soon be over if inflation and interest rates heat up. Tightening financial conditions could lead to not just a sharp Nasdaq correction, but perhaps even a prolonged bear market if they last a few years. With the Nasdaq poised near an all-time high and bonds right on the verge of breaking down, having slightly violated their support line today, I think at minimum I'll hedge with a Nasdaq put. Note the double top that may be forming in Nasdaq here. Disclaimer: not financial advice.
NASDAQ:QQQShort
by ChristopherCarrollSmith
19