So how long can be afforded higher un treasured Yielded bonds??? Cost of debts will bite...
Precious Metals Close Moderately Lower Due To Dollar Strength And Higher Global Bond Yields
June gold (GCM21) on Wednesday closed down -13.30 (-0.72%), and July silver (SIN21) closed down -0.423 (-1.53%).
Gold and silver prices on Wednesday settled moderately lower. A stronger dollar on Wednesday weighed on precious metals prices along with higher global bond yields. Losses in metals were limited by the strong U.S. CPI report and an increase in the 10-year breakeven inflation rate to a new 8-year high.
Higher global bond yields are bearish for precious metals. The 10-year T-note yield on Wednesday rose to a 1-month high of 1.692%, and the 10-year German bund yield surged to a 23-month high of -0.120%.
Wednesday's U.S. consumer price data rose at a faster-than-expected pace and supported gold demand as a hedge against inflation. The U.S. Apr CPI rose +0.8% m/m and +4.2% y/y, stronger than expectations of +0.2% m/m and +3.6% y/y. Also, Apr CPI ex-food & energy rose +3.0% y/y, stronger than expectations of +2.3% y/y and the fastest pace of increase in 25 years.
Precious metals garnered support from an increase in inflation expectations after the U.S. 10-year breakeven inflation rate climbed to a new 8-year high Wednesday of 2.594%.
Hawkish comments on Wednesday from Fed Vice Chair Clarida were negative for precious metals when he said he was surprised by the rise in U.S. Apr CPI and that the Fed "would not hesitate to act" to bring inflation down to its goals if needed.
Wednesday's action by the European Commission to upgrade its growth outlook is bearish for gold but supportive for industrial metals demand and silver prices. The European Commission raised its 2021 Eurozone GDP estimate to 4.3% from a previous forecast of 3.8%.
Gold has underlying support from the Covid pandemic, which is dovish for central bank policies. However, the pandemic in the U.S. has improved after the 7-day average of new U.S. Covid infections fell to a 7-3/4 month low of 38,152 on Tuesday. Globally, Covid infections have risen above 160.416 million, while deaths have exceeded 3.333 million.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. However, long liquidation pressure has emerged for gold after long gold positions in ETFs fell to an 11-1/2 month low last Thursday, down from October's record high of 3,459.8 metric tons (data since 2002). Long silver positions in ETFs soared to a record high Feb 2 of 1.017 billion troy ounces (data from 1990), although long silver positions fell to a 3-1/2 month low Tuesday.
Precious Metals Close Moderately Lower Due To Dollar Strength And Higher Global Bond Yields (barchart.com)
