After months of sideways trending, ten-year US bond yields have recently come close to multi-year highs. This gives the gold price additional headwind. The more exciting it will be how he will develop in the environment.
After the sharp slide between mid-April and mid-August, the price of gold has been trending sideways at around $ 1,200 an ounce for four weeks. On a euro basis, however, the price is at the lowest level since February 2016, which causes frustration for many gold fans. Over the past few months, he has had a significant headwind, especially from the rising dollar, and now comes another burden: the sharp rise in interest rates on ten-year US bonds .
Worries about US inflation are booming
Many experts are convinced that this is mainly due to the tightening of monetary policy of the US Federal Reserve . For many investors, it is a foregone conclusion that the Fed will raise interest rates at the next meeting on September 26, the next step will follow on December 19th. The US Federal Reserve would raise interest rates four times this year. In addition, the Fed has announced three further increases for 2019. However, this prospect has been known to investors for a long time and could have been priced into the market for a long time.
In my opinion, the sharp rise in 10-year US bond yields is mainly due to concerns about a return to US inflation . This is mainly due to the trade war between the US and China . With the US imposing punitive tariffs on more and more Chinese products, and eventually punitive tariffs on Chinese exports to the US of more than $ 500 billion annually, Chinese products in the US suddenly become significantly more expensive, fueling US inflation . The situation is exacerbated by the oil price of the US variety WTI, which has climbed by almost 20 percent since the beginning of the year and is thus close to the multi-year highs. That fuels inflation in addition.
Real interest is low
In the environment , investors sell US bonds , which is why the interest rates for two-year securities have climbed to 2.8 percent – this is the highest level since July 2008. Those for ten-year securities have risen to 3.05 percent, so they are listed nearby the highest price since July 2011. Although this weighs on the gold price, but the headwind is not as large as it looks at first glance, as the real interest clearly shows. If it is calculated on the basis of interest rates on ten-year US bonds and subtracts US inflation from the previous 2.7 percent, the real interest rate is only 0.35 percent . Nevertheless, nominally higher US interest rates are a headwind for the price of gold, because the precious metal does not pay interest.
US interest rates could continue to climb significantly in the coming months, especially as the trade war is likely to escalate. In the environment will show how the gold price will develop, especially as he has headwind from the rising dollar.