Rising Yields Are A Headwind For Gold
During the first half of this year gold prices really got going after the Bank of Japan moved into negative interest rates. The BoJ’s surprise decision had the effect of dragging a significant portion of sovereign debt into negative territory. As the ratio of negative yielding debt increased, gold followed suit. The chart below shows this relationship:
In July global yields bottomed and began moving higher while gold put in a short-term top and sold off to its 200-day moving average. The following chart from Strategas Research Partners show the influence global yields have had on gold:
Although gold has recently managed to get above $1,300 increases in yields should be a headwind.