Federal Reserve And Stronger Real Rates Cause Breakdown in Gold

Jon Economy, Fiscal Policies, Gold, Market Commentary, Precious Metals

Gold and gold mining stocks were setting up for a rebound until the market suddenly priced in tighter policy from the Federal Reserve. Both nominal and real yields surged and that pushed an already oversold sector below key support. Gold lost support in the mid $1100s while gold stocks (GDX) lost a critical support level. While the sector is oversold and likely to rebound as 2017 begins, the primary trend remains lower.
Our first chart plots Gold and the real yield on the 5-year TIP security. The US Treasury provides daily data and it gives us a look at day to day changes in real yields. The real 5-year tips year yield closed last week at an 11-month high. Stronger real yields hurt Gold’s desirability as an investment. This is why Gold and gold stocks have sold off.

This post was published at GoldSeek on 18 December 2016.