Gold shrugging off higher real rates

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For much of 2019 to 2021, gold prices and real interest rates moved in tandem, with declining real yields leading to higher gold prices – the logic being that, as a zero-yielding asset, the opportunity cost of holding gold declines as real rates fall. By the same logic, rising real rates should spell trouble for the precious metal. Yet even though the 10-year real yield has now increased by close to 0.7% since the new year, gold prices have held. To some extent, this is perhaps just because gold didn’t rise alongside the latest decline in real yields in mid-2021. Yet another explanation is that, as traders are worried about overvaluation elsewhere in the market, and therefore the risk that bond or equity holdings will lose value, they are willing to hold on to gold even as real rates rise.


US NFIB small business confidence fell by 1.8 points to 97.1 in January.

US small business price plans also fell in January. They would normally be consistent with lower core inflation.

The US December trade data showed exports rose by 1.5% MoM and imports increased by 1.6% MoM, keeping the trade deficit near record levels in dollar terms.

Japan’s economy watchers has remained extremely volatile.


There’s been a divergence between the Shanghai stock exchange and Nikkei in recent days, with China’s headline index faring better.

That makes it one of the best global performers in the past week.

China’s 6-month credit impulse doesn’t suggest that we’re in for sustained gains though.

Iron ore prices have been rebounding lately, helped by policy changes in China, including the announcement that the steel industry will have longer to meet its emissions targets.

Lumber prices have also been rebounding again – keeping upward pressure on prices for new homes and home improvement projects.

The rebound in cryptos is starting to look more convincing, though stalled a bit yesterday.

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