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Gold price forecast brightens amid the decline in US government bond yields

Talking Points

– The FOMC's decision to withdraw the expectation of a rate hike in 2019 turned out to be more cautious than the market players characterized – hence the big market reaction.

– Gold Prices May Generate Further Gains As US government bond yields continue to fall in the short term,

Retailers are decidedly mixed on the dollar – EURUSD, GBPUSD and USDJPY have different prejudices.

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The March Fed meeting hit the Dovish side of expectations, even though market participants initially rated it in a Dovish tone. By deciding to lower growth and inflation forecasts not only in the summary of economic projections, but also to eliminate the expectation of a rate hike in 201

9, the FOMC came to the lowest political turn in years – perhaps before the start of the Fed hike November 2015.

US Treasury Yields Breakdown

Into This Week Yields on US Treasury stocks already looked as though they wanted to break lower . At the March Fed meeting, returns indicated every reason in the world to do so: the prospect of another rate hike this year was eliminated. However, lifting the possibility of a 25bps hike in 2019 underlines greater concern over returns: the US Federal Reserve is becoming increasingly belligerent than the US state.

Why is this important for the return? The US Treasury's 2-year yield is considered as an indicator of inflation, while the 10-year yield is considered to be an indicator of growth. The fact that yields fell to new monthly lows for both maturities (and new lows for the latter in the latter case) suggests that a profound shift has actually occurred today. Consider the context of the most recent 10-year Treasury split:

10-year US Treasury 10-year earnings chart: Daily time horizon (March 2016 to March 2018) (Graph 1)

  Gold price forecast brighter below The US Treasury Yields Slump

The symmetric triangle that has formed came after an interruption in the 2016-2018 uptrend. Last week it was noted that "the likelihood of achieving lower returns is higher. That is: an interruption of a long-term uptrend; followed by a symmetrical triangular consolidation; The triangle breaks down. "The price action today brought a new year low for the 10-year yield and confirmed the outbreak. As in the bond markets, this usually also happens in other asset classes.

10-year US Treasury yield: 20-day correlation to gold prices (March 2017 to March 2018) (Graph 2)

  Gold price forecast brightens as US Treasury yields fall

Good news gold prices

The 10-year yield and the gold price of US government bonds have since a negative 20-day correlation on Friday . If the observation that a ten-fold decline in the US Treasury yield could prove beneficial to the gold price, then this should be the time when the gold price should show signs of bullish dissolution.

Gold Price Table: Daily Timeframe (June 2018 to March 2019) (Chart 3)

  The gold price forecast brightens in light of the decline in US government bonds

. The gold price action today led to a bullish performance outside the entanglement bar in the daily timeframe (the price closed at 1312.34 and cleared its predecessor daily high of 1310.83), with the price simultaneously over the daily 8, 13 and 21 EMA. Courses was. The combination of strong candle and momentum indicators that accelerate to the upside could be promising in the near term for gold prices.

Although gold prices eased in late February, the March low reached a "higher low" than the January swing lows; The series of higher lows is above the 61.8% reautacement of the full high of 2018. In the short term, more and more gains seem to be possible; Moving below the FOMC daily low of March (1298.53) would nullify optimism.

Read More: US Dollars Within Range; Breakdown of US Yields May Lead to Higher Gold Prices


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— Written by Christopher Vecchio, CFA, Senior Currency Strategist [] 19659002] Fort Act Christopher Vecchio, email at [email protected]

Follow him on Twitter at @CVecchioFX

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