(Kitco News) – Fears of recession continue to weigh on financial markets and the risk has grown as the US 10-year / 2-year yield curve approaches reversal.
Although investor sentiment has risen slightly after the US government announced its intention to ease some of its import tariffs on China, the 2-year overnight yield was within one basis point to the 10-year rate of return to reach. The yield spread is at its lowest level since 2007.
Although parts of the yield curve have been inverted for months, investors are particularly looking for the spread between 10- and 2-year bonds. A reversal of this part of the curve has preceded every recession in the last 50 years.
For some, however, the long awaited move is only one factor in a much wider landscape.
Fixed-income securities strategists at TD Securities
"This supports our Fed call of 50 basis points for further easing in 201
Daniel Seca, commodities strategist at TD Securities, added that due to the growing fear of recession, an inverted yield curve will not add much to the overall picture. He added that he did not expect an inverted yield curve to have a major impact on the gold price.
"When we finally get an inversion of the yield curve, there will be some headlines, and that's bullish for gold, but I do not see that driving prices to new highs," he said.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said it was not a big surprise if two-year rates were nearing 10-year yields.
"I think this reversal of the yield curve has been priced in to some extent and I do not see much impact on gold," he said. "It's just another signal added to all the other signals that flash there."
Bill Baruch, president of Blue Line Futures, said that the inversion will not push up the gold price directly, but the positive environment continues to highlight the yellow metal.
"The flattening of the yield curve has pushed up the gold price. It has really raised the cap on gold, "he said. "The yield curve is moving because of fears of a recession.
Baruch added that the gold price remains bullish against the precious metal despite an apparently strong resistance as the prices managed to keep the critical initial support above $ 1,480 an ounce.
Although an inverted yield curve will not push gold prices to new highs, Baruch said that this will still be the dominant force in the market.
"The landscape that promotes this drive for gold must continue to deteriorate and that is what signals an inversion.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. ] The author has made every effort to ensure the accuracy of the information provided to ensure. However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article assume no liability for any loss or damage arising out of the use of this publication.