Precious metals have been fairly quiet considering the big falls we have seen for bond yields in recent times. So, are gold and silver about to storm back to life? Well, I wouldn’t bet against them as falling yields reduce the opportunity cost of holding the non-interest-bearing metals.
Bond yields have fallen sharply in recent times on signs of slower economic growth, rising virus cases around the world and more lockdown measures. Central banks have convinced the markets that they are not going to be reducing stimulus measures in a hurry, even if inflation is expected to remain hot or get even hotter in the coming months. Among the most dovish of central banks, the European Central Bank is the reason why German bund yields are the weakest among the major economies, with the 10-year falling to below -0.5% for the first time since February today. But yields have fallen across the world, from the US to China. This should help to keep gold prices supported.
While gold has rebounded after
testing the $1810 support level for the past two days and it looks poised to break resistance around $1830 next as it continues to make bullish price action on the intraday charts.
Silver has already broken from its falling wedge pattern to the upside, which makes it more appealing from a technical point of view:
Whether or not the moves will hold remain to be seen. The focus is now turning to the US jobs sector with the publication of ADP private payrolls disappointing badly at 330K vs. 695K expected.
The ISM services PMI and its employment component are due at 15:00 BST, ahead of the usual weekly jobless claims data on Thursday and the official nonfarm jobs report on Friday.
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