By Christopher Lewis Christopher L.
Gold continues to follow yields in the United States and beyond, as we are looking at “non-yielding assets” with suspicion as well.
Gold
The gold market has been noisy during the early part of the trading session here on Tuesday, as we are hanging around an important demand zone yet again.
The $4,200 level is the top of a range that extends down to the $4,000 level. The market is trying to do everything it can to find support in this region. Part of what is helping the market right now is the fact that interest rates are drifting a little lower during the session. Not meaningfully, but we are starting to see interest rates calm down.
If that continues, we could see gold rally at this point in time
Keep in mind, non-yielding assets such as gold really take it on the chin when rates are high. In this environment, I think you’ve got a situation where traders are going to be looking at the 10-year yield in the United States, the 2-year yield, etc., and seeing whether or not they can sustain a downtrend. If they can, then gold might be the place to go.
The biggest problem at this point, of course, is that gold markets are unfortunately being held hostage by energy markets. Energy markets continue to show a lot of concern out there, as higher energy costs drive up inflation for multiple countries. As long as that is going to be the case, gold struggles a little bit when you can get paid to hold government paper.
Eventually, things snap, and we do take off in one direction or the other. But as things stand right now, it looks like we’re still waiting for some type of catalyst, probably lower yields, to rally again. What causes that? We will see.
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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire