Is the geopolitical rally in gold exhausted?
Gold prices retreat from recent highs, despite sharp drop in US yields
It seems safe-haven flows are unwinding as geopolitical nerves calm
For gold to rally back to record highs, it might need a recession
Sinking yields unable to boost goldOn paper, last week had all the elements to be incredibly bullish for gold. Yields on US government bonds came crashing down, which in turn inflicted heavy damage on the US dollar. Both of these developments are normally positive for gold prices, and yet the precious metal was unable to advance. Yields are essentially the price of money, so they can be considered interest rates that are determined by market forces. Gold doesn’t pay any interest to hold, so when yields or interest rates fall, the metal becomes more attractive by comparison. In similar logic, because gold is denominated in US dollars, a weaker dollar is also beneficial for gold as it makes it cheaper to buy for foreign investors.




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