Gold News

GLD Gold ETF 'Bleeds More Metal' But Bullion Holds $1800 as Bond Yields Jump Again

FRESH outflows from gold-backed ETFs failed to stop the metal holding above what traders called the "psychological $1800 level" in Asian and London trade Tuesday, defying yet more investment liquidation as longer-term interest rates reach multi-year highs in the bond market ahead of the new US Biden administration pushing through $1.9 trillion in Covid relief and stimulus.
 
European stock markets were mixed after New York's tech-heavy Nasdaq sank 2.5% on Monday, a "hammering" also hitting tech giants outside the US notes Barron's.
 
Europe's Brent crude oil benchmark meantime touched 12-month highs Tuesday morning above $66 per barrel, erasing the last of the Covid Crash's 70% plunge.
 
"Gold has posted a relatively sizeable rebound as the Biden stimulus package comes back into focus," says chief analyst Rhona O'Connell at brokerage StoneX.
 
"The markets are [also] expecting a dovish stance from [US central-bank chief] Jay Powell in his semi-annual Congressional testimony today...Any surprise might take some off the froth off gold's latest move."
 
Gold ETFs led by the giant SPDR product (NYSEArca: GLD) meantime "continue to bleed metal" O'Connell adds, "with redemptions in eleven of the past twelve days."
 
The GLD yesterday shrank by 1.0%, needing 12.2 fewer tonnes at 1,115 – its smallest since mid-May 2020.
 
Smaller competitor the IAU from iShares was unchanged at its smallest since end-December having not seen any days of new inflow for more than a month.
 
Chart of GLD gold ETF size in tonnes of backing. Source: BullionVault
 
While central banks across the world are holding short-term interest rates near, at or below zero, longer-term rates in the bond market have continued to rise with the recovery in commodity prices.
 
"A natural rise in long-term rates could [now] push up the cost of issuing debt," said Bank of Japan boss Haruhiko Kuroda last week, "but that is something government must accept."
 
Tokyo's central bank has targeted a zero rate on 10-year Japanese yields since 2016, buying or selling those government bonds as part of its "yield curve control" to try stimulating inflation and growth.
 
Ten-year JGB yields today touched late-2018 highs above 0.11%.
 
With the UK's Prime Minister Johnson now setting out the first major-economy's 'roadmap' for ending lockdown and other social restrictions as first vaccinations reach nearly 1-in-5 of the entire population, 10-year Gilt yields have risen 0.39 percentage points since this time last month, the steepest developed-economy rise after low-Covid nations New Zealand (up 55 basis points) and Australia (+43bps).
 
UK government borrowing costs today neared 0.71% on 10-year Gilts, the highest since New Year 2020, while Australia's 10-year yield hit its highest since April 2019 at 1.65% per annum.
 
Yesterday's drop in the stock price of last year's big FAANG Covid Crisis winners also coincided with so-called crypto-currency Bitcoin sinking from fresh all-time highs, trading in a new record daily range of $11,000 – three times the prior 2021 daily average – to bottom at $47,000.
 
"The vaccine rollouts and strong optimism over economic recovery have led to some liquidation in the yellow metal with risk-on sentiments," says analyst Tapan Patel at Mumbai brokerage HDFC Securities.
 
For households in India however – the metal's No.2 consumer market – "the fall in gold prices has allowed investors who were waiting to buy gold at lower levels."
 
Despite further outflows from the giant SLV silver-backed ETF overnight, silver held firmer than gold bullion on Tuesday, albeit 50 cents below a pop to 3-week highs at $28.30 per ounce in early Asian trade.
 
Platinum prices slipped once more, down almost $100 per ounce from last Monday's 6-year high at $1340.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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