Why Did Treasury Bonds Record a Fall in Yield?
The yield on US ten-year Treasury securities fell below the 1.6% mark for the first time on September 26, 2016 due to a rise in demand.
Janet Yellen, chair of the Federal Reserve, noted that the Fed is planning to change the annual stress tests it gives to US banks. The test results would reveal whether the banks can withstand a massive financial crisis.
Gold slipped due to the relative strength of the US dollar and the stock market after Democrat presidential nominee Hillary Clinton got the better of her Republican rival Donald Trump in their first debate.
The US dollar and the equities were helped by the increasing odds of Hillary Clinton’s chance of winning the US presidency in November.
The fall in precious metals over the past month has been driven by the Fed’s interest rate sentiments and the increasing strength of the US dollar.
Aside from the Federal Reserve’s interest rate conundrum, precious metals prices have taken cues from the Bank of Japan’s monetary policy.
The Fed’s recent decision to keep the rate of interest unchanged between 0.25% and 0.5% has affected precious metals, but only slightly.
Gold and interest rates have a close inverse relationship. The higher the rate for Treasuries, the lower the demand for non-yield-bearing assets such as gold and silver.
The fall in precious metals over the past month was driven by the Fed’s sentiment as well as the increasing strength of the US dollar.
The DXY index has increased about 1.9% on a 30-day trailing basis, while precious metals have fallen drastically.
Robert McEwen foresees that gold will increase to about 44% by the end of 2016 and confirms a possible price range of $1,700–$1,900 per ounce.
Gold remained in the neutral range of $1,313–$1,319 per ounce as Bank of Japan gave its verdict, keeping the benchmark interest rate unchanged at -0.1%.
Billionaire bond fund manager Bill Gross has stated that right now there are few choices beyond gold and real estate, given current bond yields.
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Since fear is gripping precious metal investors globally, the SPDR Gold Trust’s (GLD) holdings fell 0.41% to 938.75 tons on September 20.
Since the Fed’s verdict is just around the corner, investors seem to be flabbergasted with the plausible direction gold and other precious could take.
Precious metal traders maintained a slower pace before the federal funds rate comes out today. Gold and silver futures didn’t move much on September 20.
The current weakness in the rand made it fall to all-time lows against the US dollar in early 2016 but has helped mining companies.