XAU / USD Drops Below 21, 50 And 200 DMA As Real US Bond Yields Soar

• Gold was down on Friday, currently losing more than 4.0% or nearly $ 80.
• The trigger for the losses has been a substantial rally in longer-term US real bond yields.
• Some traders have attributed the rise in yields to comments from Fed Vice Chairman Richard Clarida.

Spot Gold (XAU / USD) has been dumped on the last trading day of the week, and the spot price is currently down more than 4.0% or nearly $ 80. XAU / USD is currently trading in the $ 1,830s, having gone from its 21-, 50-, and 200-day moving averages to $ 1,880,265, $ 1,870,074, and $ 1,835,587, respectively, on the way down from the opening levels. Friday above $ 1,900. The $ 1,820 – $ 1,830 region should offer some support.

Other precious metals such as spot silver (down over 9%), spot palladium (down nearly 3%), and spot platinum (down about 5%) have also been dumped.

The trigger for the losses has been a substantial rally in longer-term US real bond yields; the 10-year TIPS yield has risen around 9 bps to -0.96% having opened the session closer to -1.05% and the 30-year TIPS yield has risen just over 8 bps to just under -0.21 % having opened closer to -0.3%.

Why are real returns advancing?

Some traders have attributed the upward movement in yields, which has also helped the US dollar (DXY is at day highs above 90.00, another negative for precious metals!), To comments from the VP of the Fed, Richard Clarida. ; While he said he did not expect the Fed to slow down its asset purchase program in 2021 (this has been a hot topic this week with many FOMC members speaking out on the subject), he said he was not concerned about the US. The 10-year yield exceeds 1.0%, the yields are still very low, and there is no need to adjust the maturities of the bond purchase.

Traders appear to have taken this as a “green light” for the rally in yields to resume. The biggest spike in US yields today has been in real yields (the moves noted above). Nominal returns are also higher (10 years + 3.4 bps and 30 years +2.4 bps), but the fact that nominal returns have not recovered as much as real returns means that inflation evens out (the difference between the returns nominal and real) has fallen, another negative for precious metals (remember, precious metals are considered an inflation hedge).

While Clarida’s comments could have accelerated the rally in real yields (and accelerated the decline in precious metals), the main factor behind the rally is expectations that the US government will issue substantially more debt in 2021. now that the Democrats have taken control of Congress. A higher supply of debt combined with a seemingly fine Fed with higher yields (it can generally be assumed that Vice President Clarida’s comments are in line with the Fed’s consensus given its importance in the bank) is a cocktail for real yields. Taller.

Four hour chart