Gold Slumps on Rising Bond Yields
U.S. 10-year Treasury bonds fell back, after rallying strongly for 2 straight
days. Bonds rallied on mortgage worries and weak housing reports; weak housing
reports out today seemed to not affect bonds in the typical sense. Despite a
weak new home sales report, bond prices fell. Bond prices typically fall on
strength and rise on weakness, which is not what happened today. The final GDP
number due out this week should provide the bond market with major volatility.
The yen bounced today against the euro and the dollar, after Japan’s
Finance Minister warned against extended, one-way bets against the Japanese
currency. The yen has been under major pressure lately, as low interest rates
in Japan make the so-called currency trade an attractive investment. Traders
borrow the yen at low interest, and then invest the borrowed currency into
other, more profitable assets. Through the day, the yen gave up major gains to
both the dollar and the euro, to close only moderately higher. The dollar was
basically flat on the euro, despite some weak reports out of the U.S. The
dollar slipped slightly against the Canadian dollar.
Crude oil futures fell nearly 2% today, as traders speculated that
tomorrow’s Energy Department report due out tomorrow will show a major
increase in the U.S.’s oil supplies. Crude moved from around $60 a barrel to
nearly $70 in just over a month, but today’s rally has taken away some of
those gains. Crude trades very sensitively to news, especially Middle Eastern
and Nigerian-related items. Natural gas fell fractionally on moderate weather.
Gold fell 1% today, on speculation that high interest rates and bond
yields are drawing investors away from the precious metal. Gold normally
trades inversely to the dollar and with oil, but lately, interest rates and
bond yields have been factoring into the equation. Copper futures fell 2.4% on
signs of slowing China demand.
Grains traded mixed today. Wheat rose 3.4%, soy gained 0.5% and corn fell
fractionally.
Economic News |
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John Lee
Associate Editor
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