Tuesday, September 24, 2013

Major Decline in 10-year Yield Favors Gold

Sometimes you get lucky.
This morning the babble was: "As of right now we're seeing a slowdown in the rate of decline in the futures so we'd guess they stabilize or even tick higher over the next couple days." at $1313.90.
$1323.90 last.

Then the 10-year which had been showing some strength as the yield dropped from 2.99% on Sept. 5, got clobbered on (non) taper day, recovered and then, over just the last couple hours, got hammered down to 2.64%, off 0.074 at the low.
From Bloomberg:
Treasury Yields Fall to Lowest in 6 Weeks on Fed Stimulus Policy
Treasury 10-year note yields fell to the lowest level in six weeks as investors bet the Federal Reserve will maintain monetary stimulus as it awaits a pick-up in economic growth, stoking demand for government debt.
Treasuries remained higher as the U.S. sold $33 billion of two-year notes at a yield of 0.348 percent, below a forecast of 0.354 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The Fed last week maintained its policy of buying $85 billion of debt a month to put downward pressure on borrowing costs, causing investors to push back forecasts for when the central bank will raise interest rates.

There’s a “gradual acceptance by the market that the Fed will remain accommodative,’ said Aaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, a primary dealer. ‘‘The market is going to be grinding to lower yields over the next few months.’’

The benchmark 10-year note yield fell four basis points, or 0.04 percentage point, to 2.66 percent at 2:12 p.m. in New York, based on Bloomberg Bond Trader data, after declining five basis points in the previous two trading days. The yield touched 2.64 percent, the lowest since Aug. 13. The price of the 2.5 percent security due in August 2023 added 3/8, or $3.75 per $1,000 face value, to 98 20/32....MORE
Although gold responds to real rates, the decline in the 10-year yield combined with pretty much unchanged inflation means real rates decline when the nominal drops.
Here's the action in gold, the earlier post came out at 9:02 EDT: