Gold had a good day yesterday, but as it hits the $1,770 resistance line, it will be anything but easy for the yellow metal. The real test has begun. And so, it happened. Gold moved right to its target level that seemed to be the max that it could reach, but that didn’t seem to be the most likely outcome. Just because it wasn’t the most likely outcome, doesn’t make it impossible. The “most likely” can happen all the time – after all its only “most likely” not “certain” or “inevitable”. Gold declined right after its triangle-vertex-based reversal, but it appears that the market participants didn’t want to give up on the bullish tone until gold finally reached its previous lows and highs.
The recent rally in the bond yields pushed gold prices down, but this trend won’t continue forever, as the Fed will likely be forced to step in. In March, we saw a continuation of the rally in bond yields that started in February. As the chart below shows, the 10-year real interest rates have soared from -1.06 on February 10 to -0.66 percent on March 23. What is clear from the chart is the strong correlation between the 10-year TIPS yields and the gold prices. As a consequence, the rising bond yields made gold struggle. However, in March, the real interest rates were much more choppy compared to February, when they surged decisively. It may signal a lack of fuel for the further rally, at least for a while.
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