When credit spreads narrow, it’s bad for gold. But this time there is a silver lining we can look for, although it’s quite adverse for the economy.
There are several important factors affecting gold prices. Many analysts focus mainly on the US dollar and real interest rates. However, what is sometimes even more important is economic confidence. Of course, the level of economic confidence is partially reflected in the strength of the greenback and the bond yields. However, I would like to focus today on credit spreads, an often overlooked indicator of economic confidence.
Why such a topic? It’s simple, just take a look at the chart below. As you can see, the ICE BofA US High Yield Index Option-Adjusted Spread, which is a proxy for a spread between the yield on below-investment-grade-rated corporate debt and Treasuries of the same duration, has recently declined to a very low level. To be more precise,
Credit Spreads Declined Unprecedentedly Will Gold Follow? :: The Market Oracle :: marketoracle.co.uk - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from marketoracle.co.uk Daily Mail and Mail on Sunday newspapers.
Dec 17, 2020 14:57 GMTFXStreet News
Philly Fed Manufacturing Index fell at a stronger pace than expected in December.
US Dollar Index remains depressed below 90.00 after the data.
The headline Diffusion Index of the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey fell sharply to 11.1 in December from 26.3 in November. This reading missed the market expectation of 20 by a wide margin.
Key takeaways
“The current shipments index fell 11 points to 14.4 in December.”
“The current employment index has remained positive for six consecutive months but decreased 19 points to 8.5 in December.”
“The survey’s future indicators for activity and new orders were slightly weaker this month, but future indicators for shipments and employment improved.”