Turned down right from the opening of the new weekGold prices edged lower at the start of the week after posting solid gains from haven flows that were seen outperforming higher government bond yields across most of the globe. The price of precious metals decreased not because gold's upward momentum was over, but because the market needed to consolidate with resistance at 1,985 USD/ounce.
The geopolitical situation and macroeconomic factors of the Middle East may have contributed to the increase in gold prices. The decline in the iShares iBoxx High Yield Corporate Bond Fund ETF reflects the worsening outlook for corporate bonds. This credit squeeze also affected Wall Street stock indexes and increased risks to other assets.
The Middle East situation is unlikely to find a peaceful solution soon, which could maintain demand for gold despite higher Treasury yields. The 2-year Treasury note reached 5.25% last Thursday but fell to 5.10% over the weekend. The 10-year note also hit its highest level since 2007, briefly surpassing 5.0% before settling at 4.95%.
The chart shows that the rise in the 10-year Treasury yield and the USD index has not yet affected the price of gold, but it is worth keeping an eye on in case of sudden movements in those markets.
The sell-off of the iShares high-yield ETF could have broader consequences for stocks as companies face higher borrowing costs.
SELL zone 1982$ - 1980$ - stoploss: 1986$
Buy zone1945$ - 1947$ - stoploss: 1940$
