(hourly trend of spot gold and silver, source: tradingview)
Michael Widmer, director of precious metals research at Bank of America Merrill Lynch, said the significant rise in real interest rates today would naturally drive gold down. With the US PPI better than expected in July, the market will begin to re-examine interest rates and expectations.
Both US and European bond yields rose significantly on Tuesday, which also reduced negative interest rate expectations that underpin metal prices. Among them, the yield of 10-year Treasury bonds has the largest one-day increase since June this year, on the premise that the US government and enterprises have a large number of bond issuance expectations in the short term.
(hourly trend of us 10-year Treasury yields, source: tradingview)
In addition to interest rate factors, the biggest one-day outflow of the worlds largest gold ETF (GLD) since March this year, Chinas strong economic data, Trumps stance on tax cuts, and the drop in the number of hospitalized patients in California and New York State on Friday are all opportunities for the reversal of market risk preference.
Also on Tuesday, Putin announced that Russia had registered the worlds first new crown vaccine (who said safety data still needed to be reviewed), a blow to the logic that had driven gold and silver soaring. At the same time, Trumps senior advisers also said that the president of the United States will update reporters on the development of vaccines in the United States.
Carsten Fritsch, commodities analyst at Deutsche Bank, said the trend [of gold and silver today] was very sudden and brutal, but dont forget that the prices of these two assets have soared in the same cruel way in the past few months. With the rise of treasury bond yield, some investors choose to cash in the previous profits, and with a large number of profit margins accelerated to leave the market, we can see the rapid decline of assets today.
Source of this article: Yang Qian, editor in charge of CFA_ NF4425