Bond headwinds are back with a vengeance, but gold remains firm
Nominal 10-year Treasury yields have risen to the highest level since 2007. Just when we thought the bond sell-off of 2022 was behind us, it came back with a vengeance. Hawkish Federal Open Market Committee (FOMC) minutes, and a string of positive economic data from the US, are casting doubts on whether we have actually reached peak interest rates in the US. The Federal Reserve (Fed) has certainly left the door open for further hikes and its decisions will be very data sensitive.
Relative to the bond market, gold is holding up well (Figure 1). While gold prices temporarily fell below the psychologically important US$1900/oz level, Treasury Inflation-Protected Securities (TIPS) prices have fallen much further and, other things being equal, the bond market would indicate gold should be trading closer to $1800/oz. Gold’s resilience in the past month mirrors its defiance against the bond headwinds of 2022.
Historical performance is not an indication of future results and any investments may go down in value.