Trading Gold Right Now
Here is what to look for if you are trading gold right now
Gold saw some heavy selling to start the week.
Now downside in gold on a strong jobs report was the ‘no-brainer trade’ from last Friday. This was for two reasons.
- 1. The USD is disproportionally impacting gold. Strong jobs on top of Clarida’s comments from last weeks increased expectations of a Jackson Hole Symposium taper timing announcement. This sent US 10 year yields higher (they have been a bit too low for some time anyway) and the USD too. USDJPY longs were the other ‘no-brainer’ trade out of the NFP on Friday last week too.
- 2. Gold remembers the taper tantrum of 2013 where it lost around 20% of its value in a few months.
However, before we assume that the taper tantrum of 2013 is going to happen again we need to be aware of the differences between now and 2013.
- * In 2013 there were disinflationary pressures at the same time as yields started rising. This means that real yields moved sharply higher.
- * In 2013 the ECB took a dovish tilt in their policy when the Fed was tapering. This time, the ECB may be more optimistic in September and there is certainly not a big divergence as in 2013.
- * Inflation is high. This means that real yields are unlikely to surge higher the way they did in 2013. Remember that real yields are nominal bond yields – inflation.
So going forward, expect any significant adjustments in these outlooks to impact gold. In the very near term, US inflation data will be key.
Giles Coghlan
