Takeaway

The presenter argues that a global surge in government bond yields, driven by oil-fueled inflation fears, is creating a significant headwind for gold. With markets rapidly repricing for further central bank rate hikes, the rising opportunity cost of holding non-yielding assets makes gold vulnerable to a deeper correction, especially if key technical support fails.

What the presenter said

• The US 10-year Treasury yield is approaching 5%, its highest level in about three years. [00:12]
• 10-year government yields in Europe and Australia have climbed to levels not seen in over 15 years. [00:20]
• Japan's 10-year government yield is trading at levels not recorded in almost three decades. [00:27]
• Renewed inflation fears are being driven by rising Middle East tensions that have pushed oil prices sharply higher. [00:40]
• Brent crude trading around $95 a barrel is reigniting inflation concerns, which could pressure central banks to hike rates again or keep them higher for longer. [00:47, 00:54]
• Markets are now pricing in a 70% probability of a Fed rate hike in September, a sharp increase from 35% last week. [01:06]
• The ECB is expected to hike rates this month, with the potential for another hike before year-end. [01:18]
• Rising bond yields increase the opportunity cost of holding non-income-generating assets like gold and equities. [01:36]
• Global equity markets are selling off, and gold is trading at a three-week low due to higher yields and a strong US dollar. [01:50]
• Gold is currently testing a key technical level, its 200 EMA, just above 4,300. [02:11]
• The presenter believes that if the US 10-year yield pushes above 5%, it will become an increasingly important headwind for gold and equities. [02:47]

Trade ideas

None stated. The presenter's market view is bearish on gold, noting it is under pressure from surging bond yields and a strong US dollar. They identify key support levels that, if broken, could lead to further downside.

Levels and data cited

• US 10-year Treasury yield: Approaching 5%.
• Brent crude: Trading around $95/bbl.
• Gold Spot: Testing 200 EMA support just above 4,300. Downside targets are cited at 4,200 and then 4,100.
• Fed Rate Hike Probability (Sep): Market expectations are cited at 70%.

Risks and what would invalidate this

• The presenter sees a clear break below the 200 EMA for gold as a warning sign that could lead to a deeper correction towards 4,200 and 4,100.
• A move in the US 10-year Treasury yield above 5% would act as an increasing headwind for both gold and equities.