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Something Strange Is Happening in Gold and Bonds

TheoTrade, LLC
43.7K subscribers
2.7K views 4 months ago
Normally, bond and gold prices move in tandem. For instance, if the Fed, say, cuts interest rates and expands the money supply, gold will advance as short-term bonds rally on the cut in rates. Now, there are times when the prices diverge but right now we’re seeing something pretty extraordinary: Higher bond yields failed to attract any interest, and the increased selling today was met with even more vigorous buying in gold. This sort of dislocation has a lot of traders wondering: “What’s the endgame here?” Can gold prices keep going up forever as bond prices keep falling? Here’s where the tariffs come into play. Any attempt to move production to the United States is a direct threat to the dollar as a reserve currency. See, with 50% of available dollars held abroad, any increase in the selling of the dollar could increase the supply rapidly. What's causing dollar selling? Well, one source of dollar selling could be a result of defending t …...more
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Something Strange Is Happening in Gold and Bonds
107Likes
2,702Views
Apr 212025
Normally, bond and gold prices move in tandem. For instance, if the Fed, say, cuts interest rates and expands the money supply, gold will advance as short-term bonds rally on the cut in rates. Now, there are times when the prices diverge but right now we’re seeing something pretty extraordinary: Higher bond yields failed to attract any interest, and the increased selling today was met with even more vigorous buying in gold. This sort of dislocation has a lot of traders wondering: “What’s the endgame here?” Can gold prices keep going up forever as bond prices keep falling? Here’s where the tariffs come into play. Any attempt to move production to the United States is a direct threat to the dollar as a reserve currency. See, with 50% of available dollars held abroad, any increase in the selling of the dollar could increase the supply rapidly. What's causing dollar selling? Well, one source of dollar selling could be a result of defending the valuation of a currency… like… say… the Chinese yuan. Treasury holdings are converted to dollars and those dollars are sold to buy their own currency. However, in that process, some of the dollar selling may be in exchange for gold. What’s happening is the new global trade paradigm is causing at least some flow into gold, hence the impact of gold prices - for now. The more Treasuries sold, the higher the flow into gold. So, a historically positive correlation has been flipped on its head. Let’s take a look at what that means for traders… TotalTheo® Unlimited Monthly Streaming: https://theotrade.com/all/ TheoTRADE 2023 Live Event "A Trader's Paradise" https://go.theotrade.com/23-2/ Sign up for the Trading VIX Options Course: https://theotrade.com/vol/ The Next Big Short Class (Risk Twist Spread) https://theotrade.com/twist/ Weekly Options Trading Advantage Class https://theotrade.com/wo/ Learn the Tetrapod spread in the Secret Weapon to Trading Options on ETF's Class: https://theotrade.com/pod/ Consistent Intraday Strategies and Setups Class https://theotrade.com/day/ High Probability Trading with In Out Spreads Class: https://theotrade.com/spread/ Day Trading Nasdaq Futures Class with Tony Rago https://theotrade.com/nq Don't have thinkorswim? Open a TD Ameritrade Account and get the thinkorswim platform for free here: http://www.theotrade.com/tdameritrade Guide to Getting Short and Collecting Income: https://theotrade.com/getshort/ Join TheoTrade: https://theotrade.com/total Get Market Cliff Notes delivered to your inbox each trading day: https://theotrade.com/cliffnotes Get more free videos like these delivered to your inbox each trading day: https://theotrade.com Get free thinkorswim® tutorials: https://theotrade.com/theotradetutori... Subscribe to our YouTube channel:    / theotrade   Follow TheoTrade on Twitter:   / theotrade   Become a fan of TheoTrade on Facebook:   / theotrade   Follow TheoTrade on Pinterest:   / theotrade  
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TheoTrade, LLC

43.7K subscribers