Gold And Silver Prices May Turn Higher As Long-Term Treasury Yields Stagnate

Anti-fiat gold and silver prices have clawed back lost ground in the month of April, after a tumultuous sell-off in longer-term US Treasuries drastically undermined the precious metals market earlier in the year. There was an expectation that inflation data would drive yields even higher in the near term and in turn intensify the downward pressure on gold and silver, as base effects come into play.

However, this didn’t eventuate, despite a larger-than-expected rise in consumer price inflation in March. Clearly market participants had priced in a more aggressive print, with Treasuries catching a bid immediately after the release. Strong demand for longer-term maturities at the 30-year auction also drove yields lower, with the bid-to-cover ratio – a measure of demand – coming in well above the historical average.

US Inflation Rate (2016 – Present)

Gold and Silver Prices May Turn Higher as Long-Term Treasury Yields Stagnate

A continuation of this dynamic could open the door for precious metals to gain ground in the coming weeks. Indeed, the prospect of a smaller-than-expected fiscal stimulus package could put the duration trade back in vogue. President Biden hinted that he could favour a smaller package in a recent sit-down with a bipartisan group of policymakers.

Looking ahead, retail sales figures will be intently scrutinized by market participants, to determine if stimulus cheques are indeed being spent or saved. A marked rise in spending could trigger further losses for precious metals on a short-term basis, however, it is likely that this could prove to be a buy the rumour, sell the news event. In that case, gold and silver could be poised to extend recent gains.

US 30-Year Treasury Yields Daily Chart – Descending Triangle In Play

(Click on image to enlarge)

Chart prepared by Daniel Moss, created with Tradingview

From a technical perspective, US 30-year Treasury yields seem poised to continue moving lower, after failing to fulfil the Double Bottom’s – carved out in August last year – implied measured move (2.58).

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