Amid Gold’s worst week (-2.3%) in the last seven weeks, Gavekal Capital’s Eric Bush explains what he is looking at to confirm the precious metal rally’s continuation…
10-year TIPS yield briefly went negative last week and the current yield is just 3 bps. TIPS yields have fallen around 75 basis points since the beginning of the year. This decline in yield has been accompanied by a rally in gold from $1060 to $1342.
One of the more persistent relationships in the market place since 2003 has been this negative correlation between TIPS yields and gold prices.
If history is any guide TIPS yields will probably be negative if gold rallies above $1400.
Courtesy: Gavekal Capital
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