Gold Eyes Breakout as Yields and Dollar Falter
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The equity market remains in a holding pattern, while interest rates continue to decline this week. The 10-year rate fell another three basis points today, following yesterday's decline of 4 basis points. There hasn't been much data this week or in the form of headlines that should be sending rates lower, and inflation expectations have moved sharply higher in recent weeks. We will have to see what happens should the 10-year test support again around 4.35%, clearly if support breaks, rates are going lower, and the view could just be wrong. I would admit, though, that it would seem odd, given what we see in inflation expectations.
The one potential area that could be having a bigger influence and dragging rates lower is the decline in oil prices over the past few days.
Copper made a new closing high today.
Meanwhile, gold is very close to breaking above resistance at $3,450 and exiting the ascending triangle.
After appearing to break out of a falling wedge, the dollar is now threatening to move back within the wedge. In some ways, it is odd because there is a bullish divergence that has formed based on the higher lows in the RSI. So if the Dollar index doesn't bounce back relatively quickly, it seems that the breakout could have been false.
Anyway, have a good day.
-Mike
Terms by ChatGPT
Basis Points: A unit of measure for interest rates, where one basis point equals 0.01%.
10-Year Rate: Refers to the yield on the 10-year U.S. Treasury note, a key benchmark for interest rates.
Inflation Expectations: Market or investor forecasts for future inflation, which influence bond yields and central bank policy.
Support (Technical Analysis): A price level where a security tends to find buying interest and is likely to stop falling.
Copper Closing High: The highest price at which copper has closed in a given timeframe, indicating strength.
Ascending Triangle: A bullish chart pattern used in technical analysis indicating a potential breakout higher.
Falling Wedge: A bullish reversal pattern in technical analysis, typically signaling a potential upward breakout.
Bullish Divergence: A scenario where the price of an asset falls but a technical indicator (like RSI) rises, suggesting potential upward momentum.
RSI (Relative Strength Index): A momentum oscillator used to evaluate overbought or oversold conditions in a market.
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