With Treasury yields at their lowest since the election, it appears a shift towards safe-havens (or Trumpflation unwinds) is well underway. Gold is nearing $1300 this morning – its highest since the election. WTI Crude has sunk back to a $47 handle, ignoring dollar weakness as the Qatarstrophe raises more doubts about OPEC coordination.
A weaker dollar is helping precious metals (and Bitcoin) but not crude – a break in the relationship regime we have seen this year.
As UBS notes, gold is extending its recovery, creeping closer towards our target of $1300, supported
by recent developments across the macro space. The pullback in US real rates and the dollar have clearly been key
positive influences for gold prices of late. Gold’s strength is in the face of equities
hovering at all-time highs. The disappointment around the US employment report for
May triggered the move towards the latest highs in gold – although our US economists
do not think this derails the Fed from hiking rates next week, it does introduce a bit
more uncertainty around Fed expectations later this year. (See Mild slowing in payrolls
but hints of less slack)