Spare a thought for polished, yellow inflation hedges on Friday.
Gold is among the biggest victims of this week’s rampant trade optimism, which finds the US and China closing in on a deal that would see the Trump administration agree to roll back tariffs for the first time since the onset of hostilities 16 months ago.
The risk-on mood has pushed US yields to the highest in months, while gold is on track for its biggest weekly loss since the election.
That marks a stark contrast to the yellow metal’s performance in 2019 as a whole. Gold has surged this year in the face of plunging yields, central bank demand, doubts about the global economy and a renewed commitment to rate cuts and QE from policymakers.
Now, though, central banks may be inclined to stand pat at least for a spell to see if the coordinated easing push orchestrated over the last nine months is poised to manifest itself in better growth outcomes.
Meanwhile, the risk-on rotation that’s accompanied trade optimism and what counts as “progress” on Brexit (election uncertainty notwithstanding) has driven yields sharply higher off the August nadir, further denting the fundamental case for gold and other havens.
Of course, this could turn around in a hurry. All it would take to sour the mood and reignite haven demand is one irritated tweet from a guy who has a solid claim on a spot in anyone’s list of top five biggest gold fans…