Yields rise as precious metals fall

What Happened?

U.S Treasury yields have climbed over Tuesday, with a variety of events triggering higher demand. 10-year treasuries rose to 0.657% while 2-year notes reached 0.159%, and 30-year yields surged to 1.347%, marking the highest yields seen since July this year. A number of influences have driven yields up causing ripples through out financial markets, notably Gold and Silver prices both plummeted in response with drops of 5% and 13% respectively. A combination of global positive vaccine news, further fiscal stimulus possibilities and new forward inflation expectations for the united states has been the key driver triggering investors to respond with reduced risk aversion than we have typically seen in 2020.

What Caused It?

Firstly, news out of Russia with an indirect effect, about vaccine approval for Covid-19. Russian President Vladimir Putin made the announcement on Tuesday, though it has not come without controversy, with short lived positivity evolving into scepticism.

Next, President Donald Trump announced that he is currently considering tax cuts to be implemented on capital gains, though much like vaccine announcement, Trumps proposed idea has suffered scrutiny. Concerns of the implementation and the legality of trump being able to impose such large changes to the American tax system are the primary areas of interest.

US Producer Prices also contributed to the change in investor risk aversion with US wholesale goods and services offering the largest increases in 2-years, with a climb of 0.6% being officially recorded. While the reports on wholesale goods and services is better than expected, it is still important to note that inflation does remain subdued, and in some instances is still negative. The benefit that is being seen though is from the ability to forecast where inflation could be for 2021.

What should we expect for gold and silver now?

The reality is that while these increases across the board are a welcomed observation, yields on treasuries are still woefully low, Inflation is still subdued, and the premise of the vaccine is still lacking real results.

Gold and Silver Overlay - Daily