LONDON–(Marketwire – January 29, 2013) – City Index UK: The very hint of a possible change in US monetary policy has all other counter currencies moving. The Fed is still far from shifting its accommodative stance but with bond yields approaching unsustainable levels last year and the move on the 10 year note yield above 2% it is the very start of a long upwards journey. We are unsure how long or when the move up will increase in intensity, but gold is the most obvious casualty if the move is quicker and larger than expected.
Read Full Article at cityindex.co.uk: Gold stocks down as US treasuries commence the journey of a lifetime
Gold slipped slightly overnight and was last trading at around US$1659/oz. It has solid support when tested at its 200 moving average, but does also have the propensity to slip suddenly below that level if bond yields elevate quicker and faster than expected. The risk reward ratio between gold equities and the rest of the market is becoming even larger. Not only do gold equities lag when the gold price rallies but they also fall a lot more than the gold price when things go south. Holding gold equities would only yield outperformance if one was expecting the gold price to spike 10%+ in such a short period of time. That is not completely out of the question, but seems more unlikely if US 10 year bond yields continue creeping higher. Read more
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