In a market where the sentiment seems to be “sell everything,” gold is facing tough competition from bonds. Gold continues to yield zero, while US 2s sold for above 5% at auction and 10-year notes yield 4.56%. With a widening spread between the yields of bonds and gold, especially during a risk-averse climate, gold is losing its appeal as a safe haven option. However, there are some positive factors for gold, such as increased buying from BRICS and countries that are unfriendly towards the US, as well as the attractiveness of gold in China due to the weakness of the yuan. Despite these factors, gold is trending downwards against the US dollar, and if it falls below $1900, it could reach a one-month low.
While the exact timing is uncertain, there is a belief that gold could shine when the Federal Reserve changes its stance. Additionally, gold tends to rally starting in November, adding to its potential attractiveness. Currently, there is still a demand for safe havens, as evidenced by the $16 billion poured into the TLT long-term bond ETF this year. However, until interest rates start declining and this adjustment is reflected in gold, the precious metal may struggle to regain its appeal as a safe haven investment.
Overall, gold is facing challenges in the market, particularly from bonds that offer higher yields. Despite some positive factors supporting gold, such as increased buying from certain countries and the potential for future rallies, the current downtrend against the US dollar highlights the challenges gold is facing. Patiently waiting for the shift in Federal Reserve policy and the seasonal rally in November may be the better approach for investors considering gold as a safe haven asset.