Gold Defies Soaring US Treasury Yields to Hold at $4,200

Tim Elliott (0:00)

This is the Morning Drive at Mira Business FM. Gold has hit 4,219. We'll have a look at the price, where it is in a moment. It plunged back down. Energy market's been acting up. Let's break down what's been happening in the world of the oracle that is Jeff Rhodes, Managing Director for Business Development, Middle Eastern Asia at Monetary Metals. Jeff, good morning. And I have to say, we've not had you in the studio for three weeks.

Jeff Rhodes (0:27)

It's amazing.

Tim Elliott (0:28)

Farage and I have been at a little bit of a loss. I have to know what to do.

Jeff Rhodes (0:33)

Yeah, well, it's good to be back.

Tim Elliott (0:35)

Nice to see you.

Jeff Rhodes (0:37)

So the bad news is I was away for three weeks. The good news is the gold hasn't really changed.

Tim Elliott (0:42)

Yeah, I was going to say, it's around the same level.

Jeff Rhodes (0:45)

Talk about anyway.

Tim Elliott (0:46)

Is there a correlation there, Jeff Rhodes away gold?

Jeff Rhodes (0:49)

Now I'm back in the saddle, as it were.

And it has been quite an interesting week. It's doing okay.

It's doing okay. But I think before we actually get into the details of it, the big event over the last two or three months, over the summer, has really been US Treasury yields. The return, because of the selling of bonds, US bonds, it creates that the yield has gone up. It's gone up to a high that I haven't seen. I was trying to find out when it was last at 525 So, a yield of 5.25% per 10-year Treasury is quite amazing, because this is an asset class that doesn't really change. It's always been solid around 4% for as long as I can remember. So, when you've got 10-year Treasuries yielding you 5.25%, it's no wonder that there hasn't been a flood of people going into gold. The fact that gold has held on to its current levels is actually a fantastic performance in the face of US Treasuries giving you such a high yield, which tells me that there is still an element of safe haven buying of gold because of the uncertainty that we have in the world. You know, both in terms of financial and geopolitics. Now, we're still in a difficult situation, so I think gold reflects that.

Tim Elliott (2:29)

We're in a spot. There's no doubt about it. Well, actually, let's look at what happened yesterday.

Jeff Rhodes (2:35)

Yeah, okay.

Tim Elliott (2:37)

It was your report yesterday that I was reading. One minute gold is spiking. It's softer US inflation data.

The next minute, quite a brutal reversal, I think, to be fair.

Jeff Rhodes (2:50)

That was the word I used, yeah.

Tim Elliott (2:51)

Yeah, so what triggered that?

Jeff Rhodes (2:54)

It is. I think there are so many factors coming and affecting gold that it's making it quite volatile, very choppy. I mean, the right word is choppy.

Tim Elliott (3:07)

Yeah, absolutely.

Jeff Rhodes (3:08)

And so the volume, trading volumes are good. It's not like the summer where we had very light trading volume. And Tim, I like to look at the volumes traded on the New York futures market, the COMEX, because they published their volumes every day. And over the summer, it was really light. But since the start of September, we've seen good trading volume. But we're really still stuck between, if you like, the big numbers of 4,000 and 5,000.

We've been in that phase for about four months now.

And as I say, with US Treasuries at 5.25%, you would be right in thinking gold should be lower, but it's not. Why isn't it? Because there are buyers. Did I ever tell you, a colleague of mine, that I learned everything I know, really, taught me about gold? And he said, the only thing you really have to know, Jeff, are there more buyers than sellers, or there more sellers than buyers? And so that's the only reason gold goes up. And at the moment, we're at a point of equilibrium. It's almost like we've got a new gold standard of 4,200.

Tim Elliott (4:25)

It sort of feels like that.

Jeff Rhodes (4:27)

It feels that way, yeah.

Tim Elliott (4:27)

Because I mean, a few weeks ago, and well, a couple of months ago even, if we're really honest, Friday mornings, we were kind of a little bit stuck.

Jeff Rhodes (4:37)

A little bit.

Tim Elliott (4:38)

Weren't we? In a way. I mean, there is always something to say. You have a few anecdotes to pass on. I know that. But there just wasn't the activity, or there was so much uncertainty. It was very hard to put things down.