Falling yields are having a very positive effect on gold. The metal is already enjoying its best first half in years, and the fundamentals for gold look solid. Potential weakness in equities and worries about growth are both stoking gold demand, while lower yields and a weaker Dollar are also supportive. Gold is now being used as a hedge against equities in a way that bonds have traditionally been employed. “The bond market is not acting as a reliable hedge against equity weakness in the way that everyone expected it to and it hasn’t operated that way since 2008. Gold is providing better protection against potential equity weakness right now than bonds are”, says the head of gold strategy at State Street Global Advisors.
FINSUM: Gold seems like it has a nice path to keep its performance going. That said, we are worried rate cuts might spark a more risk-on equity market, which would pull money out of the metal.