Bonds, The $US and Gold

Hi Bob,

We have written a few times through 2025 that we are bearish towards the $US medium/long term but we are aware its currently a very crowded traded. There is a lot of contradictory commentary in the financial press at the moment, but we can distill our thoughts as below:

• The yield curve is dictated by markets, not the Fed, although interpretation is a very different issue. The short end, the 2s, are strong as yields fall in anticipation of 4-5 Fed rate cuts over the next year whereas the long end, the 30s, are weak sending yields up towards 5% on fears around inflation and US debt. The market’s clearly comfortable with the yield curve here having trading around all-time highs on Thursday night but a breakout above 5% by the 30s might create cause for concern.
• This year’s weakness in the $US Dollar makes sense on interest rate differentials, but it has become a consensus opinion hence a short squeeze cannot be discounted. However, as discussed, in a question around the recent Shanghai Cooperation Organization (SCO) summit, we are bearish medium/long term toward the $US.
• In line with our bearish $US view we like gold longer term but again its feeling stretched and “well owned” around $3600/oz, so we’re more a seller than a buyer in the short term.

chart

The $US Index v Gold ($US/oz)

LAST UPDATED 05/09/2025 11:29

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chart

The $US Index v Gold ($US/oz)

LAST UPDATED 05/09/2025 11:29