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Gold Remains Steady Despite Sharp Fall In Negative-Yielding Debt

  • Gold prices have remained steady in recent weeks despite the sharp decrease in the total amount of negative-yielding debt.
  • The chart below shows that the total amount of negative-yield debt, which could be seen as a measure of market stress, has strongly co-moved with gold prices in the past 5 years.
  • While the amount of debt with negative yield has fallen from over 16tr USD in early September 2021 to below 10tr USD in early January 2022, gold prices have remained steady oscillating around $1,800.
  • The major forces that have been supporting the precious metal in recent weeks are the surge in inflation expectations and the USD consolidation (that started in the end of November).
  • In addition, the recent rise in volatility could also limit the downside risk in the precious metal as gold has historically performed well in periods of surging uncertainty and price volatility (i.e. equity drawdowns).

Source: Bloomberg/MNI

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