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Gold Price and Yen to Benefit if Market Sentiment Deteriorates Further

Gold Price and Yen to Benefit if Market Sentiment Deteriorates Further

2019-03-28 10:25:00
Martin Essex, MSTA, Analyst and Editor
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Gold Price and Yen: news and analysis:

  • Financial market confidence is continuing to seep away.
  • If it continues to do so, traders could find safe havens like gold and the Japanese Yen attractive.

Safe havens likely to attract demand

Risk aversion looks set to increase in the financial markets, potentially boosting demand for safe havens. While US Treasuries and German Bunds have already benefited, gold and the Japanese Yen are lagging behind and could be the next assets to prove attractive.

The weakening of sentiment can be seen clearly in CNN Business’s Fear & Greed Index, which tracks seven indicators of investor sentiment. It is now in neutral territory at 51 – lower than the previous close, a week ago and a month ago.

CNN Business Fear & Greed Index

Fear & Greed Index.

Source: CNN Business

Two haven assets – US Treasuries and German Bunds – have already gained support, with the 10-year Bund yield now in negative territory as demand for German government debt increases. Similarly, the yield on 10-year Treasuries continues to fall and is now at its lowest since late 2017.

US 10-Year Treasury Yield Chart, Weekly Timeframe (November 26, 2017 – March 28, 2019)

Latest US Treasury Yield Chart.

Source: Investing.com

However, despite fears of a US recession – indicated by a US yield curve inversion, with the yield on three-month debt higher than the yield on 10-year notes – and moves towards monetary easing by the world’s central banks, gold has not benefited to the same extent and has now fallen for three sessions in a row.

Gold Price Chart, Two-Hour Timeframe (March 11-28, 2019)

Latest gold price chart.

Chart by IG (You can click on it for a larger image)

Nor has the Japanese Yen which has now strengthened only modestly for two consecutive daily sessions.

USDJPY Price Chart, Daily Timeframe (December 10, 2018 – March 28, 2019)

Latest USDJPY price chart.

Chart by IG (You can click on it for a larger image)

More to read:

Why does the US yield curve inversion matter?

How to trade gold

A guide to safe-haven currencies

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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