Gold Heats Up, China’s Gold-Backed Bond Move, and the 10-Year Treasury Note’s Ominous Rise

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In the turbulent macroeconomic landscape marked by clashes in Ukraine and Israel, and with the Fed’s Jerome Powell alluding to persistent and escalated interest rates, the 10-year Treasury note has soared to 5% — a milestone not seen since 2007. Amid this whirlwind, both gold and silver have enjoyed a surge, paralleling the ascent of the crypto world. In contrast, equities have faced a challenging week, with the Dow Jones plummeting over 200 points just ahead of Friday’s closing bell.

Gold Stands Firm in Macroeconomic Turmoil

On October 20, the quartet of leading stock indices — Dow Jones (DJI), S&P 500 (INX), Nasdaq Composite (IXIC), and the Russell 2000 (RUT) — witnessed declines ranging from 0.8% to 1.5%. Concurrently, just a day earlier, the yield on the benchmark 10-year Treasury bond climbed to a staggering 5%, a peak not touched in 16 years.

By Friday, this 10-year note was coasting along at 4.92%, marking a significant 38.6% rise over the past half-year. Simultaneously, WTI Crude and Brent Crude hover in the range of $89 to $92 per barrel, a significant climb from their $70 per barrel trough at June’s end.

The geopolitical tensions in Ukraine and Israel have kept markets on tenterhooks, and Federal Reserve Chair Jerome Powell took a decisive stance in his Thursday speech, hinting at impending rate hikes. Meanwhile, the crypto world showcased its resilience following the misleading ETF news on October 16, especially given that it had previously faced setbacks due to the conflict between Hamas and Israel just a week earlier.

In recent times, precious metals have certainly made their mark. Gold is on the cusp of the $2K per ounce threshold, currently trading at approximately $1,980 per ounce, marking an 8.5% uptick since the start of the year. Over the past week, gold has appreciated by 2.4% relative to the U.S. dollar, while silver has seen a 2.5% rise.

Nevertheless, on a year-to-date basis, silver has declined by 2.5%, standing at $23 per ounce. Reuters points out that the mounting demand for “safe-haven assets,” driven by concerns of a potential escalation in the Israel-Hamas confrontation, has given gold a boost.

In another development, China’s central bank has shown the nation’s sustained appetite for the precious metal throughout the year. On October 20, 2023, Reuters further unveiled that China has been gleaning insights from Russia on navigating financial sanctions.

In a report addressing escalated China-Taiwan tensions, it was highlighted that Chinese researchers from think tanks have explored the idea of issuing gold-backed bonds as a means to sidestep potential sanctions should China take aggressive action against Taiwan. The article further elaborated:

Reuters could not determine the extent to which the think tanks influence China’s decision-making, but they are known to brief and write reports for leading officials.

Gold has showcased its resilience as a trusted safe-haven asset in recent times, though this doesn’t guarantee its future stability. As it approaches its historic peak of $2,074.88 from August 2020, gold bugs are watching with bated breath. However, it’s essential to note that while gold’s performance has been commendable, bitcoin (BTC) and the broader crypto economy have outpaced the gains seen in precious metals.

What do you think about gold’s rise in recent times? Share your thoughts and opinions about this subject in the comments section below.