Gold
Gold saw some heavy selling to start the week.
Now downside in gold on a strong jobs report was the 'no-brainer trade' from last Friday. This was for two reasons.
Firstly, the USD is disproportionally impacting gold. Strong jobs on top of Clarida's comments from last weeks increased expectations of a Jackson Hole Symposium taper timing announcement. This sent US 10 year yields higher (they have been a bit too low for some time anyway) and the USD too. USDJPY longs were the other 'no-brainer' trade out of the NFP on Friday last week too.
Secondly, gold remembers the taper tantrum of 2013 where it lost around 20% of its value in a few months.
However, before we assume that the taper tantrum of 2013 is going to happen again we need to be aware of the differences between now and 2013.
- In 2013 there was disinflationary pressures the same time as yields started rising. This means that real yields moved sharply higher
- In 2013 the ECB took a dovish tilt in their policy when the Fed were tapering. This time, the ECB may be more optimistic in September and there is certainly not a big divergence as in 2013
- Inflation is high. This means that real yields are unlikely to surge higher the way they did in 2013. Remember that real yields are nominal bond yields - inflation
So going forward, expect any significant adjustments in these outlooks to impact gold. In the very near term US inflation data will be key which is out tomorrow.
