Gold firms back above $1,500 while bond yields slip further
Gold and Treasuries are basically moving in tandem as they continue to keep their focus on the ECB decision later today rather than the more optimistic US-China trade headlines earlier.
Both assets are largely affected by positioning flows in relation to central banks amid the global easing cycle, so it doesn't come as much of a surprise to see such a correlation ahead of such a big risk event - think back to the $17 trillion dollar of negative yielding debt.
With regards to bonds and gold, the thing to watch for the ECB decision today is the QE announcement. Equities may go on and do their own thing amid the rate cuts and rate tiering introduction but it's all about QE for bonds and gold.
The positioning flows here suggest that traders are looking for a more top-heavy QE announcement later today and if the ECB disappoints, expect there to be a correction back to the upside for yields (not so good news for gold).
That would fit into the theme we're seeing over the past week or so where we're seeing a more corrective trend in bonds and gold ahead of the Fed next week. As mentioned earlier, the ECB will only be one half of the story as the Fed will feed the other half to markets next Wednesday on what is to come as we head into Q4.
