Gold, real interest rates and the Dollar

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Real interest rates declined further, with 10-year TIPS yields falling to -0.57% on Thursday, June 18.

Spot Gold & TIPS

Negative real interest rates make Gold an attractive alternative investment when compared to Treasuries.

The Dollar Index found support at 96. Expect retracement to test resistance at 99 but respect would confirm the down-trend.

Dollar Index

Net foreign purchases of US Treasuries were negative in March (-$299 billion) and April (-$177 billion) according to Treasury data. The Dollar is likely to weaken if this trend continues.

The fall in real interest rates is lifting Gold which respected support at $1680/ounce. The Trend Index ranging high above zero indicates buying pressure. Breakout above $1750 would signal another advance, targeting the 2011/12 highs at $1800 to $1900.

Spot Gold

"We have gold because we cannot trust governments."

~ Herbert Hoover


Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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