Gold is finding good support around the $1,380 level

Precious metal prices are steady. Gold is finding good support around the $1,380 level, since last week US treasury yields has risen sharply. The move in the 10-year UST yield, from 2.90% last week to 3.25% today, was rather violent for such a deep and liquid market. Since break-even inflation in the US (as derived from the bond market) remains largely unchanged, implied real interest rates in the US has also moved higher in recent days.

The 10-year implied real interest rate in the US is now at 1%, up from 0.60% at the end of November. A rise in real interest rates is bearish for gold and seems to be capping upside at the moment. However, despite the latest rise in US real interest rates, the fact that the level of real rates remains low, still makes gold investment attractive. As a result we believe real interest rates will have to rise much higher before any long term negative impact will be seen on gold investment.

Gold support is at $1,367 and $1,352. Resistance is at $1,400 and $1,420.