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Gold has broken above $2,000 and is trading as high as $2,035 but a temporary pullback is in the cards. Silver also continues its recent surge, as real yields dive deeper into negative territory. Both precious metals are set to consolidate around $1,900 and $23 respectively before moving to new highs, Bart Melek, head of commodity strategy at TD Securities briefs.

Key quotes

“Fed signaling that it is weighing the abandoning of preemptive rate moves to curb inflation has many worrying that the US central bank will allow inflation to move above the historic target of 2%, driving real rates even lower. Yield suppression could very well be a target, even as fiscal policy becomes more simulative.” 

“If the yield curve goes below zero, does the Fed then move the Fed funds subzero? This, plus the fact that gold has the highest convexity is perhaps why gold is rallying, despite breakevens falling today.” 

“The near-term threat is disinflation, and higher real yields. Consolidation lower is still in the cards, as this is very much a retail speculative frenzy, with CTAs and specs both shedding length recently. Before gold moves above $2,100/oz and silver into new cyclical highs, it is likely these metals consolidate their gains near $1,900/oz and $23/oz first.”