What Breaks...Gold, Or Gold Volatility?

1) RATES – The 2YR Yield – Fed Front Runner – is still in a bearish trend (downward bias), suggesting there are still rate cuts expected.  Longer-term yields, like the 10YR, 20YR, and 30YR, are also all bearish in trend.  This was our expectation in the current economic environment we’re in, where rates tend to be flat to slightly down.  Right now, the 10-30YR yields are all signaling “oversold.”  That doesn’t mean that they can’t or won’t go lower…they probably will…but at the same time, it should not be surprising if we see a bounce in these longer-term yields either.  The US 10YR could see 4.10% before resuming its bearish move.

2) GOLD – I’ve commented before, but it bears repeating, high and rising volatility will at some point break.  But what will break?  Volatility or price?  Not always, but it’s usually price if the asset that is being tracked is also moving up with volatility.  Yesterday, gold was up another +2.3% and about +7% over the last 5 days.  But gold volatility (GVZ) was up +5.5% at the same time, also breaking above trend resistance at 36.13.  If volatility closes above that level today, it will be 3 days in a row and shifting gold’s volatility regime to bullish (upward bias).  So, what do we have today with volatility up like that?  Gold is down -2%.  $1,060 is decent support right now, but gold could trade toward the top of its trend range at $1,120 before finding some footing.  Does that mean sell gold?  No, it just means that with volatility moving up like this, we should expect some pullback in gold’s price.

3) GROWTH – The Chicago Fed has stated that economic growth accelerated in Jan to the fastest rate since Feb '25.  That’s a pretty stark contrast from Jan '25 a year ago when growth was sharply below the long-run average.  This suggests that the Q1 Goldilocks conditional economic cycle is still intact. (chart credit to E.J. Antoni, Ph.D.)