Gold seizes limelight with silver as bond market flashes red

In a world awash with recession fears, gold and silver are feeling the love – and there’s plenty more affection to come.Both metals are rallying as closely watched parts of the Treasury yield curve inverted, raising speculation that a US recession looms. The worsening US-China trade war, and its impact on global growth, are also being keenly felt, with weak Chinese and German economic data this week spurring demand.Gold has jumped this year on a constellation of mutually reinforcing drivers, with growth slowing, central banks cutting interest rates, and the high-stakes stand-off of the trade war sapping appetite for risk. Still, the Federal Reserve will likely be powerless to keep the world’s top economy from falling into a recession and the 10-year yield could sink to zero by 2021, according to JPMorgan Chase & Co. All that aids bullion, which doesn’t bear yields.“The overall uncertain macro backdrop is likely to keep interest in gold well-supported,” UBS Group AG said in a note as it raised price forecasts for every year out to 2023. There have been downward revisions to US and China growth expectations and more rate cuts are seen from the Fed, the bank said.Spot gold advanced as much as 0.5% to $1,524.38 an ounce, and was at $1,520.10 at 6:26am in London. The metal hit $1,535.11 on Tuesday, the highest since April 2013. Silver rose 0.6% to $17.3127 an ounce, near an 18-month high, as the Bloomberg Dollar Spot Index snapped three days of gains.As gold pushes higher, miners’ stocks are soaring worldwide. In Sydney, Newcrest Mining Ltd, Australia’s top producer, is up 69% this year, while smaller rival Evolution Mining Ltd. has jumped 42%. Elsewhere, heavyweights Newmont Goldcorp Corp and Barrick Gold Corp have gained ground.On top of the global macro-economic concerns, bullion has also benefited in 2019 from a flare-up in geopolitical tensions. These include anti-government protests in Hong Kong that have raised the spectre of possible intervention by the Chinese military and, in the Middle East, fraught relations between Iran and the US Investors are also tracking Brexit developments in Europe.Yesterday, the yield on 30-year Treasuries fell below 2% for the first time, after the 10-year yield dipped below the two-year rate a day earlier in a pattern typically seen as a harbinger of US recession. That’s sent investors rushing once more to haven assets, both aiding gold and pushing the world’s stockpile of negative-yielding bonds to another record.“Gold competes with interest-bearing assets for investor capital and so, with negative yields becoming more prevalent, the opportunity cost of holding the metal is quickly falling away,” Chris Mahoney, assistant portfolio manager of the Merian Gold & Silver Fund, said in a note.Investors are continuing to flood into exchange-traded funds backed by the precious metals, with gold holdings near the highest since March 2013, while inflows into silver ETFs have pushed assets to a record.