“There is no alternative” was a slogan traditionally associated with the Conservative Party, which has also been coined with the acronym “TINA”.
It was initially used on May 21, 1980, by Margaret Thatcher at the Conservative Women’s Conference.
In recent years, this motto was readjusted as a result of the financial environment and was used to explain the constant growth of stock markets. Due to the real negative yields of the majority of bonds, stock markets appeared as a unique way to achieve a positive yield.
Live Gold Price – $/oz
Things have changed in recent times. In the last few months, a great majority of Central Banks have taken action to fight the inflation rally. Despite the real yields on government bonds being negative, investors are starting to see some interesting returns there.
For example, U.S. 2-year yields jumped above 2.50%, while the 10-year Treasuries yield is currently at 2.75%, offering a potential alternative to shares. This paradigm shift has affected stocks, with partial declines, particularly on the Nasdaq and with tech stocks, which do not usually pay dividends.
Eurozone Inflation in Focus
All eyes are now on the inflation data in Europe, which will be released tomorrow.
Last month this figure reached a record 7.4%. Analysts are betting on further increases, as inflation could jump to 7.6-7.7%. This rally in prices is also forcing the European Central Bank to up the pace of rate hikes, in advance of July’s meeting.
The environment of the last few months – with a strengthening dollar and growing rates – does not represent the best scenario for gold, as a traditionally non-yield-bearing asset, with the notable exception of Kinesis.
Despite this, bullion has managed to remain above $1,800, confirming investors’ interest in this asset during times of growing inflation. In the last few trading sessions, gold has jumped above $1,850, thanks to the slowdown of the US Dollar rally.
From a technical point of view, the scenario has slightly improved. A clear surpass of the resistance placed at $1,865 would open space for further recoveries of bullion, with potential targets placed at $1,900 and $1,920. However, a decline below $1,835 could trigger a bearish impulse, increasing the possibility of a new test to the important support zone of $1,800.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.