Gold may rise on lower real yields; Canada leads fall in real yields; Australian inflation expectations slump


  • The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
  • The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
  • Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
  • US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
  • Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
  • Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
  • Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
  • Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.



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Greg Gibbs,
Founder, Analyst and PM
Amplifying Global FX Capital Pty Ltd