FX Macro Strategy

 Real Yields may have bottomed: I have been bullish on Gold since May last year, primarily because of falling real yields (Nominal Rates - Inflation Expectation) which historically have an inverse correlation with the yellow metal, the large stimulus that was provided by the US government has driven Inflation expectation Up while the central bank keeping the short end of the curve at near zero, the result is a falling Real yield, as we can see in the chart below. But now with the expectation of a strong recovery in 2021, we're starting to see nominal rates (10-year Treasury bond yield) on the rise, and with Inflation expectation already above the Fed target of 2% there is very little room for upside there. The outcome of this is that Nominal rates will start to go higher faster than Inflation Expectation I,e Rising Real yields which is the enemy of Gold. This can seem controversial for some people because there is a popular belief that Gold can be a hedge against Inflation. While t...