Gold Futures Climb as Treasury Yields Signal Recession

Safe haven asset classes like the gold bullion have gotten a boost thanks to a rise in trader uncertainty. Traders are increasingly alarmed over the possibility of a global economic slowdown. This comes after U.S. Treasury bond yields inverted inverted overnight for the first time since 2007. This signals a recession in the U.S. economy and is driving traders into safe haven asset classes like the Japanese yen, Swiss franc and the yellow metal.

Overnight, Wall Street sold off sharply after the news. The Dow Jones Industrial Average (DJIA) shed over 800 points.

As of 1 am GMT, the widely traded spot gold futures contract was trading higher. This contract added 0.3 percent to trade at $1,520.19 per ounce.

U.S. gold futures, for front end delivery, were trading lower. This contract lost 0.1 percent to trade at $1,526.80 an ounce.

Overnight, during the North American trade session the U.S. Treasury yield curve inverted for the first time in 12 years. This last happened in 2007 and indicates a looming recession in the world’s largest economy.

Gold Traders Worry about the Yield Curve as Traders Support Safe Havens

Traders worry when the Treasury yield curve inverts as that signals a recession. The ten year Treasury bond yield is at its lowest level in three years. The 30 year note is now below two percent, which is the floor for the Federal Reserves policy rate.

Trader sentiment was already bad before this after economic data rattled the markets as they showed that the German and Chinese economies were under pressure from the ongoing trade war between the U.S. and China.

This event will continue to boost safe haven asset classes today including gold and other low-risk assets.