US bond yields slightly fell during the US session to the relief of most investors. However, the stock market, Gold and the US Dollar continue to decline despite the cooling yields. Gold, the US Dollar and even the equities market are normally correlated and do not usually simultaneously move lower.

However, what we are witnessing is not a typical “risk-off” move. Instead, it reflects a combination of weaker US growth expectations, a bond-market selloff, and renewed inflation concerns. This is causing the US Dollar, Gold, and stocks to decline simultaneously. Behind this scenario are higher oil prices and weaker employment data, which are raising concerns that the Federal Reserve may find it increasingly difficult to bring inflation under control without putting further pressure on the economy.

For this reason, investors will continue to pay close attention to the bond yields, oil prices and also the upcoming Jackson Hole Symposium. The Jackson Hole event will take place towards the end of next week.

Gold to Rebound as Yields Retrace and Dollar Continues to Fall?

High bond yields do not instantly mean that Gold will decline, but if yields continue to rise in the longer-term, Gold can come under immense pressure. A good example of this was in 2021 during the COVID-19 pandemic. Bond yields rose sharply and Gold saw a quick change in trend where it fell by 15% at times.

Bond yields are retracing lower due to the US pausing tariffs on Canada, a key trade partner for the US. The White House halted the duties after Canada committed to removing discriminatory measures affecting US autos, dairy, and alcohol. Canadian Prime Minister Mark Carney said the two sides have made substantial progress, although important work remains. Neither side disclosed whether earlier sticking points would be resolved.

The US Dollar Index on Tuesday moved sideways and this morning is declining by more than 0.20%. Currently, the US Dollar is the worst performing currency of the day along with the Australian Dollar. However, Gold prices are yet to witness sustained bullish momentum in response. If the US Dollar continues to decline, bullish price movement for Gold will become more likely particularly if crude oil prices fall lower. Currently, crude oil is trading 0.50% higher.

Gold on the 5-Minute timeframe is still trading below the 200-bar simple moving average and is currently trading at the VWAP. For this reason, the price remains neutral, but this indication may turn bullish if the price rises above $4,352.35. This is a key price for bullish price action on smaller timeframes. However, if the price falls below $4,339.00 and the US Dollar rebounds, buy signals would fully fade.

S&P 500 - Meta Stocks Struggle as Various States Dispute the Company’s Ethics and Intentions

The selloff seen overnight for the US equities measured 0.71%, a moderate decline, but not a unique fall to indicate a larger longer-term selloff. However, an interesting element to the decline was that the fall took place with virtually minimal retracements and attempts to rise.

The decline is largely related to high bond yields, worries over inflation and also the tech sector. The largest declines are largely from technology companies such as Meta, Micron Technologies and NVIDIA.

Meta stocks saw a decline of 4.45% due to its largest legal trial starting in the US. In the opening statements on Tuesday, attorneys general from four states alleged Meta engineered Facebook and Instagram to be addictive and damaging to young adults while misrepresenting their safety. This is part of a broader case brought by 29 states. Analysts advise Meta is likely to continue witnessing mounting legal cases globally. In addition to this, bans on platforms for under 16s are also likely to be introduced by more countries.

A positive factor for the stock market this morning is the decline in bond yields. However, bond yields, oil prices and the US Dollar will continue to impact the S&P 500.

In terms of the market’s risk appetite, the VIX is currently trading 0.35% higher. The increase is not positive for the S&P 500, however, the VIX is not high enough to point to significant downward volatility. The put-to-call ratio is at 0.74 which provides a bearish bias but is not indicating a stock market crash.

Key Takeways:

• Gold, the USD and stocks are declining together, reflecting weaker growth expectations, inflation concerns and pressure from elevated bond yields.
• Bond yields have eased slightly, helped by the US pausing tariffs on Canada, but investors remain focused on oil prices and the upcoming Jackson Hole Symposium.
• Gold remains technically neutral, with $4,352.35 acting as a key bullish level. However, price action will depend on the US Dollar, bond yields but also oil prices.
• The S&P 500 remains under pressure, led by technology stocks. While VIX and put-to-call data point to bearish sentiment but not extreme market stress.
• Meta shares fell 4.45% as a major US trial began, with four states alleging that Facebook and Instagram were designed to be addictive and harmful to young users.