The outbreak of war in Ukraine caused a massive spike higher across the commodities complex. Anything directly linked to production in Russia (oil and palladium especially) increased significantly, whilst precious metals also advanced. However, this move has reversed in recent weeks. Whilst the war is dragging on, a move higher in bond yields and a strengthening of the US dollar (USD) are weighing on commodity prices.

  • Higher “real” bond yields are helping to strengthen the USD and are a drag on commodities prices.
  • Gold and silver remain negatively correlated to real yields. Silver is being impacted more than gold, for now.
  • Oil is being dragged lower with Brent Crude close to $100 again

Real yields are moving higher

US Bond yields continue to rise. Yields initially reacted lower to the war (on a haven flow). However, since the initial reaction, they have been rising hard since early March. Inflation fears and an increasingly hawkish sounding Federal Reserve have fuelled the move. 

US 10 year treasury yield

The US 10 year Treasury yield has accelerated higher faster than inflation expectations and as a result, “real” bond yields (bond yields minus inflation) have also moved decisively higher. Higher real yields are positive for the USD. Higher real yields are also negative for commodities (which are zero yielding assets).

Commodities now pulling lower

As can be seen from the performance of major commodities (metals and energy), there has been more of a drift lower in the past month. Oil continues to fluctuate in a volatile manner, as does palladium. However, there is an ongoing corrective drift across the broad complex now. Within that though, it is interesting to see the gold price is holding up relatively well, especially compared to platinum and palladium.

Commodities performance

Precious metals are drifting lower

Now, let’s look at the link between real yields, the USD and metals such as gold and silver. 

Higher real yields are positive for the dollar. There was a time in late February/early March when this relationship broke down. However, we attribute this to a significant safe haven flow into Treasuries (a primary safe-haven asset) and the USD (also seen as a key safe-haven choice in the forex space). Since real yields have been rising over the past month, the USD has been more tentative but is still stronger, re-aligning with the historic positive correlation. A stronger USD is a drag on commodities.

yields/us dollar  

Gold is still, on average, strongly negatively correlated to the moves in real yields. Higher yields should be negative for gold. For now, gold is holding up well, but the longer that real yields rise, the more negative drag pressure will be put on gold.


As for silver, we are seeing more of a drag lower from the impact of rising yields (and the stronger dollar too).


Technicals on Gold and Silver trending lower

Looking at the technical perspective on Gold (MT5 code: XAUUSD) we see the price gradually trending lower over the past four weeks. This comes with the 21 day moving average (a near term trend indicator) now turning lower and decisively falling for the first time since December.

The near term basis of support around $1915 is protecting a retreat to the support band $1878/$1895. However, given the trending move lower and mild negative bias on momentum configuration, we favour a move to test $1878/$1890 in due course. The resistance in place now at $1950 would need to be broken on a closing basis to suggest this corrective drift is reversing again.


On Silver (MT5 code: XAGUSD) the downtrend is more defined and a more decisive run of negative daily candlesticks which reflect the outlook of selling into strength. The market has already broken below the support band at $24.45/$24.67 which has been a corrective signal. This has opened the way towards a retreat into the next pivot band between $23.15/$23.45. It would take a decisive move above the lower high at $25.08 to suggest the corrective move is turning around.


Oil starting to trend lower 

Looking at Brent Crude oil (MT5 code: UKOUSD) there is a corrective bias that has taken hold. There has been a decisive downtrend forming over the past two weeks, with a run of lower highs and lower lows. Earlier this week, there had been potential for a basis of support forming around $105, however, that has been broken to continue to corrective move.

We are also now seeing today the market breaking the support of a downtrend of almost four months (dating back to mid-December). A closing breach of this trend would be a negative development. However, given the psychological importance of $100, we would see a close in the $90s to be a key corrective signal. 

On a near-term basis, $105.20/$107.00 is a basis of resistance, with the two-week downtrend currently up around $109.50. In light of the volatility that is still present in the oil market, a move above $112.50 resistance would be a key signal for potential moves higher in oil again.

Brent Crude Oil

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