Intermarket analysis: Gold shines amid falling equities and yields

Gold moved sharply higher on Thursday as falling equities and the risk-averse environment sent investors into safe-haven demand. The yellow metal reached fresh 3-week highs above $1,270 an ounce, extending a recovery from 3-month lows sub $1,200/oz scored late May.

Equities were into the red across the globe while US 30-year and 10-year treasury yields fell to fresh 2016 lows, while German Bund 10-year yields and the yield on the 10-year UK Gilt fell to record lows today, all of which evidences the seek for safety in financial markets. 

Meanwhile, USD/JPY fell to fresh 5-week lows during the Asian session, evidencing both risk aversion sentiment and dollar's weakness.

On Thursday, the implied probability of a June hike in the Fed fund futures market edged slightly up to 4% from 2% yesterday, but well below the 24% seen last week, before an awful NFP reading and the subsequent Yellen speech wiped out June hopes.

Gold remains very sensitive to rate hike expectations, as they tend to lift the greenback and weigh on dollar-priced metals. Meanwhile, in an environment of low interest rates investors are less attracted to bonds (and the greenback), benefitting no-yielding gold.