10-YEAR YIELD AT TWO-MONTH HIGH -- RISE IN YIELDS BOOSTS FINANCIALS -- BUT MAY BE WEIGHING ON PRECIOUS METALS

TEN-YEAR TREASURY YIELD REACHES TWO-MONTH HIGH...Bond yields are climbing today.  That may be a reaction to Mr. Powell's speech suggesting that the Fed was relaxing its attitude toward the possibility of rising inflation.   Treasury bonds are being sold as a result which is boosting bond yields.  The daily bars in Chart 1 show the 10-Year Treasury yield climbing 5 basis points to 0.74% which is the highest level in two months.   Rising bond yields are also boosting the dollar.   That combination is causing some profit-taking in precious metals.  But rising bond yields are boosting financial shares, and banks in particular.

RISING BOND YIELDS BOOST FINANCIALS... Stocks are reacting positively to Mr. Powell's comments.  And financials are the day's strongest sector.   Chart 2 shows the Financial Sector SPDR (XLF) moving closer to a test of its 200-day moving average.   Rate-sensitive banks and insurers are leading today's XLF rebound.  The combination of rising yields, however, and a bouncing dollar is working against precious metals.

GOLD SPDR TESTS TRENDLINE SUPPORT... Rising bond yields are normally negative for precious metals.   And that appears to be the case today.   Gold and silver prices are reacting negatively to today's rising bond yields and a higher dollar.   Chart 3 shows the Gold SPDR (GLD) falling sharply today and pressuring its early August low while nearing a test of a rising trendline drawn under its March/June lows.   Gold and silver miners are also under pressure.