over 2 years ago • 1 min
Gold is due for a rally back to the highs it reached in the middle of last year, according to this chart of the precious metal’s historical relationship with the US bond market.
As investors have poured money into the safety of 10-year US government bonds in recent weeks, their yield – accounting for inflation – has dropped. We’ve plotted this so-called real Treasury yield in blue above on an inverted scale so you can more easily see its relationship with the price of gold (plotted in pink).
Gold is an investment that pays out no income, so as real US bond yields drop further and further below zero the relative appeal of the metal’s non-existent yield grows.
Since the end of last year, gold has traded below the level where real Treasury yields suggest it should be. To return to its recent trend, gold would have to rally about 10% from its current price – potentially creating a buying opportunity.
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