Gold and real yields
Gold pays no interest, so it competes with the return on safe money. How real yields, the central bank and fear move gold.
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In this video
- The real yield is the bond yield after inflation: a 5.5% yield with 2% inflation leaves 3.5%.
- When real yields climb fast, gold usually struggles. When they fall, gold tends to rise. Central bank buying has weakened the link at times, so treat it as a tendency, not a law.
- Real yields follow the central bank: expected cuts with sticky inflation tend to push them down.
- Before a gold chart, check inflation, the expected central bank path, real yields and geopolitics.
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Key terms
- Bond yield
- The return an investor earns on a bond. Yields rise when bond prices fall. Short-term yields follow rate expectations, long-term yields follow inflation and growth.
- Inflation
- The rate at which prices rise. Central banks usually aim for about 2% a year.
- Safe haven
- An asset investors buy when they are scared, such as the Japanese yen, the Swiss franc, gold or US government bonds.
- Geopolitics
- Wars, elections, sanctions and trade disputes that change how investors see risk in a country or region.