Real yields and gold:the link that matters.
Real yields and gold are 1 of the most reliable links in macro. A real yield is the interest rate minus inflation. Gold pays nothing, so when real yields fall, holding gold costs you less.
That is why gold usually rises when real yields fall.
Why it works
Gold competes with bonds. When bonds pay a high real return, gold is less attractive. When the real return falls, gold looks better.
When it breaks
Central bank buying, a crisis or a strong dollar can override the link for a while. If gold rises while real yields rise, ask what else is buying.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
Real yields drop after soft inflation data. Gold rallies with them.
Gold rises with real yields. The desk explains central bank buying. You respect the move but size smaller.
Mistakes to avoid
- Watching nominal yields instead of real yields.
- Ignoring the dollar.
- Assuming the link works every day.
What makes it different
The Analyst Desk can tell you when the link breaks and why, which a chart alone cannot.
Questions
What is a real yield?
The interest rate minus inflation.
Why does gold pay nothing?
Gold has no coupon or dividend.
Does the dollar matter too?
Yes. A strong dollar usually weighs on gold.