Gold’s price tends to rise when the real yields of US government bonds fall and vice versa. In the view of economists at Capital Economics, the real yields of long-dated Treasuries are set to rise, subsequently, XAU/USD should retreat during the remainder of this year.
Gold’s outlook depends heavily on what happens to the real yields of long-dated Treasuries
“While the recent rebound in the price of gold may owe something to greater demand for safe havens in response to faltering equity prices, as well as to cryptocurrencies coming under pressure, most of it can probably be explained by a marked pull-back in the real yields of long-dated Treasuries after their surge earlier this year. We doubt the pull-back will last, though, and are sticking to our forecast that the price of gold will end 2021 at $1,600/oz.”
“The retreat of real yields of long-dated Treasuries so far in the second quarter of 2021 probably reflects a feeling that good news on growth – after a successful vaccine rollout and huge fiscal stimulus – is largely discounted and might be hampered by supply shortages. We don’t expect it to continue, though, which leads us to expect that gold will lose some of its lustre.”
“Our view that the real yields of long-dated Treasuries will rebound is partly because we anticipate that the recovery in the US will remain quite healthy despite supply shortages that threaten to hamper output.”
“Measures of long-dated inflation compensation have already risen a long way above 2%. This suggests to us that investors will anticipate more monetary tightening in the distant future if they keep edging up, especially if the Fed continues to stress that it sees current inflationary pressure as transitory and remains in no mood to tighten policy while the labour market is below ‘full’ employment.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.