Rising real yields pressure gold prices
Rising real yields and a hawkish shift in Fed rate expectations present a tactical headwind for gold, prompting a reduction in tactical allocations.
The argument
The speakers explained that they recently reduced their tactical gold allocation (which was originally added in March 2023 as a bond/duration alternative). They argue that as inflation expectations adjust and the market prices out rate cuts, rising real yields will continue to weigh on gold.
The thesis, stress-tested
✓ What validates it
- ✓Gold prices crack key technical support levels
- ✓Real yields continue to march higher
▸ Risks discussed
- ▸Geopolitical crises could trigger safe-haven flows back into gold
- ▸A sudden dovish pivot by the Fed would reverse the real yield headwind
Hear it yourself
"The reason I ask about the legacy is well, we're gonna put aside all the financial crisis stuff because it's ancient history. Although, interestingly, a lot of people don't know this, one of the Fed's primary responsibilities. People think the FOMC is the whole point of the Fed. Mhmm. They're actually a banking regulator. I know. Sure. So okay. So putting that as a banking regulator where the chairman of of the the Fed actively working against regulating, but we'll put all that aside. The legacy, really, to me, is an increased focus on asset prices at the Fed. Some would argue that's where they should have gone because more and more of the economy is being driven by assets anyway, and I believe in that."
07:30
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