Gold and the Yield Curve

As you can see by the chart in Callum’s post, gold and real yields have gone their separate ways. Is this to the detriment of gold? Is it a divergence for coming changes in yields? Is the disconnect due to the fact that the macro has completely changed since the US election? We have been noting that fiscal inflation/reflation policy has replaced monetary inflation/reflation policy, after all. They are two very different animals after all, and the disconnect happened right at the point of election.

All valid questions in my opinion. The yield curve (our macro Amigo #3) is flattening, which is in line with risk ‘on’ and economic boom times. It has shown no sign of halting the flattening trend. Yet there is gold in divergence. Gold spiked in 2016 and led the last spike of the curve and the question now is about whether or not gold is leading a steepening of the curve or looking like a sitting duck exposed in the weeds.

gold and yield curve

The yield curve would steepen under pains of inflation or systemic stress. But when it flattens all is well on the macro. But again, who is diverging who? The same can be asked of the real yields/gold graph above.

Just expanding the topic a bit for your consideration.

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