Search ForexCrunch

  • Negative US 10-year real yields power gains in gold. 
  • The yellow metal is a hedge against inflation.

Gold, a zero-yielding safe-haven metal, has gained 17% so far this year. 

The negative real or inflation-adjusted US Treasury yields seem to have power gains in the yellow metal and could continue to support the uptrend in the near term, according to Holger Zschapitz, senior editor at the economic and financial desk of the German daily Die Welt. 

As seen above, gold has rallied from $1,450 to $1,789 over the past three months, while the US 10-year real rates have declined from 0.60% to -0.73%. Negative real yields essentially represent inflation or a decline in purchasing power and gold is a hedge against inflation.

Real rates could slide further, as the Federal Reserve is unlikely to halt treasury purchases anytime soon. As such, gold could continue to gain altitude and may test the $2,000 mark in the next 12 months, as forecasted by Goldman Sachs. 

At press time, gold is trading at $1,775, representing a 0.10% gain on the day. Price hit an eight-year high of $1,789.15 on July 1. 

Technical levels