DBP - Gold's Real Bear Market Is Not Over Yet
2024-03-27 22:14:06 ET
Summary
- Gold prices, adjusted for inflation, are still below their previous highs and have underperformed cash.
- The resilience of nominal gold prices in the face of high real bond yields appears to reflect speculative interest and creates the potential for another sharp correction.
- At these high real yields, investors are much better off in inflation-linked bonds which are closely correlated with gold prices but with more upside potential and less downside risk.
While gold prices trade near all-time highs in nominal terms, when adjusted for inflation the metal is still 5% below its March 2022 highs and 12% below its August 2020 highs. The metal has also underperformed boring old cash over this period and there is every reason to expect this underperformance to continue. High real interest rates suggest that gold will continue to underperform even if the metal remains decoupled from its historical relationship with real yields....
Gold's Real Bear Market Is Not Over Yet