(Inverse) Gold and 5-year inflation-indexed bond interest rates, which have been in full correlation since approximately 2006, broke this correlation as of 2022.
Bond interest rates, which were around -1.8 at the beginning of 2022, increased to 2 by the end of 2022. During this period, if gold had followed the interest rates without breaking the correlation, it would have fallen to $830, that is, it would have lost 58% of its value. But this did not happen and gold fell to $1640, losing 17% in value.
Subsequently, the interest rate decreased from 2 to around 1.15, causing the gold to rise by around 22%, above $2000 again.
Finally, as the interest rate increased from 1.15 to the current level of 2.42 since last March, gold fell to $1865, recording a 7% decrease.
Based on this analysis, we can conclude:
1/Gold and 5-year inflation-indexed bond interest rates are fully correlated under normal market conditions. When bond yields rise, gold falls; When interest rates fall, gold rises. These rises and falls occur at nearly the same rate under normal market conditions.
Since 2022, when the correlation was broken, every increase in interest rates has only reduced gold by 1/6. However, on the contrary, the decrease in interest rates continued to increase gold at the same rate.
Therefore, although gold is suppressed against the changing and hardening monetary policy of the USA, its decline is not as deep as it should be. Therefore, we can say that gold is a solid investment tool in this process.
In light of this information, I think that in a scenario where the markets settle down and interest rates reach 0, gold will easily break its previous peaks and reach extraordinarily high levels.
Bond interest rates, which were around -1.8 at the beginning of 2022, increased to 2 by the end of 2022. During this period, if gold had followed the interest rates without breaking the correlation, it would have fallen to $830, that is, it would have lost 58% of its value. But this did not happen and gold fell to $1640, losing 17% in value.
Subsequently, the interest rate decreased from 2 to around 1.15, causing the gold to rise by around 22%, above $2000 again.
Finally, as the interest rate increased from 1.15 to the current level of 2.42 since last March, gold fell to $1865, recording a 7% decrease.
Based on this analysis, we can conclude:
1/Gold and 5-year inflation-indexed bond interest rates are fully correlated under normal market conditions. When bond yields rise, gold falls; When interest rates fall, gold rises. These rises and falls occur at nearly the same rate under normal market conditions.
Since 2022, when the correlation was broken, every increase in interest rates has only reduced gold by 1/6. However, on the contrary, the decrease in interest rates continued to increase gold at the same rate.
Therefore, although gold is suppressed against the changing and hardening monetary policy of the USA, its decline is not as deep as it should be. Therefore, we can say that gold is a solid investment tool in this process.
In light of this information, I think that in a scenario where the markets settle down and interest rates reach 0, gold will easily break its previous peaks and reach extraordinarily high levels.