On rates and gold

SeekingAlpha/Craig Hemke/2-8-2022

“A common refrain on Twitter is ‘gold and rates are rising together, therefore something wicked must be coming’. This is sophomoric ‘analysis’ and anyone with five minutes to spare can quickly discern that it’s not unusual at all for rates and gold to rise together. In the COMEX gold market, there are always myriad reasons why price rises or falls over time, yet the generalist always tries to explain the situation in the simplest of terms.”

USAGOLD note: Hemke does a good job of dispelling the notion that gold will fall if rates rise. It’s all about the real rate of return. The chart below tells the story about as succinctly and directly as it can be told. The most telling feature of the chart is that gold has yet to react to the recent decline in real rates. Some will see that divergence as a buying opportunity.

Chart courtesy of MerkInvestments.com