Part 2/7:
Historically, gold has served as a safe haven during periods of rising inflation. Investors tend to bid up gold prices when inflation expectations are high. As illustrated in the recent analysis, the price of gold closely follows the inverted real yield of 10-year Treasury bonds, which accounts for inflation. When the Federal Reserve maintained low interest rates, gold prices soared alongside inflation rates.
However, the dynamic changed when the Federal Reserve began raising interest rates and engaging in quantitative tightening—draining excess liquidity from the banks. Under these conditions, one might expect gold prices to decrease in tandem with falling real yields. Contrary to this expectation, gold prices have continued their upward trajectory, stirring interest among market analysts.