Rates, inflation, and real yield
Gold pays no coupon, so the return available from safe paper assets matters. When real yields rise, the relative appeal of gold can weaken. When real yields fall, gold's opportunity cost declines.
This is why inflation alone is incomplete. The key question is whether interest income keeps pace with inflation after taxes, risk, and currency expectations.
- Higher real yields can pressure gold
- Falling real yields can support gold
- Inflation expectations can move before policy
- Nominal rates are only part of the story
Balance sheets and credibility
QE, emergency lending, and central-bank balance-sheet growth can support markets while raising longer-term questions about currency dilution.
Gold responds to that tradeoff because it sits outside the credit claims created by monetary policy.
- QE expands central-bank balance sheets
- Liquidity can stabilize markets in the short run
- Persistent expansion can weaken currency confidence
- Gold provides non-issuer reserve exposure