The positive outlook for gold yet a short volatility
Structural uptrends may offer attractive entry points in 2025 Over the past two years, a breakdown in the relationship between gold and real interest rates has been on display. “We have in the past attributed the phenomenon largely to emerging market central bank buying and geopolitical risk premia. But perhaps bond uncertainty has also played a role, said World Gold Council (WGC) in their Gold Market Commentary for the month of December 2024. Data suggests that when interest rate uncertainty – as measures by the MOVE index - is high, yield trajectory appears to exert less of a drag on gold returns than when it is low. It also looks like this is a statistically significant difference, if we regress gold returns on a real yield component with an interaction dummy for when the MOVE index is above 100 (it has recently risen to 99). The normal sensitivity is more than halved when bond uncertainty is high, even accounting for moves in the US dollar index. ...