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Are Gold and Bitcoin Signaling the Return of Money Printing? | Michael Howell
Hidden Forces
Gold and Interest Rates: A Divergence of Insights
There is a significant disconnect between gold prices and real interest rates, particularly the TIPS yield. Typically, as TIPS yields rise, the cost of carrying gold increases, leading to a decrease in gold prices, while a fall in TIPS yields tends to drive gold prices up. However, since late 2022, this dynamic has shifted, with both rising real interest rates and an increasing gold price, indicating a divergence from traditional expectations. This suggests that the market perceives gold as a hedge against monetary inflation rather than responding primarily to real interest rate movements. Consequently, the current state indicates that despite higher real interest rates, the demand for gold persists due to concerns over monetary inflation, leading to an overvaluation of gold contrary to traditional economic indicators.
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