XAU/USD PRICE OUTLOOK: GOLD SPIKING TO RECORD HIGHS ON ANTI-FIAT BID AS PRECIOUS METALS TRACK REAL YIELDS & US DOLLAR LOWER
- Gold prices[1] have climbed over 30% year-to-date on the back of bullish fundamental tailwinds
- Gold and precious metals are rallying as central bank liquidity sends real yields plunging
- US Dollar[2] weakness likely exacerbated the parabolic rally being set forth by anti-fiat assets
Gold performance continues to glisten. The precious metal has staged an impressive 12% rally over the last three weeks, which just catapulted XAU/USD[3] to an all-time high above the $2,000-price level. This recent extension higher lifts gold price action to a 33% gain year-to-date. What fundamental forces are fueling the gold breakout and is there potential for bullion to advance further?
GOLD PRICE EXPLODING HIGHER AS REAL YIELDS CRASH (CHART 1)
The price of gold holds a strong inverse relationship with real yields, generally speaking, and underscores a primary driver of the yellow-metal’s broader direction. To that end, real yields have been crashing lower since August 2018, which just so happens to correspond with where gold prices bottomed two years ago.
Learn More: How to Trade Gold – Top Trading Strategies & Tips[4]
In light of this typically negative correlation maintained by gold and real yields, it comes as little surprise[5] that XAU/USD price action is ballooning to record highs while real yields sink to record lows. The latest stretch lower in real yields widely follows unparalleled Fed asset purchases[6] in conjunction with slashing benchmark interest rates to zero, and judging by recent commentary[7] from Fed Chair Jerome Powell, the central bank looks set on maintaining its accommodative monetary policy stance for the foreseeable future.
