Gold has outperformed 10-year Treasury bonds in cumulative returns over the past 40 years
Traditionally, when US bond yields rise, the returns on dollar-denominated assets tend to increase accordingly. This boosts the attractiveness of dollar-denominated assets, attracting more capital into them and thus driving up the value of the dollar. A stronger dollar diminishes the appeal of gold priced in dollars because holding dollar-denominated assets yields higher returns at that time, thereby increasing the opportunity cost of holding gold. Furthermore, a stronger dollar also lowers the price of gold priced in other currencies, further suppressing demand for gold. Therefore, rising US bond yields typically exert pressure on gold prices, constituting an important bearish factor for $Gold - main 2406(GCmain)$ 📉.
Conversely, when US bond yields decline, the returns on dollar-denominated assets decrease, prompting capital to flow out of them and weakening the dollar exchange rate. At this point, the opportunity cost of holding gold decreases, enhancing the attractiveness of gold and stimulating increased demand for it. Simultaneously, a weaker dollar also boosts the price of gold priced in other currencies, further stimulating demand for gold. Therefore, declining US bond yields typically benefit gold prices📈.
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