Real Treasury Yield — Gold Valuation Driver

Gold generates no cash flows — it competes with income-generating assets purely on the basis of its store-of-value and safe-haven properties.

The real yield on 10-year US Treasury Inflation-Protected Securities (TIPS) represents the true opportunity cost of holding gold:

When real yields are negative (nominal yield < inflation), investors are effectively paying to hold Treasuries, making gold's zero yield relatively attractive.

When real yields are positive, Treasuries offer income that gold cannot compete with.

The inverse correlation between gold and US TIPS yields is the strongest and most persistent in the gold market (correlation:

-0.85 over rolling 5-year periods).

In 2020-2021, as real yields plunged to -1.0%, gold surged from $1,500 to $2,075.

In 2022, as real yields rose from -1.0% to +1.5% in 12 months, gold declined 18%.

Monitoring TIPS yields in real-time provides the most mechanical gold price signal available.