Maris Research

Gold Still Shines Bright

Share on facebook
Share on facebook
Share on twitter
Share on linkedin

Gold prices hit new highs earlier this month, propelled by record low interest rates in many regions, inflation worries, and mounting government debt. Yet PIMCO’s valuation model indicates gold remains attractively valued, even at these levels.

Valuation on a real-yield-adjusted basis

Our framework is based on our assessment that while many factors influence the price of gold, only one explains the majority of moves over the past decade: changes in the real (i.e., inflation-adjusted) yield of government bonds. As we’ve written previously, gold, by its nature, essentially has a real yield of zero – so just as currency movements are driven by real yield differentials, so should be the price of gold. (We refer to real rather than nominal yield because gold prices have historically tended to rise with U.S. inflation.)

Since about 2006, gold has traded like an asset with nearly 30 years’ real duration (meaning that a 100-basis-point move lower in U.S. Treasury real yields has translated to a roughly 30% increase in the price of gold). From a market perspective, as real yields on U.S. government bonds rise, one would expect investors to marginally prefer those assets, moving out of gold and into U.S. Treasuries and Treasury Inflation-Protected

... continue reading 3rd party author's post at source website

order-1586392_1280

Can't Get Enough Freebies? Subscribe to our Newsletter!

We will send you free research and analysis summarized at the end of each month.

Leave a Comment

notes-150587_1280

More Articles.

World Oil

Saudi oil minister admonishes OPEC+ quota cheaters

By Javier Blas, Grant Smith, Dina Khrennikova and Salma El Wardany on 9/17/2020 (Bloomberg) –Saudi Arabia showed its determination to stop OPEC+ members cheating on their production quotas, delivering a thinly veiled dressing-down to its closest ally in the region, the United Arab Emirates. Prince Abdulaziz bin Salman, the Saudi energy minister, forcefully condemned cartel

Read More »

Get content like this sent directly to your inbox!

Follow OnceBurned

Share on facebook
Share on twitter
Share on linkedin
Scroll to Top