Real interest rates lead
The single most reliable driver of gold over the past two decades has been the real yield on US Treasury bonds — the nominal yield minus expected inflation. Gold pays no interest, so when real yields fall, the opportunity cost of holding gold falls with them, and the metal tends to rally. When real yields rise sharply, as they did through 2022 and 2023, gold typically struggles even if inflation is running hot at the same time.
Watch the 10-year TIPS yield if you want one number that explains more of gold's behavior than any headline. It is published daily, costs nothing to follow, and keeps you anchored to the variable the market itself is trading. Most gold commentary you read — mine supply, jewelry offtake, coin premiums — is background noise next to that one series.
The dollar connection
Gold is priced in dollars worldwide, so a weaker dollar makes gold cheaper for foreign buyers and usually supports the price. A strong dollar does the opposite. The correlation is not perfect — in true crisis periods gold and the dollar can rise together as both are bought for safety — but over normal cycles the inverse relationship holds most of the time.
There is a second layer here: a strong dollar usually signals tight US monetary policy and firm real yields, both independently bearish for gold. So the currency is part cause and part symptom of the same macro conditions.
Official and investment demand
Central banks have been net buyers of gold for well over a decade, and purchases accelerated to historically large levels after 2022, running above 1,000 tonnes a year. That steady official demand has put a floor under the market that did not exist in earlier eras, because reserve managers buy on multi-year horizons and rarely sell into weakness.
On top of that base, exchange-traded fund flows and retail coin and bar demand swing with sentiment, and those faster flows are what move prices over weeks and months. Jewelry and industrial uses matter for long-run tonnage, but they respond to price rather than drive it.
What this means for traders
If you trade gold futures, treat real rates and the dollar as your primary framework and everything else as sentiment overlay. The standard COMEX contract is 100 troy ounces, so a ten-dollar move is a thousand dollars per contract — respect the leverage and size accordingly. Futures trading involves substantial risk of loss and is not suitable for all investors.
Clients who want a second set of eyes on the metals markets can trial our client services, including simulated trading, free for two weeks.