The gold price maintains its position around the $1,940 mark as Tuesday’s trading session begins. Market forces that could have led to fluctuations in the precious metal’s value are balanced by geopolitical factors, contributing to decreased volatility.
Throughout 2023, US real yields have exhibited a consistent upward trend, recently reaching a 14-year pinnacle in the 10-year yield curve, surpassing 1.90%. Real yield represents the nominal yield minus the inflation rate estimated from Treasury inflation-protected securities (TIPS) with the same maturity.
The last time real yields reached such heights was in 2009, a period when spot gold traded below $1,000. In a more recent instance, during 2018, when real yields approached 1.0%, spot gold was valued at less than $1,300 per ounce.
However, the landscape has evolved significantly since then, with shifts in demand dynamics. The BRIC nations—comprising Brazil, Russia, India, and China—are actively exploring alternatives to the US Dollar as a global reserve currency. This geopolitical maneuvering has attracted substantial attention.
Recent discussions have centered on the potential adoption of a gold-backed currency by these nations, allowing them to circumvent reliance on the US Dollar for international trade. It’s essential to acknowledge that similar attempts have historically encountered challenges, as exemplified by the Bretton Woods gold exchange system.
During a recent visit to Western Australia, a prominent global hub for physical gold production, numerous sources emphasized that nearly every ounce of newly extracted gold is destined for China. Reports of similar actions by other BRIC members have surfaced in various regions. Notably, Australia, China, and Russia are among the world’s leading gold producers, suggesting that gold accumulation may be influencing recent price dynamics.
As we look ahead, a potential break beyond the established price range of $1,885 to $1,900 could serve as the catalyst for a significant shift in XAU/USD’s trajectory. For more insights on range trading, click on the banner below.