Real yields, the strongest link
The real yield is the interest rate minus inflation — what money actually earns after prices rise. When real yields go up, holding a bond that pays something beats holding metal that pays nothing, and gold tends to fall. When real yields fall or go negative, the reverse. This is the most reliable relationship gold has, and it is still a tendency rather than a rule: gold has risen through rising yields more than once.
The dollar, and why it is not the whole story
Gold is priced in dollars, so a stronger dollar mechanically makes gold more expensive for everybody else and the price usually eases. You will hear this stated as a law. It is not: there are long stretches where gold and the dollar rise together, usually when both are being bought out of fear. Use it as a check on your idea, not as your idea.
Central banks buy it in size
Central banks hold gold as reserves and some have been adding for years. That buying is large, slow and largely indifferent to the day’s chart, which is one reason gold can hold up during periods where the yield story says it should not. You will not see it on a five-minute chart; it is background, and it is a reason not to be too confident that a macro argument must play out on your timeframe.
Fear moves it, briefly
War, a banking scare, a sharp fall in stocks — gold usually jumps. What it does next is a different question, and the jump is frequently given back within days. Trading the headline means entering after the move, into a spread that has just widened, with no level to be wrong at. If a shock creates a level and price comes back to it, that is a trade; the headline itself is not.
What this is worth on the chart
Knowing the drivers explains why gold trends for weeks at a time and why it sometimes ignores its own rules. It does not tell you where to enter. The chart still decides the entry, the stop and the size; the macro tells you which direction you would rather be leaning, and how much to distrust a trade that leans the other way.
In short
| Pays | No interest, no dividend |
|---|---|
| Strongest relationship | Real yields, inversely |
| Dollar | Usually inverse — not always |
| Central banks | Steady buyers, slow and large |
| Shocks | A quick move, often given back |
Common questions
Why does gold fall when interest rates rise?
Because a rising real return on cash and bonds makes an asset that pays nothing less attractive by comparison. It is the real rate after inflation that matters, not the headline one.
Is gold an inflation hedge?
Over decades, roughly. Over a year or two it has frequently failed to keep pace with inflation. Anyone promising it as short-term protection is selling something.
Should I trade gold on the news?
The move is usually over before a retail trader is filled, and the spread is widest exactly then. Waiting for the level the shock leaves behind is the version that has a stop in it.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.