Barron's on Gold and Real Interest Rates

A correlation we, as well as Izabella Kaminska, looked at last week, links below.
From Barron's Focus on Funds:
Here’s What’s (Still) Driving Gold’s Price

Real interest rates are the place to look if you’re keeping tabs on the price of gold.

Real rates are simply what you get after factoring in inflation. Figure out where real rates are headed and you’re likely to have more success predicting where gold is headed.

The negative correlation of TIPS real yields with gold’s price is 82% over the long haul, according to a study by Claude B. Erb and Campbell R. Harvey. The duo aren’t convinced that real yields are what “drives” gold’s price. But with the correlation relatively high, the issue of what’s driving what is academic unless and until the relationship changes. (Worth noting: The duo also conclude that “Over practical investment horizons, gold is an unreliable inflation hedge.”)

Lately, with bond yields soaring and inflation expectations about flat (or declining), it’s a recipe for gold’s decline. Here’s how the relationship has played out over the last year, in a chart by Goldman Sachs...MORE

Thursday:
Why is Gold Crashing--Another View
So Why is Gold Down? Look To the Real Interest Rate

Focus on Funds points out the use of TIPS for the measure whereas I used the 10-year treasury -YoY for my quick-and-dirty.
At least two readers emailed the St. Louis Fed's "5-Year Treasury Inflation-Indexed Security, Constant Maturity" chart:

 

Some folks use Fed Funds as the measure but that doesn't make a lot of sense.
Last December Izabella used TIPS in one of her posts which we finally got around to in January.
From our "Spot Gold Down $21.80 as HSBC, Credit Suisse Lower Forecasts (GLD)":

Back in early December FT Alphaville's Izabella Kaminska modestly wrote in "Capping the gold price":

The following chart, we propose, has the potential to inspire a whole new way of looking at the gold and Treasury market...

Now if you cut out the upside (...Capped) you are left with the semi-variance which means you can figure out all kinds of extremely high reward bets.

As I said in April's "Gold Hammered to 15 Month Low on Heavy Technical Selling, Weak Long Liquidation":

Woulda, coulda, shoulda.
If I had been paying attention when Izabella Kaminska wrote "Capping the gold price" , I'd have more chips to play with.
Alphaville posted it on December 7, 2012, five days before the $1715 intermediate term top.
Instead it took me four weeks to get around to it, Jan. 3, with "Spot Gold Down $21.80 as HSBC, Credit Suisse Lower Forecasts (GLD)"
Here's the trading from that day:

As you can see, my thought process was something akin to "Saaaay, something appears to be happening with gold". We just hadn't been paying attention....

$1276.80 last.