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A police officer holds a small bullion coin version of the world's largest gold coin, made by Perth Mint based in Australia, which is on promotional display in Munich January 26, 2014.
A police officer holds a small bullion coin version of the world's largest gold coin, made by Perth Mint based in Australia, which is on promotional display in Munich January 26, 2014.
(Michael Dalder/Reuters)

Gold’s rally sparked by lower bond yields

The gold price had a rare week of strong performance, and U.S. real interest rates are the reason why.

The bullion price is highly sensitive to changes in inflation-adjusted (or real) U.S. rates. When real rates are high, the gold price routinely falls. Holding gold is less attractive as an investment if strong inflation-adjusted returns are available in the bond market. (Note: on the chart below, real rates are plotted inversely to better show the trend).