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The gold price is climbing along with the U.S. dollar while mid-term U.S. inflation expectations steadily fall towards zero. This is exactly what's NOT supposed to happen with the bullion price.

In simple terms, the investment value of gold arises from its position as the anti-dollar, moving higher as inflation erodes the spending power of the greenback. The gold price should move in the opposite direction of the U.S. trade-weighted dollar index. Right now it's not.

Inflation is the other part of the equation. Inflation erodes the spending power of the dollar, so gold usually moves in the same direction as inflation expectations. But at this point, inflation expectations, as measured by five year breakevens (the yield on 10-year U.S. Treasury Inflation Protected Security bonds, minus the yield on regular 10-year U.S. treasuries), are falling rapidly. So much so that pundits like Sober Look's Walter Kurtz believe the Federal Reserve will be prevented from raising interest rates for the foreseeable future.

The chart below might explain why gold is rising despite the rising dollar and lack of inflation pressure. Gold's most recent move higher has been accompanied by a rally in 10-year U.S. TIPS – real return bonds.

SOURCE: Scott Barlow/Bloomberg

Five year inflation expectations are falling but the costs for longer term inflation protection are starting to climb. In other words, higher prices may not be on the immediate horizon but buying insurance against inflation in the more distant future – both gold and TIPS fulfill this function – is getting more expensive.

Another theory regarding recent strength in bullion is that the potential for monetary easing in Europe and Asia is significant. This underscores the fact that that gold is a global asset and is not driven solely by the U.S. dollar. Unfortunately, however, I couldn't back the theory up with regional currency or bond yield data.

The gold price should continue to be driven primarily by U.S. economic data. The continued acceleration in the U.S. economy would push inflation fears and gold higher. The cost of ten year TIPS securities should provide a helpful indicator to the sector.

Follow Scott Barlow on Twitter @SBarlow_ROB.