Line chart showing the price of gold with the 10-year TIPS yield from January 2016 to March 2024. Gold prices tend to increase when TIPS yield declines and decrease when TIPS yield increases. However, since late-2022, TIPS yield has been rangebound while gold prices moved higher.
Sources: Bloomberg and Wells Fargo Investment Institute. Weekly data from January 1, 2016, to March 31, 2024. TIPS = Treasury Inflation-Protected Securities. Yields represent past performance and fluctuate with market conditions. Current yields may be higher or lower than those quoted above. Past performance is no guarantee of future results. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk, especially when real interest rates rise. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investing in physical commodities, such as gold, exposes a portfolio to other risk considerations such as potentially severe price fluctuations over short periods of time and storage costs that exceed the custodial and/or brokerage costs associated with a portfolio’s other holdings.
Key Takeaways
- Gold prices typically rise and TIPS yields typically fall during periods of rising inflation. However, recently, gold prices have moved higher amid increased volatility around a stronger U.S. dollar and increased global central-bank demand for the yellow metal.
- We believe that gold prices will continue to trend higher in 2024 as the U.S. dollar continues moderating and interest rates decline.