When analyzing the price of gold, we can simply regard it as an inflation-protected bond: the price of gold is inversely proportional to the real interest rate.
The relationship between gold price and real interest rate is not linear: when the real interest rate is high, gold price is insensitive to the change of real interest rate. It is also easy to understand that when the economy improves and other assets can provide higher yields, the attractiveness of gold drops sharply. At this time, even if the real interest rate drops slightly, the price of gold will not rise sharply. Therefore, it is most effective to look at gold with the real interest rate, or when the real interest rate is near 0.
We can also look at the price of gold from another angle, that is, the scale of global negative interest rate bonds. The scale of negative interest rate bonds is closely related to the price of gold. This is in line with the logic that the real interest rate affects gold: the scale of negative interest rate bonds rises, and the advantage of gold as a zero interest rate bond appears, and the price also rises.
At present, the scale of global negative interest rate bonds is close to 17 trillion (according to the statistics of Bloomberg Barclays Index). We can make a hypothesis that, according to historical experience, if the gap between high and low interest rates in the interest rate reduction cycle of US debt is above 300 BP, then at the end of this interest rate reduction cycle, US debt may have zero interest rate or even negative interest rate, while the size of US Treasury bonds exceeds 20 trillion US dollars. If there is a negative interest rate on US Treasury bonds, it will push up the rapid growth of gold prices. Prior to this, the scale of negative interest rate bonds in other countries will continue to grow in the downward cycle of global interest rates.
The guiding significance of real interest rate to gold is more directional. Paying attention to the trend of interest rates in China and the United States can be found that although the spread has narrowed or expanded, the trend is basically the same.
The rise of gold, the decline of US debt and the increase of the global negative interest rate bonds all tell the same story: in the context of the global economic downturn, monetary policy has to undertake more tasks, and the downward interest rate in China is part of the global economic downturn and monetary easing.