Gold Prices Tied to Real Yields, PIMCO Analysis Finds

PIMCO, a leading financial services company, has developed a framework to understand gold prices over the past two decades. According to PIMCO, real yields on U.S. government debt have been the primary driver of gold prices since 2004.

The framework assumes that investors compare the expected real return on gold with that of other liquid financial assets. With gold offering no income, the real return investors give up by holding it is the core comparison.

PIMCO's research shows that a one-percentage-point climb in 10-year real yields has historically corresponded to an 18% drop in gold's inflation-adjusted price. This translates to an empirical real duration of about 18 years.