Gold is in its worse slump since 1869 as inflation-adjusted yields turn sharply positive, says Deutsche Bank

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  • Gold prices are down for seven consecutive months, the longest decline since 1869, according to Deutsche Bank. 
  • Bullion slumped 1.6% in October and is down 11% from the start of the year. 
  • The fall in gold prices is happening as real bond yields have turned sharply higher.

Gold prices fell 1.6% in October and have dropped for seven consecutive months, marking the longest slump since 1869, according to Deutsche Bank note.

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Much of that time includes the era when the US dollar was fixed to gold, meaning the precious metal’s price didn’t move much.

But Deutsche Bank analysts also noted that such a losing streak hasn’t been seen in the half century that followed the US coming off the gold standard, ending the Bretton Woods currency exchange regime.

Bullion ticked up 1.21% Tuesday, changing hands at $1,643.56 per ounce but is down 11% from the start of the year. Meanwhile inflation-adjusted bond yields have turned sharply higher amid aggressive rate hikes from the Federal Reserve and other central banks.

Real yields went from -0.49% in March to 1.54% in October, and that has “diminished the appeal of a non-interest bearing asset, even as inflation has remained high,” the note said. 

Gold, however, has still outperformed most other notable assets despite the sharp decline this year, according to Deutsche Bank research strategist Jim Reid. He wrote in a note Tuesday that outside of oil, gold is the asset nearest to parity so far in 2022. 

“So on a relative basis, it’s performed better than virtually all other global assets,” he said. 

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