Gold Weakness is Inconsistent with Loose Monetary Conditions in the US

"...US real rates have collapsed recently. The 5-year treasury real (inflation-adjusted) yield is now deep in the negative territory and the 7-year real yield is approaching zero. It means that those who hold 5-year treasuries right now are losing money after inflation is taken into account – even if treasury prices remain stable.

This is telling us that the monetary policy in the US has become even more accommodative – in spite of the Fed’s taper.

At least in theory, low or negative real yields make gold more attractive. And as US inflation picks up (see chart), real yields could move even lower. Moreover, if the ECB embarks on a new round of aggressive easing (see post), the euro area monetary stance will become highly accommodative as well.

The recent weakness in gold price is inconsistent with these looser monetary conditions in the US and potentially in the Eurozone. If you have a view on the topic, please answer this single-question survey. Results will be published shortly."

at http://pragcap.com/gold-weakness-is-inconsistent-with-loose-monetary-conditions-in-the-us#jr9z2czXDfDilySw.99