On Wednesday, February 18, spot gold traded near $4,930 during the early European session, as the market finds itself at a delicate crossroads. Analyzing the daily chart, after a significant retreat from the previous high of $5,596.33, the price is currently seeking directional momentum within a range bounded by $4,650.00 and $5,100.00.
The MACD indicator shows a DIFF reading of 76.99 and a DEA reading of 107.41, resulting in an MACD value of -60.84. The moving average system is in a death-cross configuration, indicating weak short-term momentum. The RSI hovers around 52, suggesting the market is not significantly oversold, and the battle between bulls and bears continues. However, the market's core focus is gradually shifting from short-term price fluctuations to a deeper structural question: Is the traditional pricing relationship between U.S. real yields and gold undergoing a fundamental transformation?
The Collapse of an Old Belief: Why Are Real Yields Losing Their Influence? For a considerable period, U.S. real yields served as a reliable framework for analyzing gold price movements. The logic was straightforward: rising real yields increase the opportunity cost of holding non-yielding assets like gold, prompting capital to flow towards assets generating real returns, thus pressuring gold prices. Conversely, falling real yields enhance gold's relative appeal, leading to price increases. This mechanism was validated almost textbook-style during the 2018-2022 rate-hike cycle.
However, the current macroeconomic environment is far more complex than this single framework can describe. The market is simultaneously digesting multiple, intersecting risks: persistent inflation exceeding expectations, expanding fiscal deficits and debt levels in major economies, pressures from concentrated global sovereign debt issuance, and the ongoing reshaping of asset allocation patterns by various geopolitical frictions. Amid this convergence of diverse risks, while real yields remain an important variable for gold, their marginal pricing power has significantly diminished. The most direct evidence is recent price action: when U.S. real yields showed signs of stabilization or even slight recovery, gold did not exhibit the pronounced follow-on decline typical of previous tightening cycles.
What is Providing Support? The Invisible Hand and Structural Demand If the real yield framework describes gold's marginal pricing mechanism, then structural demand describes its pricing floor. From the demand side, support for gold currently manifests in at least three key areas. First, consistent gold accumulation by major global central banks continues. In recent years, central banks from various economies have targeted increased gold allocation as a key objective for diversifying foreign exchange reserves, a trend that has not substantially reversed over the past two years. Central bank gold buying is characterized by decision-making logic based on long-term strategic asset allocation considerations, rather than immediate reactions to short-term interest rates or price volatility.
Second, the ongoing fragmentation of the geopolitical landscape is driving a global reassessment of asset allocation. As geopolitical risk premia remain elevated over the long term, gold's strategic appeal as an independent store of value outside the sovereign credit system continues to grow. Third, demand for portfolio diversification at the institutional level is generating incremental fund inflows. In an environment where correlations within traditional asset portfolios are rising, gold's role as a low-correlation alternative asset is leading to an increased allocation weight within institutional investment portfolios. When these types of allocation-driven flows become the marginal force in gold pricing, the traditional interest rate transmission mechanism is suppressed.
The Decisive Range: Trading Strategies Amid Two-Way Risks Despite gold's current resilience, this does not imply the price is entirely immune to macroeconomic shocks. For traders, the most significant downside risk scenario involves a sustained, disorderly rapid rise in real yields, coupled with simultaneous tightening of financial conditions and significant U.S. dollar strength. Under this combined pressure, even persistent structural demand might struggle to fully offset the heavy pressure from the interest rate side.
From a technical perspective, a decisive break below the $4,650.00 support level could trigger larger stop-loss selling, accelerating a decline to find a new bottom. On the upside, if macroeconomic pressures intensify again, real yields turn lower once more, or new systemic risk events emerge globally, gold's safe-haven attributes would be reinforced. The accumulated bullish momentum could then create a resonant effect, potentially driving the price towards a breakout above the $5,100.00 level. Overall, spot gold's current pricing logic has entered a more complex regime, and a decisive directional move may not be far away.