Having trended down for three years, gold is now 36% below its peak in 2011

Having trended down for three years, gold is now 36% below its peak in 2011. With that, a number of commentators are turning bullish: In particular, gold has become increasingly unloved: ETF holdings have unwound considerably, net long speculative positioning is low and measured sentiment readings are bearish (a key contrarian BUY signal). The outlook for gold, though, will be determined by the trend in real interest rates (see chart below). Most notably, US macro momentum is building and slack in the labour market is rapidly disappearing. As the Fed continues to tighten monetary policy, real yields should therefore rise, undermining the investment case for owning gold. Of note, the gold bull market in the past decade has been built on investment flows (which have accounted for all of the growth in total global gold demand), for detail see our latest Commodity Monthly...