Chart of the Week

Historically, rising Treasury Inflation-Protected Security (TIPS) yields have been a headwind for gold prices. When interest-bearing assets such as TIPS would offer higher yields, gold would become relatively less attractive. However, as shown in the chart above, the long-standing inverse relationship between TIPS and gold prices broke in 2022.

In our view, this break with a 25-year pattern suggests that movements in gold prices are reflecting other market drivers, such as heightened geopolitical tensions and aggressive purchasing activity by global central banks, which also arose in 2022. Alongside these factors that we believe will persist in 2026, we expect additional Federal Reserve rate cuts and a stable U.S. dollar to drive gold’s outperformance, albeit at a slower pace than in 2025.

Given this backdrop, we see further upside from current gold prices and are favorable on Precious Metals. As investors watch incoming inflation data, we would emphasize the breakdown in the historical relationship between TIPS yields and gold prices. We would also reiterate our neutral guidance on the U.S. Government sector as we expect investor appetite for credit risk to tend to flourish, which may cause the sector to lag.

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