REAL RATE MODEL
Real rate model and structural premium
Before 2022, the log gold price was explained quite well by the US 10-year real yield. Applying that fixed relationship, the gap by which the actual price exceeds the model value is called the "structural premium". The divergence since 2022 comes from factors other than rates, such as central bank demand and geopolitics. If it starts to shrink, a pillar is weakening.
Range
Gold price: actual vs model (base model, log scale)
Actual (COMEX futures)Model value
Structural premium by fitting period (%)
Estimates
ln(gold) = α + β·US 10-year real yield. Results depend on the fitting period, so three are shown. β is how much ln(gold) falls for a 1pt rise in the real yield. The lower the R², the less reliable the model value.