Inflation expectations resonate with actual yields, is gold heading towards $6,600?

Summary

1. Gold likely completed its mid-term cycle low in the early morning of Monday, during which it experienced a dip to $4,100. As the market needs to re-account for the continuously rising inflation expectations, this will provide upward support for the gold price.

2. According to forecasts, the overall inflation rate in the U.S. is expected to reach 4.2% by 2026. If this occurs, and the 10-year U.S. Treasury yield remains around the current level of 4.45%, it would mean that the 10-year real yield would drop to 0.25%. Given the well-known inverse relationship between gold prices and real yields, this would translate to a 3% increase in gold prices from current levels, directly rising to around $6,600.

3. The intersection of gold’s cyclical support and resistance zones often coincides with important turning points in gold prices. For instance, significant cycle lows, bottoms, or consolidation periods are anticipated, with the next such intersection occurring between mid-August and November, approximately in the $6,400 to $6,600 range. In other words, both independent gold analysis methods can see the $6,500 range as a target for gold’s future. If this target is reached, it is highly likely to represent a peak for gold within the cycle.

Detailed Analysis

Gold

In Monday morning trading, gold prices fell to $4,100, forming a potential low within the short-term cycle. Shortly after, it quickly rebounded to around $4,400, setting a new weekly high. Ahead of the anticipated inflation data release, gold began to show a mild rebound, likely preparing for the upcoming data.

Since reaching a cycle low in mid-December 2025, gold prices have declined by 15% for most of the past 15 weeks. Most of this decline occurred in February and early March. Why did this happen? The main reason is a change in market expectations regarding inflation and real yields.

In early January and February 2026, the market anticipated that inflation would peak in April 2026 at around 4.2%. However, subsequent economic data showed that inflation had more stickiness than expected, leading the market to re-account for the continuously rising inflation expectations and to factor in higher real yields than previously.

Formula Calculation

r^{(n)}=\frac{100}{n}\left(1-e^{\frac{-r_{n}n}{100}}\right)-1\Rightarrow+32% r^{(n)}=\frac{100}{n}\left(1-e^{\frac{-r_{n}n}{100}}\right)-1

This is exactly what we mentioned in the report, as the main reason for the rebound in gold prices during the week of March 17 to March 23, 2026.

As previously noted, when the 10-year real yield significantly declines, gold prices tend to rise. We have calculated that a strong price increase may be forthcoming.

But some may argue that if the market does not push inflation above 4.2%, the 10-year real yield will remain around the current 4.45%, which means the real yield will drop to 0.25%. With the current gold price at $4,100/ounce, if the real yield drops to 0.25%, the gold price would increase by 32%, directly rising to $6,600/ounce.

Historical records indicate (Figure 1) that the bond market typically does not fully factor in peak inflation expectations until the inflation data is actually published. Therefore, before the inflation data release, the market often experiences significant volatility, and after the data is released, gold prices tend to rise significantly.

Additionally, historical data also shows that there is a significant negative correlation between real yields and gold prices. In most cases, when real yields drop into negative territory, gold prices tend to reach new historical highs. For example, when gold prices peaked in 2011, real yields fell to as low as -2%, and in 2020, real yields dropped to -2.5%.

Historical data also indicates (Figure 2) that when real yields drop into negative territory, gold prices tend to reach historical highs. For example, when gold prices peaked in 2011, real yields fell to as low as -2%, and in 2020, real yields dropped to -2.5%.

Data from gold options contracts in March 2025 and open interest show that as of the most recent week, the maximum open interest for gold options is around $4,400/ounce, indicating potential for gold price and volatility.

Historical data also indicates (Figure 3) that the intersection of cyclical support and resistance zones often coincides with important turning points in gold prices. Notably, over the past 40 years, gold prices have touched $4,100 twice, forming significant support near this cycle low. This cycle low often occurs on the eve of the start of a new cycle of rising prices; for example, after the cycle low in December 2015, gold prices rose nearly 40% over the following year.

In line with historical data, the latest level is likely to coincide with an important turning point in the gold cycle, which also aligns with the expected peak for gold.

Historical data also indicates (Figure 4) that the intersection of cyclical support and resistance zones often coincides with important turning points in gold prices. Notably, over the past 40 years, gold prices have touched $4,100 twice, forming significant support near this cycle low. This cycle low often occurs on the eve of the start of a new cycle of rising prices; for example, after the cycle low in December 2015, gold prices rose nearly 40% over the following year.

In line with historical data, the latest level is likely to coincide with an important turning point in the gold cycle, which also aligns with the expected peak for gold.

The $6,400-$6,600 volatility range holds significant importance, as it may represent the peak of the gold cycle during this period.

For those looking to profit in the gold market, their goal should be to build positions near the cycle low and then take profits near the cycle high.