Because gold pays no nominal coupon yield, its primary opportunity cost is the yield available on inflation-adjusted sovereign debt (US TIPS). Understanding that dynamic is a big part of forecasting gold at the macro level.
1. Calculating True Real Yields
If nominal 10-year US Treasury bonds yield 4.25% and 10-year inflation expectations are 2.50%, the real yield is +1.75%. When central banks cut rates or inflation accelerates faster than nominal yields, real yields drop, triggering aggressive institutional inflows into hard physical gold.