Strategists at TD Securities turn their attention to gold flows to gauge the sustainability of interest in the yellow metal as real rates could be less useful as a barometer for measuring gold's relative price. Strong ETF inflows into gold leave XAU/USD at risk of falling in case safe-appetite subsides.

Gold's recent disconnect against real rates is consistent with historical precedents

“Gold's correlation to real rates is subject to regime shifts, such that expectations for fed funds help to explain the regime. In fact, the monthly correlation between gold prices and real rates tends to deteriorate during hiking cycles, which suggests that gold's recent disconnect against real rates is consistent with historical precedents.” 

“ETF flows have tended to be more highly correlated to changes in market expectations for Fed hiking, than to real rates, the yield curve or even price momentum. This still suggests that the strong ETF inflows have rather been associated with safe-haven appetite, which could still lead to downside risks as the negotiators continue to work towards a ceasefire and as the fear trade subsides.”