Negative Real Rates Hit -0.6% and Gold Just Broke Support

The support that broke had been tested three times over the past month, and each time it held. Wednesday's breakdown happened on above-average volume, traders said. That suggests the move has conviction. The next level to watch is the March low, a zone that has historically attracted buying interest.

For a trader watching this setup, the pair to monitor is the dollar and nominal yields. Real rates went more negative but gold sold off. That divergence puts the burden on the dollar as the primary driver. If the dollar keeps strengthening, gold could test the March low. If the dollar reverses, gold might reclaim the broken level.

The next catalyst is the Fed meeting next week. The dot plot will matter. If the Fed signals a higher terminal rate, nominal yields can rise further, increasing pressure on gold. If the Fed holds its current path, the real-rate tailwind may reassert itself. Traders are watching the Fed's inflation forecasts closely.

The weakening link between real rates and gold has been a theme in recent weeks, as covered in the gold profile. For now, the dollar and nominal yields are the more important signals.