by Introduction: The Interplay Between Gold, Bitcoin, and Treasury Yields
Gold (XAU) has recently reached its highest price point since April, driven by a surge that many experts attribute to the often-overlooked factor of U.S. Treasury yield curve steepening. This shift in the bond market is not just a boon for gold; it could also provide significant momentum for Bitcoin (BTC). In this article, we’ll dive deep into how this dynamic could reshape the cryptocurrency landscape and why investors should pay attention.
Gold’s Impressive Rally: Numbers Tell the Story
Over the past ten days, gold prices have climbed more than 5%, reaching approximately $3,480 per ounce. This marks a significant increase as it inches closer to the record high of $3,499 set on April 22, according to TradingView data. This rally is closely tied to the steepening U.S. Treasury yield curve. The spread between the 10-year and 2-year yields (10y2y) has widened to 61 basis points, the highest since January 2022. Similarly, the gap between the 30-year and 2-year yields has reached 1.30%, the widest since November 2021.
Understanding the Bull Steepening Phenomenon
The steepening of the yield curve has been primarily driven by a faster decline in the 2-year yield, which fell 33 basis points to 3.62% in August. In contrast, the 10-year yield saw a smaller decline of 14 basis points, now standing at 4.23%. This phenomenon is termed a “bull steepening,” where shorter-term bond prices rise more sharply, leading to lower yields.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, highlighted that this dynamic is beneficial for gold. “For gold, lower front-end yields ease the opportunity cost of holding non-yielding assets. This shift is particularly relevant for real asset managers, many of whom have struggled—or in some cases been restricted—from allocating to gold while U.S. funding costs were elevated,” Hansen noted in a recent analysis.
The Impact on Bitcoin: A Store of Value
Bitcoin is often likened to gold, serving as a digital store of value. Like gold, Bitcoin is a non-yielding asset, meaning it does not generate interest or dividends. Its value is driven primarily by scarcity, demand, and market perception. Therefore, the decline in the two-year yield could be interpreted as a bullish signal for BTC.
Moreover, the relative resilience of longer-duration yields can be attributed to expectations of persistent inflation and other economic factors that support both gold and Bitcoin’s bullish narratives.
Inflation and Market Credibility: What Analysts Are Saying
According to analysts at ING, the steepening of the U.S. Treasury curve is unsurprising. They argue that lower rates today may risk inflaming inflation further down the line, which is detrimental for bonds. Hansen elaborated that much of the relative stability in the 10-year yield is tied to inflation breakevens hovering around 2.45%, coupled with factors that reflect real yield expectations.
Hansen remarked, “[It
