The bull market of the 1970s, early 1980s and the previous decade up to 2013 were all associated with negative US real interest rates. Further, the fall in gold prices from 1982 to 2001 was associated with a prevailing period of rising and high real interest rate environment.

However, what's interesting now is the fact that gold is back to its starting point of 2014 even though QE will be completely tapered off by November. The US 10 year yields remain below 2.5% due to the ultra dovish stance of Janet Yellen. Thus, gold is trading at the same price level as it was in early January this year when QE taper had just begun and US 10 year yields were north of 3%.

Further, the price of gold does not seem to be pricing in the geopolitical tensions around the globe as improving the US economic data has completely overshadowed other variables, which would act as catalysts to drive the yellow metals price higher.

The U.S. Dollar Index has gained almost 7% this year, and is currently quoting at its highest level since June 2010. A stronger greenback implies weaker commodities. Thus, at $1,200/ounce, this column suspects that rising the US yields and a potential Dollar bull market has been priced in already.