Like yourself I am also trying to understand how bonds fit into the picture.... fwiw, this is what I know so far...
UST's and bonds are important to the really large institutions such as pension funds etc. Banks also use them for liquidity purposes (and continue to buy even with a negative yield). The traditional purpose of bonds was to offer the "risk free" return.... so sovereign issued bonds have the lowest return but the greatest safety. All other kinds of bonds are then priced using the risk free rate as the reference (IG = investment grade ... HY = high yield i.e. 'junk bonds' etc.)
Gold doesn't easily fit into this picture because it is a 'store of value' but doesn't provide a yield. As well there is a carrying cost to holding gold (storage fees, transaction costs etc). The normal situation is bonds provide a known and predictable positive return. Gold will be held by central banks (as a store of value) and by governments (as a last resort method of payment i.e. the US became the largest holder of gold due to the European governments paying for weapons and supplies in WW2) and also gold will be held by populations for cultural reasons.
What's changed in recent times is the GFC started the 'money printing' meme and the debt has only continued to increase. With negative real rates that extinguishes the usual 'carrying cost' of gold and although gold doesn't provide any 'return' it holds its purchasing power relative to fiat currency. It is in this context that for the last couple of years Western countries central banks have, after many years, once again begun to buy and hold gold. (Both China and Russia have been buyers for several years before this).
Institutions currently do not hold much gold in their portfolios. That might change if the bond market continues to offer low to negative returns. So far, institutions have turned to the IG and HY bond markets which are also higher risk. The ECB, JCB and the FED still enjoy sufficient confidence from the 'market' that they can hold everything together... and so the current system keeps rolling along.
The latest policy to actively encourage inflation will test a lot of nerves.... the debt has gone well past the possibility of ever being repaid, all that is left is a debt jubilee, inflate the debts away or a system collapse. The inflation path, if it works, will mean over a few years the debts will reduce in 'real terms' and at some point a resumption of interest rates at more historical levels will be possible.
At the same time we have the great power rivalry playing out between China and the US which since China has invested very substantially in holding large gold reserves might throw some interesting cats amongst the pigeons.
2. The hedges in AUD terms shouldn't alter the margins of a producer. However, if the AUD strengthens the spot price in $AUD will fall and that does affect margins.
As a rule, the price of gold should been seen as a constant and everything else is then measured against it. So when the PoG goes up in $US terms it is not that gold has gone up but rather the $US has fallen. That circumstance changes from time to time. e.g. in August 2020 gold ticked over the $US 2000 mark which far exceeded any commensurate fall in the $US.... in other words gold rose in value in absolute terms. It is likely that if the $US continues to fall... imo... gold will again rise in absolute value and will counteract any relative rise in the AUD.
fwiw... Australia enjoys the benefit of being a supplier of commodities and if the inflation policy produces the intended result it should tend to keep the AUD higher (imo)... but then the overriding context will be inflation which should become a constant driver for the PoG.
Given that Australia has gone down the path of monetary stimulus, ultra low interest rates and increased levels of debt, I can't see the AUD getting too far ahead of the 'pack'. The Australian housing market is perhaps the most expensive in the World and probably is a bubble. That is a conditioning factor on how high it might rise .... imo.
ALK Price at posting:
87.0¢ Sentiment: Buy Disclosure: Held
(20min delay)