The spot gold price may have baffled investors since its move south last December, but analysts at Citi now see the precious metal being a leading indicator of U.S. Treasurys.
Gold is about to enter "phase two" of its bear market, according to the investment bank, after a brief rally and its downside target is now $1,111 per ounce from its current price of $1,231. As well as this bearish outlook, it now sees gold being a leading indicator of U.S. Treasury bills.
"Gold prices fell before and after (U.S. Federal Reserve Chairman Ben) Bernanke's warning about tapering in May, they then stopped falling in July, well ahead of the September FOMC (Federal Open Market Committee) 'no taper'. In fact, by the time of the September FOMC decision gold was falling again," analysts at the bank said in a research note released on Monday.
(Read More: Goldman predicts steep losses for gold in 2014)
"Gold seems to anticipate monetary policy developments earlier than USTs. This is possibly because gold has, in the end, no intrinsic worth and no yield and is therefore hyper-sensitive to U.S. and global monetary policy."
Citi's research shows that gold now has a roughly 60-day lead over 10-year Treasury yields. This suggests yields will be 2.9 percent by late January, it said, or 3.25 percent if gold hits $1,111.