Gold (GLD  ) had been one of the best-performing assets during the initial months following the coronavirus bottom. Like most assets, gold tumbled during the liquidation in February and March with the metal declining by 15% in a few weeks.

However, this turned out to be a fantastic buying opportunity as gold rallied by 41% over the next five months to hit a new, all-time high above $2,000 in August. It's easy to understand gold's strength as there was a tremendous amount of political, economic, and social uncertainty due to the coronavirus, dovish monetary policy, sky-high deficits, and political turmoil with the George Floyd tragedy and President Donald Trump's erratic leadership.

The two largest drivers of gold prices are real interest rates and faith in the political system. The Federal Reserve's aggressive policy moves and weak economic outlook led to a collapse in real interest rates. However, gold prices topped in August and began falling as the economy was more resilient than expected. Then, prices weakened with the successful development of a vaccine and have remained weak while economic momentum has picked up.

Basically, gold prices dropped from $2,050 in August 2020 to $1,700 in March 2021. Prices have slightly rebounded to $1,800. What's interesting is that gold prices have had a tepid reaction to some positive developments in terms of long-term rates dropping by a significant margin over the past few weeks. Further, inflation data has continued to be strong, and oil prices are hitting multi-year highs. Additionally, deficits remain high as the government continues to support the economy with the passage of the infrastructure bill looming, while President Joe Biden looks to pass a $6 trillion spending bill later this year. Fed policy remains supportive with the current policy expected to continue at least for the next 6 months.

It's a market maxim that it's bearish when assets don't react positively to good news. It's a reflection that the good news is priced in. Thus, gold bull's should be concerned by gold's lack of response to all these positive developments. Further, it's possible that more negative news could be coming in as the Fed seems to be prepping the market for a taper announcement. Additionally, the economy continues to recover and looks to be in the early stages of a sustainable rally. Finally, leading measures of inflation data are showing signs of cooling which might mean that inflation has already peaked.