By Polina Devitt
LONDON, Oct 1 (Reuters) – Gold’s resilience above $4,000 an ounce despite soaring Treasury yields suggests the post-2022 demand premium is proving more durable than many expected, setting the stage for further gains once the US Federal Reserve’s tightening cycle ends.
Typically, gold – a non-yielding asset – moved largely in the opposite direction to real yields, and from 2000 to Russia’s 2022 invasion of Ukraine, interest rates and US dollar movements explained most of bullion’s price.
That relationship changed after Western sanctions froze roughly half of Russia’s official reserves. Central banks, particularly in emerging markets, accelerated efforts to diversify reserves away from dollar assets, supporting gold even when higher yields would normally weigh on the price.
“The real-yield framework still anchors fair value, but since 2022 a persistent, structurally higher premium driven by reserve diversification and geopolitical hedging has become the dominant driver that macro factors no longer capture, and it is not fading,” said Nicky Shiels, metals strategist at MKS PAMP.
Shiels estimates this “debasement and de-dollarisation” premium – the portion of the gold price not justified by real yields and the dollar – has risen from about $120 an ounce before 2022 to an average of more than $1,000 since then.
It currently stands at roughly $840 an ounce.
“THINK OF GOLD AS COMPRESSING A SPRING”
Gold has been on a four-year roller-coaster. It surged to a record $5,595 in January before energy-driven inflation from the Iran war dragged it back to around $4,161.
None of this was expected: delegates heading to next week’s London Bullion Market Association conference in Italy had forecast a year ago that gold would be trading near $4,980 by now.
Meanwhile, the 10-year US Treasury yield, a yardstick for global borrowing costs and asset prices, rose to its highest since 2002 on Thursday, having posted its biggest quarterly rise this century in July-September.
“For a non-yielding asset, all else equal, that is going to be challenging because gold has to compete against that yield level in people’s portfolios,” said Amy Gower, commodities strategist at Morgan Stanley.
However, gold being above $4,000 despite yields that high signals that there is still demand that goes outside of what is happening with yields, she added.
“The temporary headwinds for gold are enormous and, in almost any other environment, would probably have pushed prices significantly lower,” said Jay Tatum, portfolio manager at Valent Asset Management.
“Prices are not lower because underlying factors are so strong. I think of gold right now as somebody compressing a spring.”
WHERE THIS DEMAND CAN BE SEEN
In recent years, gold has tended to rally when long-term Treasury yields rise faster than short-term yields, reflecting growing concerns about government debt, according to Morgan Stanley.
Signs of this safe-haven demand can be seen on Thursday with gold rising 0.2% despite a stronger dollar, while higher oil prices as well as a surge in bond sales to fund AI investments are driving yields higher.
Trade data capture only part of the demand picture, which analysts say tends to strengthen whenever gold approaches $4,000.
Top bullion consumer China imported 1,077 metric tons of gold in the first eight months of 2026, suggesting that this year’s annualised imports are on track for the highest in 11 years.
“Some of that is going to PBOC holdings, but a lot of that isn’t, so there must be demand elsewhere in the country,” Gower said.
Poland’s central bank has also continued to add to its reserves, with purchases running ahead of last year’s pace.
Analysts say bullion is also likely to be boosted by additional Western investment demand once the rate-tightening cycle ends. This is likely to be seen in rate-sensitive gold-backed ETF holdings, which are near record highs.
“Heavy liquidation – notably in ETFs – is reversing as structural factors that aided gold pre-Iran conflict resume, and its safe haven and portfolio diversification properties attract buyers,” HSBC said, adding that the institutional demand for large bars is robust.
(Reporting by Polina Devitt; editing by Pratima Desai and Louise Heavens)
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