Gold Attracts $500 Billion Despite Rising Yields

Gold prices advanced 15% while 10-year US Treasury yields jumped 20%. This divergence breaks a long-standing inverse correlation. Central bank buying is the primary driver of this shift. Over $500 billion entered the gold and silver markets recently. This inflow occurred despite higher interest rates.

Bitcoin outperformed gold with a 30% return over the same period. Gold rose 8% on a quarterly basis. Silver gained more than 10%. Investors have favored crypto assets for risk exposure. However, the structural demand for physical gold is changing. This shift threatens the relative advantage of digital assets.

Central banks drive structural demand

The traditional link between gold and yields has flipped. Gold no longer reacts negatively to rising rates. Central banks are purchasing gold at a record pace. This demand provides a price floor independent of monetary policy. The metal is behaving as a strategic reserve asset. It is no longer just a yield-sensitive commodity.

This dynamic supports the price even when the dollar strengthens. The 10-year Treasury yield rose significantly since late June. Gold continued to climb during this period. The data indicates a decoupling from standard macroeconomic drivers. Institutional buyers are prioritizing balance sheet diversification. This creates sustained buying pressure.

Chinese ETFs show record holdings

Chinese gold ETFs added 11 tonnes in August. This marks two consecutive months of increases. Total holdings reached 293 tonnes. This is the highest level since April. It ranks as the third highest on record. Year-to-date accumulation stands at 45 tonnes.

Early September data suggests accumulation continues. Domestic equities remain weak in China. Yields are falling in the region. This environment favors gold allocation. The positioning looks strategic rather than speculative. Investors are hedging against potential Fed-driven volatility. The capital flow is deep and sustained.

Bitcoin faces capital competition

The FOMC meeting is approaching. Investors are positioning around gold ahead of the decision. The $500 billion inflow signals a shift in risk preference. If yields stay elevated and the dollar weakens, gold will attract more capital. This could drain liquidity from risk assets. Bitcoin may face increased pressure as a result. The safe-haven narrative is shifting back to physical metals.