Is it time for gold to go on the offensive?

Is it time for gold to go on the offensive?

• Gold has withstood the pressure from the Fed’s rate-hiking cycle.
• Due to US fiscal problems, the correlation between gold and Treasury yields has broken down.

Gold has been stuck in a consolidation phase within the $4,250–4,400 per ounce range, under pressure from the US dollar, which has risen to two-month highs. The dollar, in turn, is gaining ground amid the growing likelihood of significant Fed policy tightening in the coming quarters. At the same time, strong Asian demand, the recovery in ETF holdings – which had been declining in the first half of the year – and active bullion purchases by central banks are supporting the precious metal. 

In recent weeks, gold has no longer been held back by real Treasury bond yields, which have risen to 20-year highs. Historically, rising debt-market rates have been a headwind for the non-interest-bearing precious metal. One reason for this break in correlation is investor concern over rising US public debt and the associated financial stability issues.

On the other hand, if the rise in Treasury yields reflects the strength of the US economy and is driven by intensifying competition with hyperscalers for resources, then this is negative for gold. According to BMI, gold will fall in the long term against a backdrop of faster-than-expected global economic growth.

In fact, rising energy prices and widespread monetary tightening will hold back the global economy. The more the Fed and other central banks raise interest rates, the worse it is for the economy and the better for gold. In previous cycles of rate rises, this factor allowed the precious metal to recover lost ground after initial setbacks.   

This time, a collapse did not occur thanks to strong demand for the physical asset. In the first eight months of 2026, China imported more gold than in all of 2025, whilst its ETFs added 44 tonnes in August, 18% more than in the same period last year.

Central banks are buying, on average, twice as much gold in 2022–2026 as they did in 2010–2021. At the same time, the share of gold in gold and foreign exchange reserves now exceeds, in value terms, the proportion of US Treasuries. As a rule, regulators do not base their purchasing decisions on opportunity cost, which may be another reason for the divergence between the price of an ounce of gold and the yield on US Treasury bonds.

The FxPro Analyst Team