Central Banks Boost Gold Buying Amid Rising Yields

Despite rising real yields, gold has continued to strengthen in recent weeks. According to Monarch PMS, gold prices rose from $4,242/oz on August 6 to around $4,385/oz by September 18. This trend challenges the traditional inverse relationship between real yields and gold prices.

Monarch noted that global central banks added a net 23 tonnes in July, with China alone buying 20.2 tonnes in August, its largest monthly purchase since October 2023. China's holdings have now risen for 22 consecutive months, with around 80 tonnes added in the first eight months of 2026.

The 10-year US TIPS real yield rose to 2.65% by September 17, its highest level in almost 18 years, from 2.41% in August. However, gold continued to rise, with Dhruv Joglekar, Assistant Fund Manager at Monarch PMS, stating that 'bonds have become less effective as an insurance asset during the current inflationary environment, while gold has increasingly taken on that role.'

Gold briefly declined following the Fed's 25 basis points rate hike to 3.75%-4.00% on September 16 but recovered to around $4,385 by September 18, above its pre-meeting level.