Gold Defies Rate Hike with Rising Prices and Strong Central-Bank Demand

Gold prices have continued to rise despite a US Federal Reserve rate hike and an increase in real yields, suggesting that the traditional inverse relationship between gold prices and real yields has weakened. According to Monarch PMS, gold rose to around $4,385 per ounce on September 18 from $4,242 on August 6.

Silver also gained 6.5% during this period, reaching around $65.7 per ounce. The increase in gold prices has come despite a sharp rise in real yields, with the 10-year US TIPS real yield reaching its highest level in almost 18 years at 2.65% on September 17.

Central-bank gold buying has accelerated, with global central banks adding a net 23 tonnes of gold in July and China purchasing 20.2 tonnes in August, its largest monthly purchase since October 2023. This marks the 22nd consecutive month that China's gold holdings have increased, with around 80 tonnes added in the first eight months of 2026.

Monarch PMS attributes the rise in gold prices to its increasing role as an insurance asset in the current inflationary environment, while bonds have become less effective. The Federal Reserve's rate hike has also had a limited impact on gold prices, with gold initially declining but then recovering to around $4,385 by September 18.