Gold Defies Rates as China's Reserve Shift Accelerates

Societe Generale's Conviction Thinking report notes that gold has surged above $5,400 in January and experienced two violent corrections. The second correction was driven by the U.S.-Israel-Iran conflict and renewed expectations for Federal Reserve hikes, briefly pushing gold below $4,000 in July.

However, Chinese central-bank dip-buying and Treasury's surprise decision to double long-end buybacks have helped lift the metal back toward $4,500. The recovery is becoming healthier, with gold volatility normalizing while speculative longs and call demand rebuild from the spring washout.

Societe Generale attributes the divergence between persistently positive real yields and gold prices to a post-2022 regime shift in which central-bank accumulation, geopolitical uncertainty, sovereign-debt concerns, and de-dollarisation have created a higher structural floor beneath gold. This does not make gold immune to rates, but it means rates no longer explain the entire market.