Gold has shown surprising resilience in the third quarter, gaining 3.7% despite rising bond yields and persistent inflation. The precious metal ended September at $4,157 an ounce, even as 10-year Treasury yields climbed to 5.28% and 30-year yields hit 5.63%, their highest levels since 2002. Analysts at Invesco attribute this strength to structural demand from central banks and renewed interest in gold-backed exchange-traded products (ETPs).
The firm's latest quarterly outlook highlights the competing forces influencing gold prices. While higher bond yields typically increase the opportunity cost of holding non-yielding assets like gold, the historical relationship between gold and real yields has weakened since 2022. This shift is partly due to central banks buying gold to diversify reserves, regardless of price.
Looking ahead, Invesco expects persistent inflation and stronger economic growth to keep bond yields elevated, posing challenges for gold investors. The Federal Reserve's tightening bias and growing concerns about U.S. government borrowing could further push yields higher. However, the firm maintains a constructive long-term outlook, citing continued central bank demand and geopolitical risks as key support factors.
Despite these positive indicators, Invesco warns of potential volatility in the fourth quarter. Financial market stress could force investors to liquidate gold holdings to meet margin calls, even if their long-term views on the precious metal remain unchanged. Nevertheless, the firm believes structural support for gold remains intact, with central banks likely to continue diversifying their reserves.