Gold Resilient Above $4,000 Amid Soaring Treasury Yields
Gold's price has been resilient above $4,000 an ounce despite soaring US Treasury yields. Analysts say this suggests that a demand premium is proving more durable than expected, setting the stage for further gains once the Federal Reserve's tightening cycle ends.
The relationship between gold and interest rates changed after Western sanctions froze Russia's official reserves in 2022. Central banks began to diversify their reserves away from dollar assets, supporting gold even when higher yields would normally weigh on its price.
Nicky Shiels, metals strategist at MKS PAMP, estimates that the premium driven by reserve diversification and geopolitical hedging has risen from around $120 an ounce before 2022 to an average of over $1,000 since then. This premium currently stands at roughly $840 an ounce.
Experts believe gold will continue to climb due to its safe-haven demand. China's imports of the metal are on track for their highest in 11 years, and bullion is likely to be boosted by additional Western investment once the rate-tightening cycle ends.