Gold has maintained its position above $4,000 an ounce despite a sharp rise in US Treasury yields, indicating that structural demand for bullion is increasingly offsetting one of its traditional headwinds. The resilience suggests that the post-2022 demand premium surrounding gold has become more entrenched, potentially changing how the metal responds to interest rates, currencies and global financial conditions.

Gold Defies the Traditional Interest-Rate Relationship

Gold typically faces pressure when real interest rates rise because bullion does not generate income. Between 2000 and Russia’s invasion of Ukraine in 2022, movements in US real yields and the dollar explained much of gold’s price behavior, according to the Reuters analysis.

The recent market environment has been different. Even as Treasury yields have climbed to levels not seen in decades, gold has continued trading above $4,000 an ounce. That resilience indicates that other sources of demand are increasingly influencing the metal’s valuation.

The shift is important because higher yields raise the opportunity cost of holding an asset that produces no interest or dividends. Gold’s ability to withstand that pressure suggests that investors and institutions are placing greater value on its role as a reserve and diversification asset.

Central Banks Provide a Structural Demand Floor

One of the most important changes in the gold market has been sustained central bank demand. Monetary authorities have increased gold purchases as part of broader efforts to diversify reserves, reducing dependence on traditional reserve assets and providing a source of demand that is less directly linked to short-term interest-rate movements.

According to the Reuters analysis, strong central bank demand is helping establish a potential price floor around $4,000 an ounce. This does not eliminate downside risks, but it indicates that the market now has a substantial structural buyer base that was less prominent in earlier cycles.

Reserve diversification can also become more important during periods of geopolitical and financial uncertainty. For global investors, this creates a different demand dynamic from ETF-driven rallies, where flows can change rapidly as interest rates and market sentiment shift.

China Adds Evidence of Underlying Demand

China is another important component of the current demand picture. Chinese gold imports suggest that physical demand remains relatively robust even as global financial conditions have become less supportive for non-yielding assets.

That demand matters because China represents one of the world’s largest gold markets. Continued purchases can help offset pressure from investors responding to higher yields or a stronger dollar, particularly when combined with central-bank accumulation.

Fed Policy Could Become the Next Catalyst

The outlook could become even more supportive for gold if the Federal Reserve eventually ends its tightening cycle. Gold ETF inflows are expected to return once monetary policy becomes less restrictive, according to the Reuters analysis, potentially adding financial-market demand to the existing physical and institutional base.

For investors in Israel and global markets, the key variables remain US real yields, Federal Reserve policy, the dollar, central-bank purchases and Chinese demand. Gold’s ability to remain above $4,000 despite elevated borrowing costs suggests that its market structure has changed since 2022, but the durability of that premium will ultimately depend on whether structural demand remains strong as monetary policy and global financial conditions evolve.