ETF flows show gold price decoupled from real yields as fiscal concerns now drive investor demand – Saxo Bank’s Hansen

“US 10-year real yields hit their highest level in more than 20 years on Friday at 2.63%, a 76-basis point increase since the start of the year, while total gold-backed ETF holdings continued to recover following a drop in H1 2026,” Hansen wrote in his latest gold analysis. “The divergence highlights an increasingly notable disconnect between gold demand and what historically has been a strong inverse relationship with real yields.”

The real yield is the return an investor earns on a bond after accounting for inflation. “Historically, it has been regarded as key to determining the direction of gold, as the yellow metal and other hard assets such as silver and platinum do not pay interest or dividends, so higher real yields can make bonds more attractive relative to holding gold,” he said. “When real yields rise, gold has traditionally faced pressure.”

Hansen noted that when central banks aggressively raised interest rates back in 2022–23 and real yields surged, investors responded by reducing their exposure to gold by exiting ETFs. “Gold prices, however, remained remarkably resilient during that period, supported by strong central-bank buying that helped offset ETF investor selling,” he said. “In other words, the gold price decoupled from real yields, while ETF holdings did not.”

Today, Hansen said, the picture is different. “Real yields are rising, with the 10-year tenor reaching its highest level in 20 years amid sticky inflation and a renewed surge in long-end government bond yields,” he wrote. “Yet instead of triggering another wave of ETF liquidation, investor demand for gold is showing resilience.”

“This time, therefore, it is not just the gold price that has decoupled from real yields - ETF holdings are showing signs of doing so as well.”

Hansen said this suggests that the traditional opportunity-cost relationship, where higher real yields make gold less attractive, is being superseded by other considerations. “One explanation is growing concern about fiscal sustainability and rising government debt burdens,” he said. “Investors may increasingly view higher long-term yields not simply as an attractive alternative to gold, but also as a potential warning signal about fiscal risk, rising debt-servicing costs and financial stability. In that environment, gold's role as an asset outside the traditional financial system may become more important.”

Hansen said the current environment is an unusual one, because historically high and still-rising real yields are no longer necessarily bearish for gold prices. “Combined with continued central-bank demand, the return of ETF buyers in the West alongside already robust demand from investors in Asia suggests the investor base supporting bullion has broadened compared with 2022–23.”

After the Federal Reserve’s interest rate hike last week, Hansen said gold’s price action suggested that the Fed’s more hawkish monetary policy was largely priced into the market.

“Heading into the weekend, gold appears to have shrugged off the US rate hike,” Hansen said on Friday.

With no surprises from the central bank, Hansen said he is paying attention to renewed investment demand. He pointed out that holdings in gold-backed exchange-traded funds have climbed to a seven-month high despite the precious metal’s recent price weakness.

“This highlights a market where demand from less interest-rate-sensitive investors remains firm, even with yields still elevated,” Hansen said.

Hansen compared the current environment to 2022 and 2023, when aggressive Federal Reserve rate hikes and rising bond yields failed to generate the kind of sustained weakness in gold that would traditionally have been expected.

“Then, as now, underlying demand from investors is less sensitive to interest rates and yields provided an important offset to traditional macro headwinds,” he said. “For now, that underlying demand appears to remain intact, and I maintain a bullish outlook that is being slowed but not halted by rate hikes.”

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