Gold is holding above $4,000 an ounce, even though the textbook says it shouldn't. Treasury yields have jumped to multi-decade peaks, raising the cost of holding an asset that pays no interest.

iShares 20+ Year Treasury Bond ETF (TLT) has slid 11.4% year-to-date, while the SPDR Gold Shares ETF (GLD), which tracks physical bullion, is down by just 4.7%.

Policymakers at the London Bullion Market Association's annual conference in Sorrento, Italy, explained why on Monday.

"Gold is a safe haven asset, probably the safe haven asset, as proven by its performance over time and across a broad range of crises," Sergio Nicoletti Altimari, deputy governor of the Bank of Italy, said according to Reuters. "This role is particularly relevant today in an environment of high geopolitical risk and concerns about economic fragmentation."

Bundesbank President Joachim Nagel said rising yields are making bonds relatively more attractive to reserve managers. Still, he said the case for diversifying into gold remains significant because of geopolitical stress and the credit risk that comes with high debt levels.

Official buyers aren't making a short-term safe-haven trade. They're focused on the structure of reserves, even as retail investors mostly stay out.

A Structural Shift

Altimari said the gold market has undergone a structural shift since 2022, driven by central bank purchases in emerging economies. He said concerns over high public debt and fiscal expansion have also weakened gold's usual inverse relationship with real yields.

"These forces became particularly evident last year and early this year when the traditional relationship between gold and real yields weakened significantly," he said.

In a June forecast, consultancy Metals Focus said central bank demand would slow to 15%, or 720 metric tons, in 2026, still above pre-2022 levels.

Central banks reported net purchases of 39 tons in August, bringing the year-to-date total to 170 tons, according to the World Gold Council (WGC). Poland leads with 98 tons this year, including 8 tons in August. That lifts its holdings to 648 tons, closing in on its 700-ton target.

China's central bank added 20 tons in its 22nd straight month of buying. That number brings its purchases this year to 80 tons and its total holdings to about 2,387 tons, or 9% of reserves.

Turkey led sellers with net sales of 82 tons this year, though it bought 3 tons in August. Russia sold 6 tons in August and 56 tons year-to-date. The WGC says monthly swings mostly reflect how purchases are carried out and each country's liquidity needs, not changes in long-term goals.

Reserve managers are also paying closer attention to where they store their gold. On Sept. 2, De Nederlandsche Bank announced it would move 86 tons from New York and Ottawa to London to make its reserves easier to trade. The Banque de France carried out a similar operation in 2025.

Missing Retail Wave

Central banks have become steady, long-term buyers as countries reduce their reliance on the U.S. dollar, Fiore Group chief executive officer Frank Giustra told The Northern Miner at the Precious Metals Summit in Colorado. They keep buying when prices dip, he said.

"Gold is your hedge against all human stupidity," Giustra said.

Demand is shifting in China as well. Shanghai Gold Exchange Vice President Zeng Hui explained that investment and institutional buyers increasingly drive the market. Bar-and-coin purchases overtook jewelry for the first time in 2025, he said.

Ordinary investors, however, have largely missed the rally, Giustra noted.

"The general public hasn't really been exposed to the gold market yet, not in ways that I've seen through my 45 years in this business," he said, adding that a geopolitical or financial shock could trigger the next leg higher.