Gold and Treasuries: Rising Yields, Gold Advances

The correct thesis: nominal and real yields are not the same

The view that higher bond yields must necessarily weigh on gold is too simplistic. Historical data show that gold and 10-year Treasuries can rise together when the increase in nominal yields primarily reflects expected inflation, term premium, fiscal risk and declining confidence in US duration.

The inverse relationship is more stable when real yields and the dollar rise simultaneously. Nominal yields, however, must be broken down into two components: the real yield and the compensation demanded by the market for future inflation. The 10-year breakeven rate published by FRED measures the average inflation expectations implied by nominal and inflation-linked Treasury securities.

This distinction is crucial in 2026. A 6% Treasury yield could be bearish for gold if it results from a sharp increase in real yields; it could instead accompany a rally in the metal if the move from 5% to 6% is driven by expected inflation, fiscal risk premium and demand for monetary protection. In the latter case, Treasuries and gold are no longer pure alternatives: they are two different responses to the same confidence shock.

Starting point: elevated yields, resilient gold

On September 18, the official yield on the US 10-year Treasury stood at 4.93%, after reaching 5.00% on September 15, according to the US Treasury Department’s yield curve. The 10-year real yield stood at 2.68%, while the 10-year inflation breakeven rate was 2.33%, according to the Treasury’s real-yield data and FRED.

On the same day, spot gold rose 1.2% to $4,390.11 per ounce, recording its first positive week after four weeks of declines. The reaction occurred despite a more hawkish Fed and a still-strong dollar, suggesting that the market is assigning gold a hedging role against inflation, geopolitical risks and fiscal risk, rather than viewing it solely through the lens of opportunity cost.

Holding above the 4,400-4,440 area, identified by the market as the first technical resistance zone, would confirm a new upward impulse. A sustained break above this range would make subsequent areas around 4,800, 5,200 and 5,600 dollars more likely. These are technical levels derived from the recent structure of highs and consolidations, not official targets issued by any central bank.

COT Legacy: the speculative market is already positioned for upside

The official CFTC COT Legacy report for COMEX, referring to September 15, 2026, shows:

During the week, commercial traders increased their long positions by 2,014 contracts and reduced their short positions by 6,539. This represents a net improvement of 8,553 contracts, while non-commercial traders remain heavily exposed to the upside.

The definition requires some clarification: non-commercial traders represent large speculative operators classified by the CFTC, including funds and leveraged traders; they do not correspond to the entire universe of institutional investors. Nevertheless, the data are clearly consistent with a bullish trend-following phase. If prices break through resistance, the combination of new inflows, short covering and systematic buying could amplify the move.

Positioning is elevated and therefore does not eliminate volatility. However, within the trajectory analyzed here, crowded positioning would not become the catalyst for a liquidation. Instead, it could provide fuel for a breakout, provided that real yields do not accelerate much faster than inflation premia.

The Fed: rate hikes at the short end, pressure on long-term yields

On September 16, the Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00%. In its official statement, the Fed described economic activity as solid and inflation as still elevated, while reaffirming the goal of returning inflation to 2% more promptly. (Federal Reserve)

The next FOMC meetings are scheduled for October 27-28 and December 8-9. (2026 FOMC calendar) Following the decision, the market priced in approximately a 55% probability of a rate hike in October. Immediately after the meeting, market readings also indicated roughly an 81% probability of at least one rate hike by December, according to CME FedWatch.

The Fed directly determines the short end of the yield curve. A move above 6% for the 10-year Treasury would require a second process: greater debt supply, a higher term premium, persistent inflation expectations and reduced willingness among international investors to absorb US duration at previous levels. In this scenario, official Fed hikes would not be the sole cause of higher long-term yields. They would signal more persistent inflation and could coexist with a rising premium demanded by the market for holding long-maturity debt.

ECB and BoJ: a global tightening of monetary conditions

The ECB raised all three official rates by 25 basis points on September 10. As of September 16, the deposit rate stood at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility at 2.90%. (ECB) The next monetary policy meetings are scheduled for October 28-29 and December 16-17. (ECB calendar)

The market has begun pricing in further tightening, potentially as early as October, although ECB Vice-President Boris Vujčić warned that expectations had been driven mainly by energy prices and that decisions would remain dependent on a broader set of data.

The BoJ raised its overnight rate to 1.25% on September 18, with a 7-2 vote, and stated that it would continue raising its policy rate depending on inflation, economic activity and financial conditions. (BoJ) The next meetings are scheduled for October 29-30 and December 17-18, according to the official BoJ calendar. Expectations remain for gradual normalization: a Reuters poll sees the rate reaching 1.50% by March 2027 and at least 1.75% in the second quarter of 2027.

The result is a global environment that is less favorable to long-duration assets. Liquidation of Treasuries, Bunds and JGBs could increase the premium demanded across sovereign bonds, while gold would benefit from reserve demand and protection against the erosion of purchasing power.

The forecast through December 2026

The trajectory analyzed here is a single one: the Fed implements at least one hike in October and another by December; the ECB and BoJ maintain restrictive policies; financing needs and the term premium push the nominal 10-year Treasury yield above 6%, while inflation expectations expand enough to prevent real yields from becoming the market’s main driver.

The estimate implies a rise of approximately 40% in gold from the $4,390.11 recorded on September 18. The move would not be linear: first a break above 4,440, followed by a move through 4,800 and 5,200, and then an acceleration toward 5,600-6,150 amid new COT highs, a weaker dollar and official-sector purchases.

The key point is that a Treasury yield above 6% would not represent, in this forecast, a superior alternative to gold. It would represent the yield required to hold long-term debt in a system characterized by higher expected inflation, large deficits and reduced confidence in the stability of the currency’s real value. Bonds would pay a higher nominal coupon; gold would be purchased to protect capital from a shock to the real value of that coupon.

In summary

The reading most consistent with COT data, yield trends and recent price behavior is therefore one of a joint rally, not an automatic inverse relationship. The COT shows that large speculators are already net long; the Fed has reopened its hiking cycle; the ECB and BoJ are tightening financial conditions; and the long end of the curve is increasingly reflecting fiscal and inflation risks.

The single forecast for December 2026 is therefore a 10-year Treasury yield of approximately 6.20% and spot gold around $6,150 per ounce. The key condition to monitor is the composition of the rise in yields: as long as breakeven inflation and the term premium increase faster than real yields, a move above 6% could become the catalyst for an acceleration in gold rather than a headwind.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a public offering solicitation or a recommendation to buy or sell. The projections are estimates subject to significant uncertainty and may not materialize.