The price of gold has dipped and then rallied in 2026 after two years of meteoric rises. Are the forces contributing to its elevated price likely to prove long-lasting? Between July 2025 and January 2026 the French central bank sold 129 tonnes of gold stored in New York, and replaced it with gold bullion to be stored in Paris, realising around $15bn in capital gains. In a separate move, the central bank of the Netherlands moved 86 tonnes of gold from the US and Canada to vaults in London. In terms of geopolitics, these moves reflect growing attention to the security and accessibility of reserves, although France described its transaction as a technical upgrade rather than a political decision. Nations that consider themselves vulnerable to invasion may not hold the bullion in their own vaults, but those with confidence in their security may prefer to do so. This comes during a period of growing confidence in the precious metal as a long-term store of value and a useful hedge in a portfolio with risky assets. The central bank of China has increased its holdings of gold, adding to reserves for 22 consecutive months. At the end of August 2026 it held 2,387 tonnes, worth $350bn, up from 2,313 tonnes in the first quarter. Aggregate imports of gold bullion by Chinese investors and the central bank exceeded 1,000 tonnes in the eight months to end August. Meanwhile foreign holdings of US Treasuries have fallen globally. The latest figures, from July this year, show a fall of $50bn to $9.25tn, the lowest total since October 2025. China’s reported holdings of US Treasuries fell by $15bn to $618bn, the lowest figure since August 2008. The price of gold has soared in recent years. By late January 2026, the price had more than doubled in a two-year period – from around $2,080 per ounce at the start of 2024 to more than $5,000. It was due a correction at least, and it duly fell, dropping to below $4,000 by July, in part owing to the conflict in Iran. Although gold is a safe haven asset, rising energy prices fuelled inflation concerns and expectations of higher interest rates, putting pressure on gold. Governments may also sell gold to meet emergency needs or prop up their currencies. It offers a mature and liquid market. The gold price has risen since July, trading at around $4,283 on September 25, although it fell during that week. In the second quarter of 2026, the average price of $4,506 was 8% lower than the first quarter, but 37% higher than the second quarter of 2025.In recent years the appeal of gold has been maintained through the economic cycle. In the 2020s the historic inverse relationship between the gold price and real yields on bonds has weakened at times. According to UBS analysis published in the Financial Times, between March 2022 and October 2023, real yields on US five-year Treasuries rose by more than four percentage points. In previous times, this might have been expected to trigger a substantial fall in the price of gold, but instead it increased 7%. There has been no US recession, and stock market prices have also risen, albeit with much concentration in a small number of stocks. Many central banks continue to face inflation persisting above targets of around 2%, while government bond yields creep upwards in an era of high deficits and public sector debts. Gold can be a more effective hedge than bonds against inflationary shocks for a portfolio that is heavy on stocks.Periods of bond yields, equities and the gold price rising in tandem challenge traditional assumptions. In short, commodities are expensive, borrowing costs are rising, and geopolitical trust is weakening. Tangible assets are prized, as well as corporate assets with real income streams. In early 2022, following the Russian invasion of Ukraine, the US and its allies froze part of Russia’s foreign reserves. This was treated as a precedent by cautious central banks: If approximately $280bn of reserve assets could suddenly become inaccessible, it was prudent to increase the share of reserves represented by a physical asset held domestically, and the obvious choice is gold. Central banks held around $5tn of gold assets at the end of the second quarter of 2026, representing 18% of all above-ground gold. Central banks and sovereign funds in emerging markets have increased the percentage of reserves represented by gold from 5-7% in 2022 to around 11%, while for advanced economies it has reached 26%, according to UBS analysis published in the Financial Times on September 3. Gold, however, represents around 3% of global financial assets excluding central-bank reserves, so there is scope for increase. Gold is not the only commodity holding its value, or appreciating substantially. Agricultural products, for example, could fetch high prices given pressure on land and unpredictable climate, owing to global warming and the prospect of an exceptional El Niño phenomenon this year and next in the Pacific Ocean. Copper hit record high prices in early September of over $14,500 per tonne, supported by tight supply and speculation of fresh tariffs by US President Trump. The price of silver was around $64 per ounce on September 25, below the highest price of 2026 of over $100, but still substantially higher than a year earlier. Oil prices are high owing to the conflict in the Gulf. For gold, while there will be corrections and dips from time to time, the forces that keep prices elevated are likely to prove persistent. The last time US headline consumer-price inflation was below 2% was in early 2021.Will the inverse relationship between gold and yields strengthen again at some point in the future? It is possible, but real yields are only one influence on gold alongside central-bank demand, the dollar and geopolitical risks.n The author is a Qatari banker, with many years of experience in the banking sector in senior positions.
