Amid sustained inflation pressures pushing U.S. Treasury yields higher and markets continuously pricing in a more aggressive Fed rate hike path, gold prices remain under pressure but have not broken key support levels. Joy Yang, Head of Global Index Product Management at MarketVector Indexes, states that despite recent selling pressure on gold prices, the gold market overall shows considerable resilience, and the unusual calm in the stock market may serve as an important source of support for the precious metal.

Yang pointed out in an interview that gold’s ability to resist declines is linked to low volatility in the stock market. She mentioned that even with a sharp surge in bond yields, the VIX fear index recently hovered near 15 at one point. “On the surface, equity investors seem somewhat numb, while the bond market bears are gaining momentum,” she said.

At present, gold prices are holding above the initial support level of $4150 per ounce, while the 10-year U.S. Treasury yield has climbed to 5.26%, hitting a 20-year high. Meanwhile, the VIX index fluctuates around 17.5. Yang believes this combination reflects that the market is digesting both a higher interest rate environment and more complex macro risks simultaneously.

Inflation and Oil Price Shocks in the Spotlight

Yang says both stock and gold investors are waiting for answers to two key questions: whether high inflation will peRSIst for longer, and whether the latest round of oil price shocks will continue. Although the stock market remains generally calm, she suspects some investors are using gold as a tool to hedge against these risks.

She adds that gold and Bitcoin exchange-traded funds (ETFs) continue to see strong capital inflows, indicating that even as the opportunity cost of holding non-interest-bearing gold rises, investors are still seeking value in alternative assets. “We are seeing very strong daily capital inflows in September for both gold and Bitcoin, even though bond yields are rising and we may be entering an even higher rate environment,” she said.

In her view, this resilience reflects a shift in how some investors view gold. Gold no longer merely competes with bond yields; it is increASIngly regarded as a structural hedge against broader macro risks. She notes that higher bond yields hurt gold, but also amplify uncertainty by raising debt servicing costs for corporations and governments.

Divergence Between Stocks and Bonds Supports Allocation Demand

Yang states that stock and bond investors currently view the economic environment from distinctly different angles: equity investors focus more on growth and capital appreciation, while bond investors are increASIngly worried about capital preservation and the immediate costs brought by higher interest rates. This divergence may be one reason why investors are willing to hold gold even amid rising yields.

“You can see equity investors trying to hedge their entire portfolios with gold and Bitcoin, and bond investors expressing strong fear and uncertainty,” she said.

Nevertheless, Yang also warns that gold is not immune to further downward pressure. She says gold ETF investors may be particularly sensitive to shifts in interest rate expectations in the short term. For now, portfolio investors appear to be cautiously hedging and diveRSIfying mounting economic risks rather than fleeing the stock market entirely. However, if genuine market panic sets in, the situation will be completely different. In a widespread scramble for liquidity, investors may sell gold first, at least in the initial stage.

Structurally Higher Prices May Become the New Normal

Despite short-term risks, Yang does not expect gold to return to the markedly lower levels seen in previous years. She points out that peRSIstent uncertainties surrounding debt, geopolitics, sanctions and supply shocks may keep gold trading within a higher structural range.

“I do not expect a breakout rally, but I also do not think gold will fall back to levels from last year or even two years ago,” she said. “I believe this is the new range we are looking for, because we truly do not know what will happen. We have no clear answers. If you treat gold as a hedge, you are not really thinking about gold’s future returns or whether it is too expensive to buy now. Instead, you are considering the other side of your portfolio. You ask yourself, can gold serve as a good structural hedge for equity positions?”