Soaring yields – A prelude to gold’s next upcycle?

Gold is entering a new upcycle because fiscal stress, de-dollarisation and financial repression are weakening the traditional inverse relationship between real yields and gold.

• Gold has remained near USD 4,200 per ounce despite sharply higher yields, marking a break from the historical relationship between US real yields and the precious metal since the 2022 inflection point.
• The freezing of approximately USD 300 billion of Russian sovereign reserves after the invasion of Ukraine accelerated de-dollarisation, while gold’s lack of counterparty risk has increased its appeal to central banks and other investors.
• Central-bank purchases exceeded 1,000 tonnes per year from 2022 to 2024, versus just under 500 tonnes annually from 2013 to 2021; purchases then remained historically strong at 863 tonnes in 2025.
• Gold ETF investors have bought more than 5 million ounces since mid-July, while silver benefits from demand in solar photovoltaics and electronics alongside multi-year supply deficits.
• US government interest payments have reached USD 1.4 trillion annually, public debt stands at 123% of GDP, and net borrowing is projected at 8.5% of GDP this year, increasing the risk of fiscal dominance and financial repression.
• Baker Steel’s meetings with more than 70 mining companies found strong free-cash-flow generation, capital discipline and shareholder returns, although operating-cost inflation is estimated at 4–7% and capital-cost inflation at 5–15%.

Takeaway: The authors see gold as a hedge against sovereign credit and monetary risks and believe the recent sell-off creates an opportunity in undervalued precious-metals miners, but stress that cost pressures and divergent company results make selectivity essential.