Rates rise, gold holds: who is buying it and why
US interest rates have gone up again, bonds are yielding the most in almost twenty years, and yet the gold price has not collapsed. So who is buying the metal at a time when, by the textbook, everyone should be selling it? The trail leads mainly to China, to central banks and, in recent weeks, to European and American funds as well. We look at what the available data say about each group of buyers and what it means for anyone buying investment gold.
Why gold should be weakening, and isn’t
Gold pays no interest, so holding it costs as much as the same money would earn in a safe bond after inflation. The higher this real yield, the less appealing the metal should be. Right now every indicator favours bonds: the Fed has added another 0.25 percentage points to rates, the ten-year US Treasury yields over 5 %, the highest since 2007, and the real yield has climbed to 2.66 %, the highest since 2008.
We explained in detail why this relationship has stopped working in recent years in the article Why gold valuation models stopped working. This June is a good illustration: back then Bloomberg wrote that the trade built on weakening currencies was coming apart and named Kevin Warsh as one of the reasons. Analyst Luke Gromen has since pointed out that gold has risen by about 9 % in the meantime. The answer to the question why lies with the buyers, not with interest rates.
China: record imports and fewer US Treasuries
China remains the biggest buyer. According to the Financial Times, it has spent a record 158.8 billion dollars on gold imports this year and brought in over 1,000 tonnes by the end of August alone. Compared with last year:
| China’s gold imports | Volume | Value |
|---|---|---|
| full year 2025 | 886 t | USD 96.5 bn |
| 2026, January to August | over 1,000 t | USD 158.8 bn (a record this year) |
It is not only the central bank behind the purchases. Chinese households and companies are looking for a safe place for their money as domestic assets yield little and geopolitical tensions persist. At the same time, China’s holdings of US Treasuries have fallen to their lowest level since August 2008, so part of the reserves is evidently moving from bonds into metal. Why global tensions usually lift demand for gold is explained in the article Why gold rises in times of geopolitical uncertainty.
American investor Fred Hickey sums it up: “This is the main reason why gold is doing so well despite rising interest rates, a relatively strong dollar and Western investors’ irrational enthusiasm for AI-bubble stocks. It will take only a little buying from the West for gold to launch its next explosive rally.”
Central banks buy more than they report
Official statistics tend to understate central bank purchases. Goldman Sachs estimates that they bought a total of 44 tonnes in July, more than double the pre-2022 average of 17 tonnes a month. It attributes 35 tonnes of that to China, even though China itself reported only a small part. The vaults offer indirect confirmation: holdings of foreign central banks at the Bank of England are growing faster than they are shrinking at the New York Fed.
It is not just the big players. Kazakhstan added over 7 tonnes in August, the seventh month in a row, bringing its reserves to 377 tonnes. For wider context, see the articles Why central banks buy gold and Gold overtakes bonds as a reserve asset.
Western investors return through funds
While the East buys for the long term, Western demand is only now picking up, mainly through exchange-traded funds (ETFs). In August they took in 18 billion dollars, the second-largest monthly inflow on record, and their holdings rose to a record 4,189 tonnes. European funds gained 7.9 billion dollars, more than ever before, and North American funds 7.8 billion. Inflows continued into September for the tenth week in a row. Unlike last year, this is not short-term speculation by a single group of investors; money is arriving from several regions at once.
We covered the latest trend in ETF holdings in the update Gold below 4,300 USD: ETFs and real yields. Bear in mind, however, that a fund share is not the same as a bar in your hand; the differences are summarised in the article Physical gold vs. paper gold.
How much room is left in reserves
Under the Bretton Woods system, gold accounted for roughly 60 % of global foreign exchange reserves. Central banks today hold about the same number of ounces, but its share has fallen sharply because other assets, above all US Treasuries, have grown much faster. The authors of the annual In Gold We Trust report see this as room for reallocation: if banks want to raise the share of gold, they have to buy more. Eastern central banks are already doing so. If Western institutions and investors joined them on a larger scale, demand would run into a limited supply of metal. How a gold-backed system worked is described in the article The gold standard.
What it means for private investors
For private investors this is not a signal to buy right now. Rather, it shows that the gold price today is shaped more by who buys the metal and why than by interest rates. That argues for a gradual, calm approach:
- Buy regularly in smaller amounts so that price swings are spread over time, see Buying gold regularly.
- Hold gold as one part of your savings, usually within the range discussed in the article How much gold in a portfolio.
- Choose liquid forms: among gold bars, for example the 10 g Argor-Heraeus or the 1 Oz Argor-Heraeus, and among gold coins the Wiener Philharmoniker 1 Oz. Prices change several times an hour; follow the latest moves on the Gold price page.
Frequently asked questions
Why isn’t gold falling when interest rates rise?
Higher rates raise the cost of holding gold, but this year they were outweighed by strong demand from China, from central banks and, more recently, from European and American funds. Buyers such as central banks pay no attention to interest rates; they buy for the security of their reserves.
How much gold has China imported this year?
According to the Financial Times, over 1,000 tonnes in the first eight months of 2026, worth a record 158.8 billion dollars. For the whole of 2025 it was 886 tonnes for 96.5 billion dollars.
Why would central banks report less gold than they buy?
Gold purchases are a politically sensitive topic and some countries do not want the market to know their true volume. Analysts therefore estimate them from trade statistics and movements in vaults. Goldman Sachs, for example, estimates that China bought 35 tonnes in July, far more than it officially announced.
Are gold ETFs or physical gold better?
ETFs suit fast trading, but they are a fund share that depends on a manager and an exchange. A physical bar or coin is your property with no intermediary and can be stored outside the financial system. For a long-term reserve, most private investors therefore choose physical gold.
About the author
HEFFO, GOLDU’s blogger, sees everything in context. From a pile of global numbers and news, he fishes out what matters and adds a conclusion you would not have expected. The precision of his conclusions and his love of chocolate suggest he has lived in Switzerland for years.
