Gold vs Treasury yields in 2025: Has the classic hedge stopped working?

Gold’s long-standing inverse relationship with U.S. Treasury yields has effectively broken down in 2025. The precious metal has surged beyond $4,000 per ounce, even as Treasury yields have stabilised and the U.S. dollar has weakened. This divergence signals a deeper shift in global risk sentiment: investors are no longer treating U.S. government bonds as a reliable hedge. Instead, gold has become the preferred safe-haven asset in a market rattled by debt concerns, inflation risk, and fiscal uncertainty.

Key takeaways

• Around $9.2 trillion in U.S. marketable debt matures in 2025, forcing the Treasury to refinance record amounts of bonds amid weak demand.
  
• The federal deficit is projected to reach $1.9 trillion, fuelling fears of unsustainable debt and fiscal complacency.
  
• Persistent inflation and tariff-related shocks have raised the term premium on long-term bonds, making Treasuries behave more like risk assets.
  
• The U.S. dollar has declined even as yields stayed high, reflecting eroding faith in the government’s fiscal position.
  
• Gold has risen 52% year-to-date, breaking above $4,000 as central banks and investors shift from bonds to hard assets.
  

Treasury yields market under pressure

The U.S. Treasury market has endured one of its toughest years in decades. A wave of maturing debt - roughly $9.2 trillion, much of it concentrated in the first half of the year - forced the government to issue new securities at a rapid pace. Investor appetite couldn’t keep up, leading to a broad-based sell-off and rising yields, particularly on longer-dated maturities.

At the same time, the fiscal deficit ballooned to $1.9 trillion, fuelling fears that rising government spending would worsen long-term debt sustainability. Investors demanded higher yields to hold U.S. debt, effectively repricing Treasuries as riskier assets rather than defensive ones.

The situation was worsened by technical and policy shocks - including shifts in U.S. trade policy and tariff changes - that distorted pricing and raised the term premium. This combination of oversupply, inflation anxiety, and fiscal concern made Treasuries more volatile than at any point since 2020.

Gold as a safe-haven fills the vacuum

Normally, a sell-off in Treasuries would strengthen the U.S. dollar and weigh on gold. But 2025 has upended that playbook. The dollar declined alongside bonds, exposing a crisis of confidence in U.S. fiscal credibility. That opened the door for gold to assume the defensive role once held by Treasuries.

Investors, fund managers, and central banks accelerated purchases of physical gold and ETFs, viewing the metal as a more reliable store of value in an environment where government-backed debt looked fragile. 

The result was a historic rally past $4,000 per ounce, marking gold’s best performance in nearly five decades.

Gold vs U.S. Treasury Yields - 2025 Performance Comparison

Sources: World Gold Council (Mid-Year 2025 Outlook), Reuters (8 October 2025), YCharts U.S. 10-Year Treasury Rate Series.

The data underscores how gold and yields are now moving in tandem. Gold’s 42% rally alongside steady yields around 4.1% confirms that the traditional inverse correlation - where gold rises as yields fall - has collapsed. Instead, both assets are now responding to fiscal uncertainty and investor mistrust in policy stability.

Consequences of the gold–Treasury correlation breakdown

The breakdown of the gold–Treasury hedge has made markets more volatile and less predictable. Yields have stayed elevated, while equities have struggled to find stability amid cross-asset correlations that used to offset each other. The dollar’s weakness has amplified inflation concerns, creating a feedback loop that further supports gold demand.

Some analysts, however, see potential for a reversal later in 2025. If the economy slows and the Federal Reserve cuts interest rates, yields could fall and partially restore the old inverse relationship. But for now, gold and Treasuries are moving together - a sign that the structural foundation of the classic hedge has cracked.

Gold price forecast 2025–2026

Analysts remain divided on what comes next. Goldman Sachs projects that gold could hold near record levels if fiscal risks persist, while some strategists believe lower yields from a potential recession might ease pressure on bonds later in the year.

However, the underlying issue - high debt issuance, persistent inflation, and waning trust in U.S. fiscal management - points to a long-term rebalancing. Treasuries are no longer viewed as a pure safe-haven asset; they’re part of the risk environment. Gold, meanwhile, has become the anchor for stability in uncertain times.

Gold price technical insights

At the time of writing, strong buy pressure is evident on the daily chart. However, prices going within touching distance of the upper ascending channel could hint at a potential pullback towards the lower limit of the channel at $3,850. This pullback narrative is supported by the RSI being deep in overbought territory. On the flipside, MACD shows strong bullish momentum.  A decisive move beyond current levels could give buyers the green light to target $4,100. 

Gold investment implications

For traders and asset managers, the 2025 landscape signals a new hedging reality.
In the short term, gold is likely to consolidate above $4,000, supported by sustained central bank demand and safe-haven flows. If a recession triggers rate cuts, bond prices could recover - but gold will likely retain its strategic appeal as protection against policy and credit risk.

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