Developments in Financial and Commodity Markets

Rising sovereign yields may begin challenging equity valuations and expose fiscal constraints across developed, debt-laden economies. Recent Treasury intervention has produced only short-lived relief, suggesting yields are increasingly being driven by time and risk premia rather than policy expectations alone. Higher yields are increasing the opportunity cost of holding equities, while persistent monetary and fiscal strain may strengthen the case for holding real assets, which can help protect portfolios against the erosion of purchasing power. China is narrowing its dependence on Nvidia hardware and thereby extending its technological self-sufficiency. If, or perhaps when, domestic systems are able to support frontier-model training at scale, Nvidiaʼs strategic importance could diminish, potentially weakening a key pillar of Western AI-led growth. In Europe, growing demand for sovereign AI systems could disrupt hyperscaler economics, shifting workloads towards locally controlled infrastructure while narrowing the market for major cloud providers.

 

In 2021, US Treasury yields broke a three-decade-long downward trend. This came as the Fed reduced bond holdings and raised rates following an inflationary spike due to Covid-era stimulus and supply chain constraints. What began largely as a reaction to monetary policy has since evolved into something more structural as, despite a dovish inflation report in June, yields rose significantly across the bond maturity spectrum. Reduced foreign holdings of US Treasuries, led by Japan, the UK, and China, weakened demand and fuelled the sell-off. In response, the US Treasury doubled its long-duration buyback operations, from USD 2 billion to USD 4 billion. The relief proved short-lived, however, as 10-year yields climbed back above pre-announcement levels within 24 hours.

European and Japanese markets were similarly affected, while Switzerland was a notable exception with yields holding below 0.5%. The turmoil coincided with a rally in gold, demonstrating the metal‘s counter-cyclical appeal. Unlike other assets and even commodities, whose demand follows industrial cycles, market trends, and economic growth, gold benefits from investment demand that tends to strengthen when economic and financial uncertainty rises.

 

Goldʼs 128% price rise over the past 5 years has left 33% of UK adults regretting that they did not invest, according to new research from The Royal Mint. Silver, which gained around 126%, generated similar regret among 30% of respondents, compared with 20% for Bitcoin. Despite this, only 25% say they are likely to put savings into gold or silver over the next 5 years. By contrast, 60% said they would still keep their money in a chequing account. Over the past 5 years, only 8% held savings in gold and 3% in silver, while 63% relied on chequing accounts. A majority of respondents (73%) said they are concerned about global conflicts and economic instability affecting their money, however, financial uncertainty remains widespread with 53% being unsure where to place savings in order to feel financially secure. The research results point to a broader financial-literacy gap, highlighting the importance of helping savers better understand how assets such as precious metals can add robustness to a portfolio.

Precious Metals and Commodities

Near-term momentum is likely to remain subdued across commodities, however, over the medium and long term, gains are expected to strengthen across all commodity markets.

 

Market Risk Signal

 

Gold vs stocks forecasting model

The current level of debt relative to real economic output is similar to that in the Germanic nations prior to WW1, and in France leading up to the French Revolution in the 1790s. In such high debt level scenarios, the likelihood of instability and a deleveraging process is amplified.

 

Since gold holdings are normally free from another’s liability, the deleveraging process has a gentler impact on gold prices than on equities. The anticipated deleveraging process can be modeled using coupled differential equations which suggest that gold will perform better than stocks from 2022 onwards. The model was calibrated in 2019, and has not since been adjusted for new input data.

Based on this data, the peak at which economic activity assets (such as equities) will outperform gold was around Q3 2022. From then on, the model predicts an outperformance of gold relative to stocks (light line). When compared to real data of the stock to gold price (dotted line), the trend of gold outperforming stocks began early in 2022.

Since the modelʼs 2019 calibration, the AI boom has emerged as a significant new force influencing capital allocation, equity valuations, and debt creation. Like Covid, this may alter the trajectory and extend the timeline, however, it does not change the modelʼs underlying macroeconomic conclusion.

17 Sep 2026 | Categories: Gold, Silver, US, UK

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