From October 2016 to August 2020, gold rose 55% while US real interest rates fell from 0% to −1.08%. That fits the textbook. From January 2022 to September 2026, real rates rose from −0.97% to 2.85%. Gold rose 133% anyway.
Something else took over. Here is what drives the gold price, with the data on each driver since 2016.
What drives the gold price? Gold pays no interest, so its price depends on what holding it costs and who wants to buy it. Four forces stand out in the data: real interest rates, the US dollar, central bank buying and investors' demand for safety.
From 2016 to 2021, gold moved almost exactly against real interest rates.
From 2022, central banks bought more than 1,000 tonnes a year for three years, over twice their earlier pace. Gold rose despite higher real rates.
In 2025, gold rose 64%, its best calendar year since our data begin in 2016.
How we measure the gold price
We track gold with GLD, a fund that holds physical gold bars in a vault. Its price follows the price of gold, less a small yearly fee. It traded at $391.69 on 24 September 2026.
Gold has no earnings or interest. A bar bought today is the same bar in ten years. Its price is whatever the next buyer will pay. That makes the forces on demand the whole story.
Driver 1: real interest rates
A real interest rate is the return on a safe bond after inflation. We use the yield on 10-year US Treasury Inflation-Protected Securities (TIPS). These bonds adjust for inflation, so their yield is a real return. It was 2.85% on 24 September 2026.
Holding gold means giving up that return. When real rates are high, gold costs more to hold. When they are low or negative, it costs little.
Source: YX Insights price data (GLD); FRED (DFII10)
From October 2016 to December 2021, the two moved almost as mirror images. The correlation between their levels was −0.95. Correlation runs from −1 to +1. A reading of −1 means they always move in opposite directions. When real rates hit their low of −1.08% on 6 August 2020, GLD stood at $193.89.
From January 2022, the pattern broke. Real rates rose by almost four points, yet gold more than doubled. The correlation of levels turned positive, at 0.46.
The month-to-month link survived. Since 2022, monthly moves in gold have still had a correlation of −0.42 with monthly changes in real rates. So rates still push gold around from month to month. Something else lifted the level.
Driver 2: the US dollar
Gold is priced in dollars. When the dollar strengthens, gold costs more for buyers paying in other currencies, which tends to cut demand.
Since October 2016, monthly changes in gold and in the broad dollar index have had a correlation of −0.49. In 2022, the dollar index peaked on 26 September. That same day, gold hit its low for the year, 21% below its March high.
Driver 3: central banks
Central banks hold gold as part of their reserves. The World Gold Council tracks their net buying.
Source: World Gold Council
2010 to 2021: 473 tonnes a year on average.
2022: 1,082 tonnes.
2023: 1,037 tonnes.
2024: 1,092 tonnes.
2025: 863 tonnes, lower but still far above the earlier average.
That buying lines up with the years when gold rose against higher real rates.
Driver 4: demand for safety
Demand for gold as a safe asset shows up in fund flows. Gold funds added 801 tonnes in 2025, the second-largest yearly inflow on record. Total gold demand passed 5,000 tonnes for the first time.
GLD rose 64% in 2025. The London gold price set 53 record highs that year.
Gold can fall hard too. GLD peaked at $495.90 on 29 January 2026. By 24 September, it was 21% lower.
Gold and inflation
Inflation can feed into gold through the first driver, real interest rates. When inflation rises faster than bond yields, real rates fall. We explain inflation itself in What Is Inflation? Whether gold protects against inflation in practice gets its own guide.
How to read the gold price
A few checks help when gold moves:
Real yields. Look at the 10-year TIPS yield. A sharp fall usually supports gold.
The dollar. A weaker dollar usually helps.
Central bank buying. The World Gold Council publishes it every quarter.
Fund flows. Large inflows to gold funds show investor demand.
Gold has no cash flow, so its price is all about the cost of holding it and the appetite to own it. Since 2022, central banks have been among the biggest buyers.
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DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.