The current selloff reflects a sharp recalibration of interest rate expectations, with markets pricing in two additional hikes since mid-August. This "peak market hawkishness" has bolstered the U.S. dollar and pushed nominal and real yields higher, creating tactical headwinds that complicate the path toward higher valuations. Despite these pressures, Doshi argues that the structural case for gold remains unshaken, as rising borrowing costs only serve to exacerbate the fiscal imbalances and debt-servicing challenges facing major economies.

State Street highlights that long-term term premia in the U.S., U.K., France, and Germany have climbed to their highest levels since 2011, driven by institutional credibility concerns and ballooning sovereign debt. U.S. public debt surpassed $40 trillion in August, a milestone reached with accelerated speed. This fiscal environment has fostered a resilient "structural bid" for gold, supported further by robust physical demand from China, where non-monetary imports hit a record 1,000 tonnes through July 2026.

Strategic investment behavior also signals confidence in gold’s defensive qualities. Western investors added $17.1 billion to global gold-backed ETFs in August, and derivatives markets have shifted from put-biased to call-biased positioning. For Doshi, the divergence between rising 10-year Treasury yields—now around 5.3%—and gold’s proximity to $4,000 highlights the metal’s role as a hedge against macro-policy uncertainty rather than a simple inverse play on interest rates.