"If you look at it as far as mine production goes, 2022, 23, 24, almost one out of every three ounces of gold that was mined went into a central bank," James Steel said.
The familiar account of the last year is a retail rush into gold and then a crash. Steel's account is that the buying came from official institutions on multi-year mandates, and that the people who were washed out sold gold precisely because a crisis had arrived.
"This has been the most exciting and eventful 12 months in my entire career."
Steel is HSBC's chief precious metals analyst, and his frame of reference runs back to the years when gold and oil moved together — the 1970s on the way up, the 1980s on the way down — and through the 20-year bear market that began in 1991.
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Here are the 8 takeaways that matter.
👤 Guest: James Steel, Chief Precious Metals Analyst at HSBC
🎙️ Host: Aline van Duyn, Global Head of Editorial and Multimedia at HSBC, who presents The Macro Brief from the bank's New York studio
📰 Published: 15 September 2026 on the HSBC Global Viewpoint feed
🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 14 min
Key Takeaways
Almost 1 in 3 ounces of gold mined in 2022, 2023 and 2024 went into a central bank
Gold has passed US Treasuries in value on central bank balance sheets
Steel's own hedge on it: for the first time ever, or at least the first time in modern finance
Gold fell after the strike on Iran because it no longer moves with oil
Higher oil raised inflation fears, which lifted yields and the dollar and hit equities, and gold was liquidated alongside them
A large share of gold owners are not price-agnostic, and sell it when equities fall
Central banks sold gold for about 20 years straight, and geopolitics drove both the selling and the buying
The first heavy selling came three months after the Cold War was declared over
Sanctions are what restarted official buying, in Barry Eichengreen's account
Over 90% of the bullion bought in India is bought by women
Fractional and tokenized gold moves the marginal buyer to lower-income countries
The dollar is the first thing he watches, and government debt is what sits underneath everything
1. The Most Eventful Year
Van Duyn opened on the tug of war between safe-haven demand and the headwind from higher bond yields, and asked whether the last year is a temporary swing or a durable change in how gold behaves.
Steel's answer was that the year has no precedent in his own working life. "This has been the most exciting and eventful 12 months in my entire career," he said, and when van Duyn noted that career has run for decades, he added: "And it doesn't show any sign of letting up."
The round trip is the whole story. "We went to an all-time high of over 5,400-odd dollars in February, only to pull back quite sharply."
What drove the ascent was official demand, not a trade. "Now, what motivated the market going up was persistent central bank buying over several years."
2. Gold Past Treasuries
Van Duyn checked what central bank buying actually means — that the metal goes into reserves the way dollars or other assets do — and Steel confirmed it.
He pointed to the scale of the diversion from supply. "If you look at it as far as mine production goes, 2022, 23, 24, almost one out of every three ounces of gold that was mined went into a central bank."
The claim he led with is a crossover in the reserve mix. Steel cited the European Central Bank and a special report his own bank published on gold surpassing the value of what central banks hold in US Treasuries "for the first time ever" — then hedged it himself: "At least for the first time in modern finance."
"And that shows, A, how quickly gold rallied, and B, how much the central banks were buying."
Official buying is already slowing, and is still far above normal. "Now, they reduced their buying a little bit last year, and they're likely to reduce it again this year," he said, but "it's still historically high."
3. Cut Hopes Lifted Gold
The second driver was not policy itself but what the market thought policy would be. "I'd say the other issue was not so much monetary policy, but expectations of monetary policy," Steel said. Coming into this year the market carried "expectations for 50, 60 basis points" of Federal Reserve cuts.
Van Duyn's summary of the mood: this was going to be the year of rate cuts in the United States.
Those expectations pushed on gold through four channels at once. "And lower yields reduces opportunity cost. It also stokes inflation, and does all sorts of things to the yield curve and weakens the dollar. And that's all good for gold, all of it."
4. FOMO and the Washout
On top of the macro case came a crowd. "Now, in addition to this, we had good old-fashioned FOMO, which is particularly from August of last year, but virtually 12 months ago, we had a lot of new entrants coming into the market under fear of missing out."
Their arrival is what made the fall so severe. "Their entrance partly explains the severity of the washout."
The trigger was the one event that should have helped gold. "After the strike on Iran, gold did not act the way most were expecting, in that it did not go higher with oil. Instead, it sold off."
The new money left. "Those new entrants and others left the market and liquidated and market fell below 4,000."
Van Duyn read the sequence back to him — strong rally, supportive macro, central banks buying, retail investors piling in, then a genuine geopolitical crisis in which gold does not behave as a safe haven and the new entrants sell — and asked whether that means a different driver is setting the price. Steel agreed: "There's a different dynamic."
5. Gold Stopped Tracking Oil
The mistake the market made was assuming the old oil relationship still held. "And that was really why so many in the market were wrong-footed," Steel said. "And gold was positively correlated to oil on the way up in the 70s, on the way down in the 80s."
That link broke when oil shrank as a share of output. "That began to break apart this century when oil becomes a less large percentage of the GDP."
So an oil spike now reaches gold through inflation and rates, and the sign flips. "It pushed yields higher. That strengthened the dollar. It weakened equity markets, and the consequence was heavy liquidation in gold."
The second mechanism is the one Steel says is misunderstood: gold holders sell into the very event they bought it for. "See, a percentage of people who own gold are not agnostic to the price," he said, and "that's what I think a lot of people don't understand is that they buy it as a safe haven to their equity or their paper portfolio." When equities fall, selling the gold is what lets an investor keep the rest of the portfolio intact — and that, he said, is what happened.
Asked where that leaves the market, he expects less violence but no calm. "I think it's going to remain volatile, but possibly not as volatile as the last 12 months." Historically, he added, it is going to be volatile.
Van Duyn tied that to the policy backdrop under the new Federal Reserve chair, Kevin Warsh, where the path for both rates and inflation is less settled: "So that uncertainty feeds into uncertainty in the gold market too."
6. Geopolitics Flipped the Bid
Van Duyn put it to him that central banks are filling the vaults regardless of price — "They don't care what's happening to the price, presumably."
Steel corrected the premise without rejecting it. "Well, they're not as price sensitive as, say, a hedge fund or an individual trader, but they don't like to give it away either." They are astute, he added. "Now, they have the great advantage of having multi-year strategies."
The same institutions were sellers for a generation. "When central banks sold gold, they sold for about 20 years straight," ending earlier this century.
What turned them in both directions was geopolitics. "it was geopolitics that triggered the sales," and it is geopolitics driving the buying now.
The reserves being sold had been built for war. "Many Western European central banks had built up massive gold reserves in the post-war period, because in a war, you don't know whose currency is redeemable." He named the Banque de France, the Bundesbank and the Banca d'Italia as the big holders.
The timing of the turn is the detail he says nobody connected. "When the Cold War was officially declared over by the first Bush and Gorbachev, the first heavy central bank sales occurred just three months afterwards. And no one put the two together at the time."
That supply is why the bear market ran as long as it did. "Gold was going down one year after another. The world was getting better. The world was globalizing." Democracy was spreading. "Societies were becoming more liberal, more capitalist, and geopolitical risks were dropping for the first time in my lifetime."
His frame for all of it is that the price is a reading of risk. Gold, he said, is "a risk thermometer", and it reflects these things more accurately than anything else he can think of, with the possible exception of the dollar.
The specific thing that restarted official buying, he said, is sanctions, citing an economist by name: "And one of the things that Barry Eichengreen, who's an excellent gold economist at Berkeley, what he says is that the use of sanctions has reinvigorated central bank demand for gold in case you're in a country that could be put under sanctions."
That sits on top of the ordinary reasons a reserve manager buys gold — holding more dollars than you want, wanting to diversify, wanting to protect the rest of the portfolio.
7. Gold Sold by the Fraction
Van Duyn raised the widening investor base, including a previous episode the two of them recorded on gold tokenization — "digital assets which allow exposure to gold" — which lets a buyer take much smaller fractions.
Steel's read is that the small buyer now has a vote. "Well, I think it allows digital gold, allows the smaller investor, a very small investor, a much greater voice."
Van Duyn interrupted his "he" with "Or she," and Steel took the correction and ran with it. "Actually, when it comes to gold, it's likely to be she." "India is often the first or second largest consumer of gold in the world." "And over 90% of the bullion bought, actually closer to 95% of the bullion bought in India is bought by women."
"Now, you've thrown me right off there, Aline."
The through-line he drew is a long widening of access. "what we've got is the democratization of gold." Originally an investor had to buy a gold mining equity, a coin or a bar — "Bars are pretty expensive," and coins carry a high premium. Then came exchange-traded funds. "Now you can buy much less than an ounce, and just a fraction of an ounce."
He expects that to change where the marginal buyer lives. Demand, he said, will "come principally from the lower income countries." "And it will bring a lot more players into the gold market."
8. The Dollar Comes First
Asked for two or three things to watch through the rest of the year, Steel gave three.
The dollar, ahead of everything else. "I think you have to look at the dollar first and foremost. There's a traditional inverse relationship between the two." The exception is acute stress, when both rise: "Now, during periods of heightened crisis or risk, both the dollar and gold can move higher together, as it did during COVID or the global financial crisis." Otherwise, "So if the dollar remains strong, that's a headwind against gold."
Monetary policy second. If the market keeps shaving its expectation of a rate rise, back toward a neutral setting, he said that would be positive for gold.
Government debt third, and it is the one he frames as structural. "lurking in the background is fiscal profligacy." The rest of the claim he gave in one sentence: "Government debt, higher government debt, periods of accelerating government debt, which is across the Western world right now — the United States is not the only violator in this regard — has traditionally been good for gold for a whole range of historical reasons."
He named a political catalyst for the US fiscal question. "And yes, of course, issues around the fiscal outlook in the US where the deficits remain at very high levels could turn up in the US midterm elections."
Bonus Insights
Van Duyn's framing of the year was a tug of war between safe-haven demand and the headwind from higher bond yields, with gold still one of the standout assets of 2026 despite the swings.
Steel described the post-1991 decline as something he lived through rather than studied: "I remember it vividly."
The episode was recorded in HSBC's New York studio and produced by Tom Barton.
Steel's bottom line is that gold's record high and its slide below 4,000 came from the same place: a metal that prices geopolitical risk rather than inflation, bought for years by central banks working to multi-year plans and sold in a hurry by investors who needed the cash to protect everything else they own.
Products, Companies & Tools Mentioned
HSBC (Steel's employer, and the publisher of the special report he cited on gold passing US Treasuries in central bank reserves)
Banque de France, Deutsche Bundesbank and Banca d'Italia (The Western European central banks whose post-war gold stocks were sold down for about 20 years from the end of the Cold War)
European Central Bank (Named alongside HSBC's own report on gold surpassing the value of central banks' US Treasury holdings)
Gold exchange-traded funds (The step that opened gold to investors who had previously been left with mining equities, coins or bars)
Books & Resources Mentioned
Barry Eichengreen (The Berkeley economist Steel credits with the argument that sanctions reinvigorated central bank demand for gold)
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