From March to July 2026, the real yield rose steadily, which should have created a "rate squeeze" on non-yielding assets as usual, but the gold market staged a countertrend: according to estimates from Morgan Stanley, based on the historical relationship between real yield and gold price during this period, gold prices should now be below $3,000; however, in reality, since the peak in August, it has only retreated about 10% and still remains slightly above $4,000, with nearly 30% in the "bubble range" above the theoretical level. In a report on October 26, Morgan Stanley attributed this premium to structural buying: central banks bought approximately 1,155 tons of gold annualized in the second quarter, and gold ETFs saw a net inflow of about $31 billion in the third quarter, setting a historical record. Based on this, they maintained a price target of $5,000, essentially saying that as long as official and ETF funds do not withdraw, interest rates cannot affect gold. However, just two days later, Yuxuan Tang from JPMorgan Private Bank gave a contrasting narrative: in an environment of thin liquidity and potentially rising interest rates, the Federal Reserve may continue to raise interest rates in December this year and in the first quarter of next year. The yield on 10-year U.S. Treasury bonds still has upward space, posing a downside risk to gold. This misalignment and divergence present a sharp signal for "digital gold" like Bitcoin and Ethereum: on one side, rising real yields and returns on risk-free dollar assets elevate the discount rate and opportunity cost for all risk assets; on the other side, gold, supported by central banks and ETFs, is enduring high yields to maintain its high position, making official reserves and conservative funds more willing to stay in gold rather than diverting into crypto assets. In other words, when interest rates decouple from gold prices and Wall Street begins to see cracks in the outlook for gold, the crypto market is being forced to reselect risk preferences between “pricing along with interest rates” and “betting on structural capital stories.”
Soaring Real Yields and Gold Pricing Gap
From March to July 2026, real yields rose significantly, which should have pressured all "no cash flow" assets' valuations—gold being the first and foremost. The classic textbook version is that rising real yields elevate the returns on holding cash and government bonds, pushing up the opportunity cost of holding non-yielding assets, leading gold prices to either actively decline or passively "lag" nominally behind yields. However, according to Morgan Stanley's calculations based on the relationship between yields and gold prices during this period, gold prices should theoretically be below $3,000 per ounce; in reality, even though it has fallen about 10% since the August peak, gold is still slightly above $4,000, about 28% higher than the theoretical level. The gap of nearly 30% between the yield model and market prices indicates that the "mainline factor" of interest rates has been forcibly diverted by the structural demand from central bank gold purchases and ETF inflows.
This same discounting logic applied to U.S. stocks and crypto assets does not afford them the same level of “moat” as gold. The upward movement of real yields and risk-free rates has raised the discount rates across the entire risk asset curve. High-duration assets—growth stocks, tech stocks, as well as high-volatility crypto assets like Bitcoin and Ethereum—historically tend to realign with interest rates through valuation compression and volatility amplification; they do not have central bank buying nor the large-scale passive allocation that gold ETFs provide as a buffer. When gold is "supported" by structural capital to levels 28% above models in a high-yield environment, the pressure from rising rates does not disappear; rather, it more heavily weighs on those risk assets lacking safe asset narratives and fully exposed to discount rates. This is the macro pricing reality that the crypto market must face currently.
Central Banks Buying Gold and ETFs Exploding: Who is Supporting Gold Prices
When real yields rise steeply, and the "reasonable gold price" indicated by models falls below $3,000 per ounce, the real reason holding the current price above $4,000 is two overlapping structural forces. The first is the "rigid buying" from official departments: in the second quarter of 2026, central banks purchased about 1,155 tons of gold annualized, continuously increasing their positions despite rising yields and opportunity costs associated with holding gold, treating it as a reserve asset and tool for hedging geopolitical risk, rather than trading it simply by discount models. The second is private funds through passive and semi-passive allocations in ETFs: in the third quarter of 2026, global gold ETFs saw net inflows of about $31 billion, setting a historical record, locking in large amounts of capital that might otherwise have moved into cash or other risk assets, into positions with inertia. In a report on October 26, Morgan Stanley pointed out that central bank gold purchases and ETF inflows are the core reasons why gold prices are above theoretical levels, creating a pricing gap of about 28%, and based on this, they maintained their price target of $5,000 per ounce.
A more critical dividing line is: official sectors recognize only gold among reserve assets; they do not view Bitcoin as "digital gold" eligible for foreign exchange reserves, while the private sector weighs between gold ETFs and crypto assets in the same "anti-inflation, anti-currency depreciation" basket. When central banks seize spot supply and ETFs absorb hundreds of billions in incremental funds, Bitcoin and Ethereum in the same basket become more "marginal" allocations—competing not only against the opportunity costs of rising real yields from U.S. Treasury bonds but also with gold, which is seen as a safe asset within the system for hedging budgets. The result is that gold prices are underpinned by central banks and ETFs, while the on-chain funds of "digital gold" are more exposed to fluctuations in interest rates and risk preferences; for multi-asset investors, the dynamics of official gold withdrawals and ETF inflows effectively diminish the weight of crypto assets in narratives of safety and hedging.
Morgan Stanley's $5,000 Target and JPMorgan's Correction
In the context of central banks and ETFs "buying gold," Morgan Stanley straightforwardly characterized this round of gold price "distortion" in their report on October 26 as a structural repricing: according to their calculations, if they solely relied on the historical relationship between real yields and gold prices from March to July 2026, gold should now fall below $3,000, rather than hovering above $4,000. The roughly 28% gap is attributed to the long-term allocations of official entities and ETFs. Central banks purchased about 1,155 tons in the second quarter, and gold ETFs saw net inflows of about $31 billion in the third quarter; in the eyes of Morgan Stanley, this is not a short-term mismatch but rather the new normal. Consequently, they chose to maintain the price target of $5,000 per ounce, locking gold in as a “core hedging base” in multi-asset portfolios, implicitly considering Bitcoin merely as a supplementary asset within this basket.
On the other hand, JPMorgan Private Bank drew a different extension line for the same curve. On October 28, Yuxuan Tang warned clients that liquidity remains thin, with the possibility that the Federal Reserve will continue to raise rates in December 2026 and in the first quarter of 2027, and that the yield on 10-year U.S. Treasury bonds still has room to rise. In his view, the U.S. Treasury sell-off raising yields is just a part of tightening financial conditions; the true interest rate hike cycle has not yet concluded, while persistently high energy prices add more fuel to the rise in yields. Under such a path, gold itself faces a risk of correction; not to mention Bitcoin and Ethereum, which are also categorized as "alternative/hedging assets." For institutional investors, the Morgan Stanley version of the world means leaning more risk budget towards gold without reducing the total scale of this basket, compressing crypto positions; the JPMorgan version, however, suggests the entire basket is being squeezed by rising interest rates and tightening liquidity, forcing gold and crypto to deleverage together, with high-volatility on-chain assets often becoming the priority for reducing positions.
U.S. Treasury Yields Rising and Energy Adding Fuel to the Fire
Aside from the divergence between Morgan Stanley and JPMorgan, the yield curve itself is pressuring the “alternative asset basket.” On October 28, 2026, Yuxuan Tang assessed that the Federal Reserve will not pivot quickly, but will likely raise rates once more in December 2026 and again in the first quarter of 2027, consequently pushing up the yield on 10-year U.S. Treasury bonds in the time that follows. This means that risk-free rates will be raised in steps, and the overall real return on yield curves will increase, providing a unified discount benchmark for all dollar-denominated assets. For institutions needing to allocate risk budgets among gold, Bitcoin, and Ethereum, this is not just a simple emotional fluctuation but rather a rewriting of the discount rate curve: every point of interest rate increase will more severely push down future cash flows and forward prices.
Ben Emons provided another perspective on this chain. He pointed out that the recent selling of U.S. Treasuries driving up yields is indeed helping to tighten financial conditions, but this market-driven rise in yields cannot replace the Fed's duty to further raise rates to combat inflation; conversely, even if long-end yields have risen significantly, as long as inflationary pressures persist, the policy rate side may continue to rise. He also emphasized that persistently high energy prices are one of the main drivers potentially leading U.S. Treasury yields to rise further, directly binding the rise in yields with real economic costs. For the crypto market, the higher risk-free rate elevates the overall returns on dollar assets, synchronously raising the opportunity cost of holding Bitcoin, Ethereum, or dollar-pegged tokens; the "water level" of dollar liquidity is tilted toward traditional assets, with rising financing costs and an upward shift in discount rates weakening the appeal of crypto assets as high-beta instruments. In this combination of rising yields and energy costs, BTC, ETH, and related on-chain dollar tools find it difficult to enjoy the past "free liquidity" benefits, with higher costs and tighter financial conditions becoming their new pricing backdrop.
The Resilience of Gold and Three Signals for Crypto Funds
Despite a significant rise in real yields, gold remains just above $4,000 per ounce, approximately 28% higher than the "theoretical price" determined by historical relationships. The first layer of signal is that the entire safe-haven asset sector may be overextending future low interest rates and high inflation expectations; once yields continue to rise along the path described by Yuxuan Tang, pushing 10-year Treasury yields to a new plateau, it's not just gold prices that are overestimated, all assets perceived as "hedging against currency depreciation" may face synchronous repricing, and the upward pressure on the discount rates of crypto assets will not be absent. The second layer of signal comes from the structure of funds: central banks bought about 1,155 tons of gold annualized in the second quarter, and global gold ETFs saw net inflows of about $31 billion in the third quarter, coupled with Morgan Stanley's recommendation of a $5,000 price target and JPMorgan's caution about the downside risk in gold, which creates a sharp contrast. This indicates that official reserves and institutional funds prefer regulated and accountable physical gold within the "safe asset pool," while Bitcoin, viewed as "digital gold," remains on the balance sheets of private and speculative capital, limiting its space to act as a core safe-haven anchor during this rising interest rate cycle. The third layer of signal pertains to the monitoring framework at the trading level: in an environment where real yields, the Fed's rate hike path, and high energy prices collectively dominate global discount rates, it is essential to continuously compare the price interactions between gold and BTC, ETH, observing net inflows and outflows of on-chain dollar funds as well as changes in leverage structures. Only when the correlation between gold and crypto assets, along with changes in on-chain fund risk preferences, experience synchronized turning points around these macro variables will it signal that the "resilience of gold" behind this scenario, along with the pressure on crypto funds, truly begins to be repriced.
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