Tapping into a $2.1 trillion total addressable market

June’s Treasury International Capital data landed August 17 with a number that deserves more attention than it received: foreign holdings of U.S. Treasuries fell $72.1 billion in a single month, bringing the total to $9.299 trillion. That is the third decline in four months, retreating from February’s record high.

The country-level breakdown is where the signal sits. Japan, still the largest non-U.S. holder, saw its holdings fall 2.3% to $1.1167 trillion in June from $1.1431 trillion in May. China’s holdings fell more sharply, dropping to $633.4 billion from $659.3 billion. That is the lowest level since September 2008, when holdings stood at $618.2 billion.

Now ask where the money went. The answer is not entirely into other dollar assets.

Central bank gold demand picked up sharply in the second quarter of 2026, reaching 289 tonnes, a record high for a second quarter and a large jump from a revised 57 tonnes in Q1. Poland’s central bank was the biggest buyer at 51 tonnes, followed by China’s, which purchased 33 tonnes, its largest quarterly addition since late 2023. The PBOC did not wait for gold to stabilize before accelerating. The June purchase of about 15 tonnes was the largest monthly purchase since October 2023. Sovereign buyers treated the dip as a discount.

The arithmetic of the reallocation is instructive. China reduced its Treasury position by roughly $25.9 billion in June alone. Its June gold purchase, at roughly 15 tonnes and an average price near $4,083, cost approximately $2 billion. The gold line accounts for a fraction of the Treasury reduction, which is the point. Gold and Treasuries form only part of a much larger portfolio spanning deposits, securities, and multiple currencies, and market-price changes can alter reported holdings without creating an equal cash flow into another asset. What the data does confirm is the direction of travel: dollars out, bullion in, over time.

74% of reserve managers expect the dollar’s share of global reserves to fall over the next five years. That figure is the mechanism: central banks are systematically rotating out of dollar-denominated assets and into gold.

The Term Premium Is the Mechanism That Connects Both Trades

For gold investors, the more consequential variable is what the Treasury selloff is doing to the long end of the yield curve. The 30-year Treasury yield recently hit about 5.3%, the highest level since 2007. Barclays strategists have tied the rise less to inflation and more to the U.S. budget deficit, high issuance levels, and a higher term premium, the extra yield investors are demanding to hold government debt. When the largest foreign creditors pull back, someone else must absorb supply, and at a price. That price is a higher term premium.

A rising term premium is not automatically bullish for gold. Real yields are what matter, and gold is trading the balance of those two forces. Concerns over U.S. debt and fiscal sustainability have been colliding with higher long-end yields. The Treasury’s own response reinforced the anxiety: on August 19, the Treasury announced it would at least double liquidity-support buybacks for longer-dated securities, raising the maximum from $2 billion to at least $4 billion per operation.

What Jackson Hole Changes

The Jackson Hole Economic Policy Symposium runs August 27 to 29. Fed Chair Kevin Warsh is set to deliver the chair keynote on Friday, August 28.

If Warsh signals tolerance for the long-end backup, treating it as a fiscal problem rather than a monetary one, real yields could stay elevated and cap gold’s near-term upside. If he leans toward accommodation, the debasement trade has another leg. Neither outcome changes the structural fact that gold has been gaining share in official reserves as central banks diversify.

Risks to Monitor

The bullish case for gold through this lens is not guaranteed. CFR’s Brad Setser has argued that while there has been an increased PBOC bid for gold, that bid has been, judging from China’s disclosed data, marginal. Undisclosed purchases through London custody make the true figure opaque. A sharp reversal in the dollar, or a credible hawkish pivot from Warsh on Friday, would push real yields higher and pressure gold regardless of sovereign buying pace.

What investors should weigh is this: the $72 billion foreign exit from Treasuries in June is not a single-month anomaly. It is the third decline in four months, occurring in a market where U.S. debt has crossed $40 trillion, long-dated yields have approached two-decade highs, and inflation remains above target. Central banks are not timing a trade. They are completing a structural rebalancing that has been underway since 2022. The Treasury market and the gold market are pricing the same underlying reality from opposite sides of the ledger.