- Spot gold rose 0.6% to $4,063.35/oz even as Brent crude fell nearly 6% after President Trump delayed a new strike on Iran, showing gold demand held despite lower geopolitical risk.
- Central banks bought 289 tonnes of gold in Q2, up 62% year over year, led by Poland and China even as Western gold ETFs recorded outflows.
- North American gold ETFs lost 61 tonnes in H1, their weakest first half since 2013, as higher real yields increased gold’s opportunity cost even while central banks kept adding gold.
- A record 45% of surveyed central banks plan to increase gold reserves over the next 12 months, showing official buyers continue adding gold even as Western ETF demand weakens.
- The US 10-year TIPS yield is nearing 2.5%, a level linked to weaker North American gold ETF demand, but continued central bank buying could offset weaker Western investment demand.
Gold Holds Above $4,000 as Central Bank Buying Offsets Short-Term Macro Volatility
Spot gold rose 0.6% to $4,063.35/oz as Brent crude fell nearly 6% after President Trump delayed a new strike on Iran. The dollar index held near 99.79, down more than 1.5% over the previous week after Japan and the US coordinated yen-buying intervention. Short-term price moves masked continued central bank buying as Western ETF demand weakened.
Gold demand held at 1,269 tonnes in Q2 even as the LBMA gold price averaged $4,506.29/oz, up 37% from a year earlier, showing higher prices did not reduce physical demand. Stable demand despite record prices supports the case that official-sector buying continues to absorb market weakness.
Higher Real Yields Weaken Gold ETF Demand While Central Banks Continue Buying
Three Fed officials said inflation could remain above the 2% target without another rate hike. Markets are pricing one Fed rate hike in October. ING said the Fed is unlikely to skip a September rate decision unless economic data weakens, keeping rate-sensitive capital cautious.
While higher rates have reduced Western ETF demand, central banks continue expanding long-term gold reserves, widening the gap between short-term positioning and official-sector buying.
Record 45% of Central Banks Plan to Increase Gold Reserves as Poland Targets 700 Tonnes
Central banks build gold reserves through multi-year purchasing programs, allowing them to keep buying during periods of market weakness. Poland bought 51 tonnes in Q2, lifting reserves to 632 tonnes and H1 purchases to 82 tonnes toward its 700-tonne target. The People’s Bank of China bought 33 tonnes in Q2, its largest quarterly purchase since Q4 2023, raising reported reserves to 2,346 tonnes. A World Gold Council survey found 89% of central banks expect global gold reserves to grow over the next year, reinforcing continued official-sector demand despite weaker Western ETF flows.
ING said the Fed is unlikely to delay another rate hike unless economic data weakens, but central banks continue buying based on long-term reserve objectives rather than short-term rate expectations. In the base case, markets continue pricing no change at the October Fed meeting, keeping gold near current levels through Q3. In the bull case, central banks maintain their 289-tonne quarterly buying pace while more reserve buyers follow through, allowing spot gold to retest the Q1 record average of $4,872.9/oz within two to three quarters. This week’s ADP employment report and nonfarm payrolls will test whether markets continue pricing an October Fed rate hike.
North American Gold ETFs Lost 61 Tonnes in H1 Despite Continued Official Gold Buying
North American gold ETFs lost 45 tonnes in Q2 and 61 tonnes in H1, their weakest first half since 2013, even as the LBMA gold price averaged 37% above a year earlier. Higher real yields drove ETF outflows, while central banks bought 289 tonnes of gold in Q2 through long-term reserve programs.
Standard Chartered expects seasonal buying to support gold prices, and the World Gold Council expects investment demand to remain constructive through the second half of 2026. The gap between official-sector buying and Western ETF selling shows long-term demand remains intact despite weaker short-term sentiment.
Watch the 2.5% TIPS Yield to See Whether Gold’s Official Demand Holds
Gold remains supported by 289 tonnes of central bank buying in Q2 even as Western ETF demand weakens, while the US 10-year TIPS yield stays below the 2.5% opportunity-cost threshold. A TIPS yield below 2.5% continues to support physical gold demand and gold ETF prices.
An October Fed rate hike or a TIPS yield above 2.5% could extend North American ETF outflows beyond H1’s 61 tonnes, but continued central bank buying would provide ongoing support for the market. This week’s ADP employment report, weekly jobless claims, nonfarm payrolls, and the US 10-year TIPS yield will determine whether short-term macro conditions begin to outweigh continued official-sector demand.