Gold prices have climbed by 10% since August, driven by declining rate expectations, geopolitical uncertainties, and a record-high influx of official-sector purchases, signalling a strategic shift amidst broader economic uncertainties.
Gold’s sharp rise is being driven by a familiar mix of falling rate expectations, geopolitical anxiety and a powerful new force: official-sector buying. Reuters said the metal has climbed by about $400, or 10%, since early August after spending weeks near $4,000 an ounce, putting it on track for one of its strongest monthly gains in more than two decades.
The move comes as markets reassess the outlook for US monetary policy after the Federal Reserve left rates unchanged, while softer jobs data and muted inflation have weakened the dollar and improved the case for bullion. At the same time, renewed tensions involving the United States and Iran, doubts over peace efforts and fresh concerns about the Fed’s independence have increased demand for assets seen as a store of value.
Bond-market pressure has added to the appeal. Yields on 10-year US Treasuries have climbed to an 18-month high, while returns on 30-year bonds and inflation-linked debt have also reached levels not seen for years. Reuters noted that central banks are meanwhile reducing some of their US government bond holdings kept at the New York Fed, a sign that official investors are still rethinking how much exposure they want to reserve assets tied to the dollar.
That shift has been especially visible in gold buying. The World Gold Council said central banks made net purchases of 289 tonnes in the second quarter, more than five times the previous three months and a record for the period. Deutsche Bank analysts estimated that official-sector demand reached $45 billion at average prices, while a June survey found 45% of central banks planned to add to gold holdings over the next 12 months. China has been a major buyer, with the People’s Bank of China adding about 20 metric tonnes in July alone and lifting its reported reserves to a record 2,377.5 tonnes, according to Reuters and Axios.
Even so, the case for gold is not absolute. The International Monetary Fund has warned that bullion does not protect against every shock and should be treated as a higher-risk reserve asset, not a simple liquidity substitute. But as confidence in traditional reserve assets softens, central banks appear increasingly willing to use gold as part of a broader strategy to diversify away from currency and geopolitical risk.
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