Central banks are expected to buy less gold in 2026 than the record 863 tonnes purchased in 2025, but demand will still remain significantly higher than pre-2022 levels. The World Gold Council reports that central banks bought over 1,000 tonnes in three of the four years leading up to 2025, a sharp increase from the previous decade's average of 473 tonnes. Notable purchases include Poland's 82 tonnes in the first half of 2026 and China's 40 tonnes, its largest quarterly addition since 2023. However, reported figures can be unreliable, as seen in the first quarter of 2026 when unreported purchases were reclassified, adjusting the total by 187 tonnes.
Western investors play a different role in gold demand. Unlike central banks, their purchases are more sensitive to price and real yields. The ten-year real yield currently stands at 2.42%, just 47 basis points below its post-2003 high. Historically, gold has performed well after peaks in real yields, with median gains of 29% in the 12 months following such peaks. The World Gold Council identifies 2.5% as the level traditionally associated with a higher opportunity cost for holding gold, suggesting that a decline in real yields could trigger renewed Western ETF demand.
Despite higher prices, global gold ETFs received about $8 billion in the first half of 2026, even as North America recorded a $7.7 billion outflow. Gold holdings reached a record 4,176 tonnes in June, with Western ETF flows turning positive in July. Higher prices have impacted jewellery fabrication, which declined 12% in the second quarter, while consumption fell 17%. However, the value spent increased 22%, indicating that buyers are purchasing less gold at higher prices, though this decline has not offset demand elsewhere.
Gold is roughly flat on the year after giving back its war premium, supporting the view that real rates influence it more consistently than geopolitical headlines. The market structure is clear: central banks provide the floor, while Western ETF flows offer potential upside if real yields decline. Combined with the reduced reliability of bonds as an equity hedge, these forces support a strategic allocation to gold.