Central Banks Buy Record Gold Amid ETF Outflows
The World Gold Council (WGC) reported that the second quarter of 2026 saw the largest quarterly drop in gold prices in a decade, but also witnessed the strongest buying activity in central bank data. The WGC's Gold Demand Trends report shows that global gold market witnessed a sharp decline in the second quarter.
The conflict in Iran has created a global energy crisis, triggered inflation concerns, and forced central banks to adopt more hawkish monetary policy stances, negatively impacting gold prices. Specifically, expectations of rising US interest rates have pushed bond yields higher, increasing the opportunity cost of holding a non-interest-bearing asset like gold.
Investment demand (excluding the OTC market) fell sharply to 262 tonnes in Q2 2026 as physical gold ETFs recorded net outflows of 45 tonnes after attracting strong inflows earlier in the year. Selling pressure was concentrated in June as investors sold off due to falling gold prices, rising real yields, a stronger US dollar, and market expectations that the Federal Reserve (Fed) would raise interest rates later in the year.