Central Banks Fuel Gold Buying Spree Amid Dollar Strength

Gold prices have been experiencing a choppy consolidation, but beneath the surface, central banks are buying gold at an unprecedented rate. According to the World Gold Council's second-quarter demand trends report, global gold demand held steady at 1,269 tonnes year-over-year, with first-half demand reaching 2,522 tonnes, a 2% increase and $380 billion in value.

Central bank purchases totaled 289 tonnes in the quarter, up 62% from the same period last year and the strongest second-quarter figure ever recorded. This shift in central banks' reserve holdings is significant, as gold has now overtaken US Treasuries at 22% for the first time, accounting for 27% of worldwide currency reserves.

The dollar's rebound on Friday weighed on gold prices, knocking them off their intraday highs above $4,100. However, the weekly picture tells a more resilient story: gold still managed a 1.06% gain for the week and is up 1.35% monthly, its first monthly advance in five months.