Central Banks Fuel Gold Demand, Prices Hit One-Week High

Gold prices have closed out the week at $4,382.82 an ounce after experiencing a sharp reversal in sentiment. Initially, rising crude prices led to concerns about inflation and further rate hikes, causing gold prices to decline. However, softer energy costs later in the week eased those fears and revived expectations of falling real rates, giving bullion room to recover.

According to Reuters, since the Federal Reserve's meeting last Wednesday, gold has added 2.8%. The World Gold Council reports that net central bank purchases have increased by 62.4% from the same quarter a year earlier, reaching 288.9 tonnes in the second quarter of 2026.

Goldman Sachs estimates that monetary authorities have been buying around 91 tonnes a month, a pace that was just 17 tonnes monthly before 2022. The bank expects purchases to average 60 tonnes a month across 2026 and 2027. Additionally, 45% of central banks surveyed by the World Gold Council intend to add to their reserves over the next twelve months.

Physical repositioning also supports the trend, with the Dutch central bank moving 86 tonnes of gold from New York and Ottawa to London between March and August, increasing its share of holdings stored in the UK capital to 32.1%. Private investors have also been buying gold, with $18 billion flowing into physically backed gold ETFs worldwide in August, the second-highest monthly figure on record.

However, not all demand signals are positive, as Indian gold imports fell to $2.3 billion in August from $4.16 billion in July due to high prices curbing buying in key consumer markets. Goldman Sachs still maintains its year-end 2027 target of $5,400 an ounce, arguing that the broader uptrend remains intact even with a slower pace of gains.