Central Banks Hoard Gold Amid Fed Hawkishness

Gold's price has been caught in a tug-of-war between two opposing forces. On one hand, the Federal Reserve signaled tighter policy ahead, leading to a sell-off that gathered pace after Fed Chair Kevin Warsh's hawkish Jackson Hole appearance. On the other hand, central banks are hoarding gold at an unprecedented rate.

The price weakness masks a remarkably resilient structural picture. Central banks purchased a net 288.9 tonnes of gold in the second quarter, a 62 percent jump year-on-year and the strongest Q2 on record. Poland led the charge with 51 tonnes in the quarter, inching closer to its multi-year target of 700 tonnes in total reserves.

The National Bank of Poland has positioned itself as the world's most active central bank buyer this year, with net purchases of 82 tonnes since January. China's central bank recorded its largest quarterly purchase since late 2023 at 33 tonnes, marking the 21st consecutive month of accumulation. Uzbekistan and Kazakhstan also continued their buying streaks from the prior year.

Beijing has formally classified gold as a strategic mineral and a cornerstone of China's financial and industrial security in its 2025 action plan. This designation elevates the metal beyond mere portfolio diversification into the realm of national policy, with long-term implications for global demand.