Gold Defies Hawkish Fed, Central Banks Continue Buying

The third quarter of 2026 was a mixed bag for gold. Despite the Federal Reserve hiking interest rates in a hawkish move, oil prices remaining high due to the US-Iran conflict, and bond yields breaking out, gold still held its ground.

Gold had bounced back from its 14% drop in Q2, rising by 6.4% on the quarter as of September 25th. However, it was down 4% on the month at that time, indicating weakening momentum heading into Q4.

The biggest headwind for gold in Q4 is policy tightening from major central banks, including the Fed. The FOMC's September rate hike sent the dollar surging higher against most major currencies, making it more expensive to hold gold priced in US dollars.

Despite these challenges, central bank buying is likely to remain strong in Q4, which should keep gold supported. Central banks have been accumulating gold at a rapid pace, with China and Poland leading the charge. In fact, the People's Bank of China has been making double-digit monthly purchases since May 2026.

One potential source of support for gold in Q4 could be a weaker US dollar, which could happen if investors lose faith in the Fed's ability to combat inflation or yields continue to rise.