Gold Market in Flux: Central Banks Fuel Buying Spree Amid Geopolitical Volatility

The gold market is experiencing a contradictory situation, with prices seemingly calm at around $4,090 per ounce despite a complex geopolitical landscape.

A planned US strike on Iran was called off, and negotiations were announced for Monday afternoon, sending oil prices plummeting. However, the easing of tensions had little impact on gold, which slipped 0.2% to $4,090.30 due in part to a coordinated US-Japanese intervention supporting the yen, making the dollar weaker and bullion cheaper for overseas buyers.

The real story behind the gold market, however, lies with central banks, which significantly increased their purchases of the metal in the second quarter. Total global demand held steady at 1,268.9 tonnes year-on-year, but the composition shifted dramatically. Central banks ramped up purchases to 288.9 tonnes, a 62.4% jump from a year earlier and the strongest quarterly haul since the fourth quarter of 2024.

The World Gold Council's second-quarter demand report reveals that Poland led the buyer list with 51 tonnes in the quarter, while Russia stood out on the sell side, offloading 22 tonnes. Standard Chartered analyst Suki Cooper sees a clear pattern in the official-sector behavior: price dips are now being deliberately used as buying opportunities.

The appetite for bullion extends well beyond traditional central banks, with Tether, the stablecoin issuer, adding 14 tonnes of gold in the second quarter and representing about 10% of the company's $187.8 billion in reserves.