Gold Price Hikes Amid Hawkish Fed and Record Central Bank Demand

The gold market is navigating a complex and contradictory period, influenced by both hawkish monetary policy and strong central bank demand. Despite a recent 5.6 percent decline in value over the past week, gold prices have gained nearly 1 percent since Tuesday's close, currently trading near $4,373 per ounce.

The Federal Reserve's signals of additional rate hikes, particularly after Fed Chair Kevin Warsh's statement at Jackson Hole on August 28, contributed to a significant drop in gold prices. Market participants now assign a roughly 64 percent probability to a September rate increase, down from the peak of 70 percent.

However, central banks are rewriting the playbook by increasing their gold purchases. In the second quarter of 2026, they acquired a record-breaking 288.9 tonnes of gold, with China spearheading this trend at an estimated 100 tonnes per month on a seasonally adjusted basis. The World Gold Council reports that 89 percent of respondents expect central bank gold holdings to continue growing.

Natixis analyst Bernard Dahdah has raised his year-end target for gold prices to $5,000 per ounce from $4,600, citing weak economic data and expectations of a December rate cut. Other market observers remain optimistic as long as the $3,950 support level holds.