Gold Price Slumps Amid Fed Hawkishness, but Physical Demand Remains Strong

The gold market is experiencing a paradoxical situation where the short-term price action and long-term accumulation are at odds. On one hand, a hawkish turn from the Federal Reserve sent bullion plummeting by 3.2 percent to $4,454.60 an ounce on Friday.

However, beneath the surface, wealthy investors are accumulating physical metal at an unprecedented rate, causing vault space to become scarce. Sharps Pixley is scouting for new premises, Swiss Gold Safe is expanding six facilities simultaneously, and refiner MKS Pamp is carving out dedicated vault capacity for clients holding bars worth at least $50 million.

The demand picture remains strong, with a HSBC survey showing 52 percent of affluent investors intend to increase their gold allocations in 2026. The Bank of Singapore reports that client holdings of physical gold have grown by 40 percent since the end of 2025. UBS notes that gold's share in the portfolios of 307 family offices has climbed from 2 percent to 3 percent.

The World Gold Council's first-half figures underscore the scale, with global investment in bars and coins rising by 21 percent to 784 tonnes. Turkey alone posted a record surge of 29 percent to 26.1 tonnes in the first quarter.