Gold Prices Rebound on Central Bank Demand and US Fiscal Risks

Gold prices have recovered by 8.4% from their CY26 low on September 22, following a 26% decline from its YTD peak in June amid the Middle East conflict and a sharp rise in US 10Y real yield.

Despite near-term headwinds, Elara Capital believes that structural factors such as rising US fiscal risks, declining safe-haven appeal of UST bonds, re-emergence of sanctions, and sustained retail and Central bank demand from China support a positive long-term outlook for gold.

The report highlights the role of persistent price-insensitive demand from Central banks and reserve diversification as key structural tailwinds. Central banks are buying gold as a strategic, non-sanctionable, zero-counterparty-risk reserve asset, with global purchases totaling around 130 tonnes YTD, compared to 160 tonnes in the same period last year.

The analysis shows that a record 45% of global central banks added to their gold reserves on a YoY basis as of Q2CY26, led by Poland, China, and Brazil among major economies. The US Federal debt recently crossed $40tn (~123% of GDP) and remains on an unsustainable path.

Elara Capital expects gold prices to trade in the range of $4,200-4,700 per troy ounce for the rest of CY26E, before rising to $5,000-5,200 per troy ounce by end-CY27E as central bank hawkish policy action softens.