Gold Rally Driven by Unlikely Buyers Amid Fiscal Anxiety

The gold market has seen significant gains over the past week, driven by a combination of factors. The latest development to contribute to this rally is Tether's increase in physical gold holdings, which expanded by roughly 14 tonnes in the second quarter of 2026, bringing its total reserves to 146 tonnes with a market value of about $18.8 billion.

This expansion underscores how far gold's appeal has stretched beyond its traditional institutional base. The metal climbed 2.1 percent on Friday to $4,671.20 per ounce, marking a three-month high and a third consecutive weekly gain.

Washington's announcement of plans to double the pace of long-dated bond buybacks has also had an impact on gold prices. This move aims to cap borrowing costs and ease the burden of servicing a national debt that has now blown past $40 trillion. The immediate effect was a decline in yields on government debt, a softening dollar, and increased bids for gold.

The World Gold Council reported 288.9 tonnes of central bank purchases in the second quarter of 2026, up 62 percent year over year. Poland led this charge with 51 tonnes, followed by China's central bank at 33 tonnes. Meanwhile, private buyers in China are also showing significant demand for gold.

Despite these factors driving the rally, there is some concern about the sustainability of the current price surge. The technical backdrop suggests the market may be overbought, with a 14-day relative strength index reading of 70.9 and a trading level 11 percent above its 50-day moving average.