Gold Rally Pauses Amid Fed Caution and Inflation Concerns

Gold's recent rally has entered a delicate pause near $4,600 an ounce, following a surge of roughly 14 percent this month alone. The precious metal's price is influenced by Washington's bond strategy and the Federal Reserve's caution on monetary policy.

The US Treasury's plan to double its buybacks of long-dated government bonds was seen as inflationary, briefly propelling bullion past $4,700, a three-month high. However, traders have turned their attention to Friday's speech by new Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.

A structural bid beneath the surface is driving gold prices upward. Central banks are accumulating gold at a record pace, with official-sector purchases reaching 289 tonnes in the second quarter, a 62 percent year-on-year jump.

The People's Bank of China continued its steady accumulation, adding 20 tonnes in July following 15 tonnes in June. A WGC survey of 76 central banks underscores the longevity of this trend: 74 percent expect the dollar's share of global reserves to decline within five years, and 45 percent plan to expand their own gold holdings over the next twelve months.

Morgan Stanley's Amy Gower raised her 2026 price target to $4,400 on August 21, a level already surpassed, while TD Securities reaffirmed its $5,350 target on August 25. However, GMO liquidated its entire position in gold miner Barrick Mining during the second quarter.