Gold Recovery Hinges on Central Banks vs. Hawkish Fed

The gold market is experiencing a fragile recovery after plummeting by over a quarter from its January peak.

Central banks are quietly accumulating reserves at a record pace, purchasing a net 288.9 tonnes in the second quarter, roughly 62 percent above year-earlier levels, according to the World Gold Council's latest data.

This trend is expected to continue in the second half of the year, with Asian investors shouldering an increasing share of investment demand.

However, private investors are heading for the exits, driven by softer prices, elevated rate expectations, and a firmer dollar. Exchange-traded gold funds saw net outflows of around 45 tonnes over the same period.

The Federal Reserve's hawkish stance remains a primary headwind for the precious metals market, with Chair Kevin Warsh emphasizing the commitment to bringing inflation back to the two percent target.