Gold Recovery Hinges on Dollar, Fed, and Central Banks

The gold market is experiencing a fragile recovery, trading around the psychologically significant $4,100 mark. The precious metal slipped 1.23 percent on Friday to $4,111.60 per troy ounce but remains on track for its first monthly gain in five months.

A suspected intervention by Japanese authorities has bolstered the yen and put the dollar on the back foot, making gold cheaper for buyers holding other currencies. However, the dollar has since firmed again, prompting Friday's pullback.

The Federal Reserve's next move is still an open question, with three regional presidents dissenting in favor of a hike at the last meeting. Markets have responded by pricing in a 63 percent probability of a September rate increase, which typically weighs on gold.

Despite this, central banks are accumulating gold at an unprecedented pace. The World Gold Council reports that net purchases surged 62 percent in the second quarter to 288.9 tonnes. Poland has emerged as the standout buyer, acquiring 51 tonnes and pushing its cumulative purchases since 2022 past the 100-tonne mark.

China's demand for gold is also on the rise, with imports increasing by 89.1 percent year-on-year in the first half of 2026. India is contributing to physical demand through informal channels due to higher import duties.