Gold's Price Drop Masks Central Bank Buying Spree
The price of gold has been volatile in recent days, dropping 4.9% last week following hawkish remarks from Federal Reserve Chair Kevin Warsh.
The comments sent gold plummeting as traders repriced the probability of a September rate hike to around 70%, up from just 36% beforehand.
Despite the sell-off, central banks have continued to accumulate gold at an unprecedented pace. According to the World Gold Council, they purchased a net 288.9 tonnes in the second quarter, a 62% jump year-on-year and the strongest figure ever recorded for that period.
China is leading the charge, adding 20 tonnes to its reserves in July and bringing this year's purchases to 60 tonnes. Goldman Sachs' nowcast model suggests even faster momentum, with Chinese buying accelerating to roughly 100 tonnes per month on a seasonally adjusted basis.