Record Central Bank Buying Fuels Gold Rally Amid US Fiscal Experiment
The price of gold has reached a milestone in August, climbing 13% since the start of the month and propelling it towards its strongest August showing since 1999. The metal's latest rally is no longer a one-dimensional story, with two distinct engines driving its rise: official-sector buying at unprecedented scale and an increasingly contentious fiscal experiment in Washington.
Central banks have been aggressively purchasing gold, acquiring a record 288.9 tonnes of bullion in the second quarter, a 62% jump year-on-year. Poland topped the buyer list with 51 tonnes, while the People's Bank of China added 33 tonnes, its largest quarterly haul since the fourth quarter of 2023.
The buying spree shows no sign of abating, with 45% of central banks planning further purchases, according to a World Gold Council and YouGov survey. Meanwhile, exchange-traded funds have also joined the party, recording net inflows of 46.7 tonnes worth around $6.4 billion in the past week.
Across the Atlantic, the US Treasury is doubling the size of its bond buyback operations to a minimum of $4 billion per operation starting September 9. Market participants increasingly read the move as a veiled nod toward looser monetary conditions, prompting a defensive shift into precious metals.