Central Banks Flock to Gold Amid US-Iran Tensions and Market Volatility

Gold prices have surged by around $400, or 10%, since August, and are on track for their best month this century. This uptrend can be attributed to a combination of economic and political factors, including the Federal Reserve's 'dovish hold' on interest rates, weak employment data, and low inflation figures.

The US-Iran war has escalated, and hopes of a peace deal are evaporating. Additionally, concerns about the Fed's independence and Chair Kevin Warsh's credibility have grown, leading to market volatility. Yields on the 10-year Treasury note have climbed to their highest level in 18 months.

Central banks have been increasing their gold holdings, with net purchases totaling 289 tons in the second quarter, a record high for this period. China's central bank bought 20 metric tons of gold in July, lifting its total reserves to a record 2,377.5 tons.