Sentiment toward gold has turned more constructive over the past month as expectations for imminent U.S. interest-rate increases have faded. A weaker-than-expected July payrolls report and downward revisions to prior months reduced concerns over aggressive monetary tightening. U.S. gross domestic product growth also slowed to a 1.5% annualized pace in the second quarter, down from 2.1% in the first quarter. At its July meeting, the Federal Open Market Committee held its policy rate steady, though three members dissented in favor of a hike. Markets have since pared near-term tightening expectations, with a rate increase no longer fully priced before early 2027.
Geopolitical risks remain a two-sided influence on gold. A brief ceasefire between the U.S. and Iran collapsed in early July, renewing energy-supply concerns and briefly pushing Brent crude above $100 per barrel. Subsequent de-escalation efforts eased pressure, but attacks on shipping through the Strait of Hormuz have since driven Brent back to around $87 per barrel as of August 14. While heightened uncertainty can bolster safe-haven demand, a sustained energy-price shock could reignite inflation expectations and expectations for tighter monetary policy.
Investor sentiment has also improved, with renewed inflows into global gold exchange-traded products (ETPs). Between July 20 and August 13, ETP holdings rose by 1.3 million ounces, reversing most of the prior month’s outflows. The World Gold Council noted the pickup in demand was broad-based, led by Europe. Holdings remain below the 100-million-ounce mark last seen in March, at roughly 97 million ounces as of August 14.
Central-bank demand has shown signs of stabilization after a sharp revision to first-quarter estimates. The World Gold Council reduced its estimate of Q1 2026 purchases from 244 tonnes to 57 tonnes, indicating weaker-than-expected demand at elevated prices. Official data showed a rebound to 289 tonnes in Q2, the strongest second quarter since 2010 and the strongest quarter since Q4 2024. For the first half of 2026, central-bank purchases totaled the lowest level since 2022, though the scale of the Q1 revision warrants caution in interpreting the quarterly pattern.
China’s central bank continued to expand its gold reserves, reporting a 20-tonne increase in July following a 15-tonne rise in June. The People’s Bank of China has added nearly 60 tonnes to its reserves in the first seven months of the year, the strongest pace since 2023. Poland’s central bank remained the largest reported buyer in the first half, adding 82 tonnes to reach 632 tonnes by the end of June, nearing its 700-tonne target.
Dollar weakness since late July has provided additional support for gold. A coordinated intervention by Japanese authorities to stabilize the yen on July 30 contributed to broader U.S. dollar weakness. The U.S. Treasury instructed the New York Fed to sell euros and buy yen, limiting direct pressure on the dollar index. The combination of softer rate expectations, renewed ETP inflows, and a weaker dollar has improved the near-term backdrop for gold. Further declines in bond yields, additional dollar softness, or sustained improvement in investor sentiment could translate into stronger price performance, though risks from the Middle East remain a key variable.
