Central banks are stepping up their gold purchases at a historic clip, with Poland adding 82 tonnes in the first half of 2026 and China boosting reserves for the twentieth consecutive month. Yet the spot price has only just clawed its way back above $4,000 an ounce after a sharp sell-off triggered by tensions in the Strait of Hormuz. The disconnect between institutional demand and market pricing laid bare a tug-of-war between long-term reserve diversification and short-term interest-rate anxiety.
Gold rose 1.99% on Tuesday to settle at $4,088.20 per troy ounce, recovering from a low of $4,008.30 the previous session. The rebound came as traders reassessed the fallout from an almost complete blockade of the Strait of Hormuz, where escalating US-Iran tensions have driven oil prices sharply higher. While such geopolitical shocks would normally boost gold’s safe-haven appeal, this time the surge in energy costs has stoked fresh inflation fears, reinforcing expectations that the Federal Reserve will keep rates elevated for longer.
That dynamic explains why gold’s crisis premium has failed to materialise. Higher interest rates raise the opportunity cost of holding non-yielding bullion, and the market is now betting that the Fed will not ease policy soon. The resulting headwind has left the metal more than 5% below its 50-day moving average of $4,345.41 and nearly 10% below the 200-day average. The 52-week high of $5,626.80 from the end of January is now 27.34% away, while the 52-week low touched in late October 2025 stands just 4.79% below current levels.
Technically, the recovery lacks conviction. The Relative Strength Index has climbed to 43.5 after briefly dipping into oversold territory earlier in the week, signalling that selling pressure has eased but momentum remains tepid. Annualised volatility remains elevated at 28.72%, underscoring the market’s skittishness.
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ETF investors remain cautious. Outflows from the largest gold-backed fund have slowed compared with the prior week, but capital is still being withdrawn. The combination of Middle East uncertainty, crude price swings and an unclear rate outlook is keeping institutional money on the sidelines.
Central banks, by contrast, are leaning into the weakness. Poland’s National Bank president Adam Glapiński confirmed purchases of 82 tonnes in the first six months of 2026, lifting the country’s total reserves to 632.4 tonnes. The bank deliberately used the price dip to buy at cheaper levels. China added 15 tonnes of gold to its reserves in June, the largest monthly increase since October 2023, extending a buying streak that has now run for twenty months.
The buying spree looks set to continue. A World Gold Council survey conducted in June found that 45% of central banks plan to increase their gold holdings over the next twelve months – a record high. Some 89% of respondents expect global central bank reserves of gold to rise overall, with three-quarters predicting a long-term decline in the US dollar’s share of reserves. Over the past four years, central banks have averaged roughly 1,000 tonnes of annual purchases, double the pace of the previous decade.
The immediate direction of gold now depends on two factors: next week’s US inflation data, which will shape rate expectations, and the evolution of the standoff in the Persian Gulf. If oil prices continue to climb, the rate-hike fear trade could keep gold under pressure despite unprecedented official-sector demand. If tensions ease, the metal may recover enough to attract the very institutions that are already buying at current levels.
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