Central Bank Gold Buying Surges, but Hawkish Fed Minutes Keep Bullion in Check
Published on 07/10/2026 at 16:46 | Redaktion boerse-global.de
Gold is caught in a tug-of-war between voracious central bank demand and the growing threat of higher US interest rates. While Poland and China continue to load up on bullion at a rapid clip, the metal's spot price remains under pressure, slipping 0.85% to $4,097.10 per troy ounce on the day and posting a weekly loss of 2.15%. Year-to-date, gold is down 5.64%, a stark contrast to the buying frenzy among monetary authorities.
Poland’s central bank has emerged as one of the most aggressive buyers. Governor Adam Glapi?ski has been using price dips to accumulate reserves, adding another 18.5 tonnes in the past month alone. That brings Warsaw’s total holdings to 632.4 tonnes, with a stated target of 700 tonnes. The unrealized book profit on those reserves now runs into billions of dollars. China’s central bank isn’t far behind, buying 14.93 tonnes in June — the 20th consecutive month of purchases. Its reserves stood at 75.44 million fine ounces at the end of last month.
Yet central bank buying alone has not been enough to lift gold out of its recent doldrums. The main headwind comes from the Federal Reserve. The latest Fed minutes revealed that nine of the 18 committee members see a case for raising rates further before year-end, and several voiced concern that inflation remains stubbornly high. Markets now price in a 63% probability of a rate hike at the September meeting. New York Fed President John Williams called inflation “still far too high,” while reaffirming the central bank’s 2% target. Higher interest rates increase the opportunity cost of holding non-yielding gold, sapping investor appetite.
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Geopolitical tensions in the Middle East have provided some support, but the effect is muted. US forces struck Iranian targets over two days in retaliation for attacks on shipping in the Strait of Hormuz. Iran responded with strikes on US bases, and the confrontation escalated further with additional US raids and counterstrikes on Kuwait and Bahrain. President Donald Trump said Iran had sought a deal, but the mixed signals have kept gold volatile, with prices briefly topping $4,100 before giving up gains. Analysts at OCBC Bank note that geopolitical risk usually bolsters gold, but this time the impact is filtered through higher oil prices, which feed into inflation and reinforce the case for tighter Fed policy.
The shifting outlook for US rates has prompted several banks to revise their gold price forecasts. HSBC cut its 2026 projection from $4,864 to $4,560, and lowered its 2027 estimate to $4,925 from $5,000. Bank of America followed suit, trimming its target to $4,360. The common thread: expectations that the Fed will not cut rates in 2026 as previously assumed. Longer-term views remain more optimistic. Goldman Sachs sees gold at $4,900 by year-end, and UBS believes $6,200 is achievable over the long haul.
Technical indicators reflect the bearish near-term sentiment. Gold is trading 6.13% below its 50-day moving average of $4,364.87 and 9.73% below the 200-day line. The relative strength index of 42.1 is neutral but leans toward the weak side. At $4,097, the metal is 27.19% off its 52-week high of $5,626.80 hit in January, yet only 5.02% above the 52-week low of $3,901.30.
Structural demand from central banks continues to provide a floor. Beyond China and Poland, Hong Kong launched a central clearing system for gold this week and revived gold futures trading, aiming to establish itself as a regional bullion hub. Such moves underscore the long-term bull case even as short-term price action remains hostage to the next Fed decision and the trajectory of US-Iran relations. For now, these two opposing forces are keeping gold in a tight, choppy range, with no clear breakout in sight.
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