Gold’s Two-Track Market: Central Bank Hoarding at Record Levels Amid a 14% Quarterly Collapse

Gold’s worst quarterly performance on record — a 14% rout that dragged prices below $4,000 for the first time since November — is being met with a counterintuitive surge in physical buying. The World Gold Council estimates that central banks quietly added 244 tonnes to their reserves in the first quarter, more than fifteen times the officially reported figure. Yet that voracious institutional appetite has done little to stem the tide of macro-driven selling.

The divergence is stark. Official disclosures put net central bank purchases at just 16 tonnes for Q1, with Turkey alone offloading significant stockpiles in March. But data triangulated from London bullion flows and Swiss refinery shipments tells a different story. The World Gold Council believes actual buying reached 244 tonnes, a sharp increase from the previous quarter, driven overwhelmingly by China. Chinese net imports surged to 317 tonnes early in the year, while the People’s Bank stepped up its monthly purchases — though the official tally lags far behind.

What is overwhelming those buying flows is a twin shock from geopolitics and monetary policy. Talks between the US and Iran opened in Doha on Tuesday, mediated by Oman and Qatar, aimed at stabilising shipping through the Strait of Hormuz. President Trump first outlined a framework agreement on his Truth Social platform on 24 June, describing toll-free navigation. With face-to-face negotiations now under way, the geopolitical risk premium that had propped up bullion in preceding months is evaporating.

Should investors sell immediately? Or is it worth buying Gold?

At the same time, the Federal Reserve under chair Kevin Warsh has reinforced its hawkish stance. The core PCE price index — the Fed’s preferred inflation gauge — stood at 4.1% in May, while headline consumer price inflation remained at 4.2%. Markets now assign a 63% probability to a rate increase in September, with three full hikes priced into the curve. Fed officials have pushed any expectation of easing into 2027: Goldman Sachs recently cut its end-2026 gold target to $4,900, stripping out all rate cuts from its forecasts and pencilling the first loosening only for June or December next year.

The rate shock has been brutal for zero-yield gold. Surging Treasury yields and a strengthening dollar are raising opportunity costs, and the metal’s plunge accelerated after a blowout US jobs report in early June triggered a single-day sell-off of 3.7%. Tuesday’s drop below the $4,000 psychological barrier triggered a cascade of stop-loss orders, pushing the spot price as low as $3,943 — well beneath its 200-day moving average of around $4,340.

Technical analysts now eye the next support level at $3,879. Whether that holds depends heavily on the data calendar. The ADP employment report is due Wednesday, followed by the official non-farm payrolls on Thursday. A second consecutive robust reading would embolden the hawks and could push gold toward that threshold. A separate manufacturing PMI release later in the week will also influence expectations.

Not everyone is bearish. J.P. Morgan maintains a year-end target of $6,000, arguing that the physical-demand floor is underestimated and that macro headwinds will eventually fade. For now, however, the price action is dictated by a simple equation: peace talks remove fear, and rate hikes remove appeal — leaving gold caught in a tug-of-war where even 244 tonnes of quiet central bank buying cannot tip the balance.

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