Gold's Floor Is Official: Central Banks Buy More Than They Admit

A firmer dollar is doing the heavy lifting in gold trading today, with investors also holding fire ahead of fresh signals on the U.S. rate path. The currency and rate story dominates the tape even as seasonal demand in India picks up. For investors the picture is mixed: support from the physical market is running into a difficult monetary backdrop.

The most recent rebound is not yet a clear counter-signal. Gold settled yesterday at USD 4,017.07 per troy ounce, adding 0.5% over the session. Today's pressure from the stronger dollar shows that this gain should not be read as an easing of conditions.

Reuters reported on Friday that rising oil prices were stoking inflation worries and expectations of U.S. rates staying high for longer, with gold posting its steepest weekly decline since June. The rate outlook was already a major drag before today's session opened. The Federal Reserve's two-day meeting ends on 28 October with the rate decision, followed on 29 October by U.S. PCE data. Both dates sit at the center of the search for clues on the policy path — and it is not just the decision itself that matters, but the expectations for future policy that emerge from it.

India's Discount Collapses

On the demand side the picture is friendlier. The World Gold Council reported on 20 October that seasonal demand in India is picking up ahead of the festival and wedding season, with lower prices supporting jewellery demand. The price discounts in the Indian market have also shrunk: according to a report published Friday, the average discount narrowed from USD 66 per ounce in September to USD 8 per ounce as of 16 October. That points to a revival of local business rather than any general shortage — the World Gold Council also flagged ample supply. Indian demand is therefore a support, not a counterweight to the dollar and rate drag.

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Official Reserves Tell a Messier Story

State gold holdings are moving in opposite directions. Russia's gold reserves fell by 6.2 tonnes in September, according to media reports yesterday, and are down roughly 62 tonnes since the start of the year. Poland, by contrast, is continuing to build its reserves and is closing in on its target. Such opposing moves explain why individual sales do not automatically signal that central banks are turning their backs on the metal.

Goldman Sachs reckons official buying is in fact stronger than the headline numbers suggest. Its estimate, based on trade and capital-flow data, sits above the net purchases reported by the World Gold Council — a sign, in the bank's view, of demand that official disclosures do not fully capture. Asian countries were the largest identifiable buyers, with estimated purchases of 25 tonnes in August against 20 tonnes officially reported. The gap underlines the estimate's character: it is not a fully confirmed inventory count.

Separately, the storage of existing holdings is shifting, with a relocation spanning six months. That distinction matters for the demand balance. Moving gold between storage locations does not increase reserves and must not be counted as an additional purchase; nor do shifts between the vaults of different custodians, on their own, prove new demand.

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Oversold, Not Yet Reborn

Central bank buying did not prevent the recent slide. Higher oil prices and fears of further rate hikes weighed on the metal, compounded — according to Bloomberg — by selling to cover losses from the selloff in technology stocks. BCA Research strategist Roukaya Ibrahim considers gold technically oversold, yet expects a sideways move rather than a sharp recovery in the near term. Persistent inflation and a U.S. dollar likely to stay strong through year-end cap the upside in her view.

Further out, central bank purchases and private demand could carry more weight again, for instance if worries about U.S. finances grow. Ibrahim sees a more favourable environment possibly emerging in early 2027. Official buying is thus a structural argument for gold — but no reliable signal of an imminent turn in price.

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