Precious metals prices are facing headwinds this week but this doesn’t necessarily spell the end of gold’s golden run.
Central bank buying has been a mainstay of demand recently but will it continue?
Central banks bought 244 tonnes of gold on a net basis in the first quarter of 2026, despite sizeable net sales of 30t in March.
Central banks then resumed net gold purchases in April, buying 19t, according to World Gold Council data out earlier this month.
Poland remained the top buyer in April with 14t.
China intensified its pace of purchases, with its 8t net purchase the highest since December 2024, extending its current buying run to 18 consecutive months.
Meanwhile Russia continued its selling streak with net sales of 6t in April, taking its year-to-date sales to 22t, the WGC said.
JP Morgan Global Research out this week said trade concerns, geopolitical crises and central bank buying, and selling, had contributed to gold’s volatile spot price.
It said China appeared to be systematically building gold reserves as part of a long-term project to establish the renminbi as a credible reserve currency alternative.
The bank expects gold will average US$6,000/oz in the final quarter of 2026, about $1,800/oz above the current spot price but 5% lower than its February forecast.
JP Morgan’s head of base and precious metals Greg Shearer said investor interest in gold had declined amid the prospect of the Fed responding to energy-driven inflation with rate hikes.
But he said while the geopolitical conflict involving Iran, Israel and the US might be a headwind, the way it had unfolded reinforced many of the themes driving demand diversification into gold.
A detailed Sprott Precious Metals Report out this week said factors supporting gold included central bank buying, inflation and currency debasement concerns.
“Despite persistent geopolitical and macroeconomic volatility, gold’s price action is consistent with a consolidation phase rather than a breakdown,” Sprott Inc managing partner and market strategist Paul Wong said.
He said central banks were choosing gold over treasuries and remained significant buyers of bullion, which reinforced gold’s role as a strategic reserve asset.
In the near term, Wong said gold faced a cyclical headwind stemming from the recent energy shock and its impact on liquidity and policy expectations.
“These pressures, however, are cyclical rather than structural,” he said.
He said the broader macro setup remained intact, referring to a rebuilding of the debasement trade, and high debt levels limiting policymakers’ options and increasing the likelihood of monetary intervention and negative real rates.
“While rising nominal yields may present short-term headwinds, they are unlikely to remain sustainably positive in real terms, given the structural constraints policymakers face,” he said.
“This view is reinforced by continued central bank demand,” he said, pointing to official sector purchases averaging more than 1,000t annually over the past four years.
“While short-term fluctuations in demand may result from liquidity needs, the broader demand trend remains intact.”
Fresh insights into the central bank community’s views on gold as a reserve asset will be revealed in the WGC’s annual Central Bank Gold Reserves Survey out later this month.
