Central Banks Gobble 244 Tonnes of Gold in Q1, but the Fed's Hawkish Grip Holds Prices in Check

Despite $193B in demand and 244 tonnes of central bank buying, gold remains range-bound as the Fed holds rates restrictive and inflation stays elevated, delaying rate cuts until 2026.

Gold’s record-breaking first quarter — $193 billion in total demand and a staggering 244 tonnes of net central bank buying — has done little to break the metal out of its trading range. The reason? A Federal Reserve that, despite flagging “notable” financial stability risks in its latest minutes, remains firmly on a restrictive path. Spot bullion edged lower on Wednesday as traders digested a policy stance that leaves little room for a rate cut before 2026.

The World Gold Council’s Q1 2026 tally shows total gold demand including over-the-counter transactions hit 1,231 tonnes, a 74% jump from the same period a year earlier. In dollar terms, that translated to a quarterly record of $193 billion. Bar and coin purchases surged 42% to 474 tonnes, while gold-backed exchange-traded funds added 62 tonnes after years of outflows. Jewelry demand, however, cratered 23% as high prices and economic caution weighed on consumer appetite.

Central banks remained the structural anchor, adding 244 tonnes net in the quarter — a 17% increase from the previous three months and 3% above the prior-year period. This marks the strongest single-quarter accumulation on record. A survey conducted by the council found that 68% of central banks intend to expand their gold reserves further in 2026, with emerging-market buyers such as Poland, Uzbekistan and China leading the charge as they shift away from dollar and euro holdings.

But on the macro front, the headwinds are stiff. The Federal Reserve’s April 28–29 meeting minutes, released Wednesday, kept the federal funds rate at 3.50%–3.75% and revealed that a majority of participants saw the possibility of further tightening if inflation remains stubborn above the 2% target. Three members opposed even the slight easing bias included in the statement, underscoring the internal divide. Gold, which offers no yield, suffers when real rates rise. The April producer price index rose 1.4% month-on-month, while consumer prices held steady at 3.8% — reinforcing the view that rate cuts are still far off.

The minutes also pointed to a less?discussed but potentially powerful force: financial stability concerns. The Fed explicitly flagged elevated asset valuations, the fast?growing private?credit market, and high leverage in hedge?fund treasury positions as “notable” risks, warning of the possibility of abrupt corrections. For gold, that is a double?edged signal. While such systemic stress historically boosts bullion’s safe?haven appeal, the metal has yet to capitalize on the warning — largely because the dollar remains firm and short?term yields stay elevated.

Adding to the mix, the US is in the final stage of negotiations with Iran, a development that last week pushed down Treasury yields and oil prices. Any sustained de?escalation in the Middle East would remove a chunk of the geopolitical risk premium that has supported gold, shifting investor focus back to industrial metals tied to growth expectations.

Technically, gold is consolidating. The metal faces resistance at $4,600 an ounce, with support at $4,475. Goldman Sachs left its year?end 2026 target unchanged at $5,400, betting that central?bank buying will continue to underpin prices even if macro conditions remain unfriendly. For now, however, the tug?of?war between record demand and a hawkish Fed keeps gold trapped just north of $4,500 — waiting for a catalyst that neither the vaults of Warsaw nor the warnings of Washington have yet to provide.