Gold’s $4,000 Recovery Masks Divergence Between Central Bank Buying and Market Bears

Gold clawed back above $4,000 amid China's record 20-month buying streak, but 79% of analysts expect further declines as Fed hawkishness and strong dollar weigh.

Gold managed to claw back above the psychologically critical $4,000 level by the close of last week, settling at $4,021.30 an ounce after briefly dipping below it during Friday’s session. The 1.03% daily advance snapped a streak of losses that had pushed the metal down roughly 2.5% for the week, leaving it with a year-to-date decline of 7.19% and a monthly loss of 3.63%. The recovery was notable given the chorus of bearish calls from Wall Street, but beneath the surface, a powerful counterforce is at work: the People’s Bank of China is steadily building its gold hoard at a pace far outstripping official disclosures.

China’s central bank added 480,000 ounces to its reserves in June, bringing the total to 75.44 million ounces and extending its buying streak to 20 consecutive months — the longest in more than a decade. Goldman Sachs estimates that the PBOC purchased roughly 48 tonnes of gold via the London over-the-counter market in May alone, nearly five times the 10 tonnes it officially reported. This institutional appetite has pushed gold’s share of global official reserves to 27% by the end of 2025, overtaking US Treasuries at 22% for the first time. The buying remains a key plank in the long-term bull case, with Goldman reiterating its $4,900 target by end-2026 and UBS forecasting $5,200 within 12 months, citing persistent central-bank demand.

Yet this structural support is colliding with a decidedly bearish near-term consensus. A Kitco survey of Wall Street analysts found 79% expecting further declines this week, while only 7% predicted a bounce. The CPM Group has explicitly recommended a short position at $3,980 with a target of $3,820, and FxPro sees the potential for a drop to $3,300 by September. The metal’s 14-day Relative Strength Index of 40.6 points to a market that is deeply oversold but not yet generating a buy signal. After hitting a 52-week high of $5,626.80 on January 29, gold has now fallen 28.53% from that peak — a correction that has left many technical indicators flashing caution rather than opportunity.

The headwinds are formidable. The US Federal Reserve remains resolutely hawkish: Chair Kevin Warsh declared the inflation fight “far from over,” Vice Chair Jefferson flagged a possible rate hike, and Dallas Fed President Logan explicitly called for higher rates. Markets are pricing in no change at the July 28-29 meeting but anticipate tightening before year-end. The strong dollar and rising real yields are making non-yielding assets like gold less attractive, even as the escalating US-Iran conflict drives oil prices more than 14% higher to a 19-week peak above $90 a barrel. An Iranian rocket attack on the Jordanian city of Aqaba — disputed by Jordan but confirmed by Israeli and US sources — and incidents in the Strait of Hormuz have kept geopolitical risk elevated, yet safe-haven demand has been conspicuously absent.

Not all analysts are convinced the slide will continue. Paul Wong of Sprott believes the market is oversold and could find a floor if a catalyst emerges, while Adrian Day expects a sideways grind until the Fed provides clearer guidance. Chris Gaffney views the $4,000 level as the decisive pivot point. ANZ’s commodity team places the support zone between $3,800 and $4,000, and Bank of America, despite calling 2026 a potential “lost year” for gold, remains long-term bullish on central-bank buying, sovereign debt concerns and dollar de-dollarization.

Adding to the complexity, Chinese private demand is fading. Gold ETFs in the country have swung to net outflows, and jewelry consumption tumbled by more than a third in the first quarter — a stark contrast to the PBOC’s relentless accumulation. The divergence between official and retail appetite underscores the tension that currently defines the gold market.

Traders now turn their attention to the European Central Bank’s interest-rate decision on Thursday, followed by US purchasing-managers’ index releases and the Fed’s late-July meeting. Whether gold can hold the $4,000 floor — or break decisively lower — will depend on whether the central-bank bid can outweigh a wall of short-term selling pressure backed by hawkish monetary policy and a surging dollar.