Gold’s Crosscurrents: Central-Bank Buying Surge Vies with Rate Hike Bets and Modi’s Gold Freeze

Goldman Sachs upgrades central bank gold purchases forecast, but gold slides below $4,550 amid hawkish Fed, India's buying restraint, and oil-driven inflation fears.

Goldman Sachs has sharply upgraded its nowcast of global central bank gold purchases, yet the metal continues to trade under pressure from a hawkish Federal Reserve outlook and an unusual call for consumer restraint in India. This three-way tension has pushed bullion well below its recent highs, even as geopolitical tensions in the Middle East show no sign of easing.

The investment bank now estimates that central banks bought a monthly average of 50 tonnes in March, up from a prior assessment of 29 tonnes. The revision for January is even more striking: estimated purchases jumped from 12 tonnes to roughly 66 tonnes, based on British export data and outflows from London vaults. Goldman projects this institutional buying will persist, with demand averaging 60 tonnes a month through the end of 2026.

That bullish call on official-sector appetite, however, has done little to halt the slide in prices. Gold closed Friday at $4,555.80 per ounce and slipped further to $4,549.60 on Monday. The weekly loss stands at 4.13 percent, and the 30-day decline has reached 6.34 percent.

The main source of pressure remains monetary policy. US consumer prices rose 3.8 percent in April, and producer prices also exceeded expectations, dashing hopes of near-term rate cuts. The yield on the 10-year US Treasury climbed to 4.54 percent, raising the opportunity cost of holding non-yielding assets. The FedWatch tool now assigns a 50 percent probability to another rate hike by December 2026, with the current fed funds rate at 3.5 to 3.75 percent.

Adding to the uncertainty, Kevin Warsh is set to be sworn in as the new Federal Reserve chairman, while Jerome Powell serves in an acting capacity. This leadership transition injects additional ambiguity into the central bank’s next policy steps, unsettling gold investors further.

Physical demand from Asia is also showing signs of fatigue. Indian Prime Minister Narendra Modi has urged citizens to refrain from new gold purchases to support the rupee and limit the trade deficit. A higher import tax on precious metals reinforces the message, directly dampening appetite in one of the world’s largest gold markets. In China, speculative investors have been reducing positions after the metal’s strong run-up, adding to the consolidation.

The Middle East crisis, while theoretically supportive, has backfired. The blockade of the Strait of Hormuz and drone attacks on infrastructure in Saudi Arabia and the United Arab Emirates have driven oil prices above $100 per barrel. Rather than igniting a safe-haven bid, this energy price spike fuels inflation expectations, reinforcing the case for tighter monetary policy.

Technically, gold has lost momentum. The 50-day moving average stood at $4,728.38 at Friday’s close and slipped to $4,715.43 by Monday, with gold trading 3.52 percent below that level. The relative strength index at 49.8 signals neutral territory.

Despite the near-term headwinds, Wall Street remains bullish on gold’s longer-term trajectory. Goldman Sachs holds a year-end target of $5,400. JPMorgan forecasts $5,243 for 2026, while ANZ sees $5,600 by end-2026 and $6,000 by mid-2027. UBS sets its sights higher at $6,200. The key support zone around $4,500 will be critical — a break below could rekindle selling, but as long as central banks keep buying at these elevated rates, the downside may prove limited.

India, already a major holder with gold reserves exceeding $120 billion, could play a pivotal role if Modi’s appeal dampens local demand. For now, the overarching narrative remains a tug-of-war between institutional accumulation and macroeconomic tightening, with the metal caught in the middle.