Gold's Demand Shift: Bar and Coin Purchases Surge 42% as Inflation and Dollar Check the Rally

Gold prices hold near record highs as investor and central bank buying surges 42% while jewelry demand collapses, offsetting headwinds from sticky inflation and delayed Fed rate cuts.

The yellow metal is weathering an inflation shock that has all but extinguished hopes of imminent rate cuts, thanks to a dramatic reordering of its demand base. While jewelry buyers have stepped back, private investors and central banks are hoarding bullion at a pace not seen in years, providing a floor beneath the price.

Data from the World Gold Council for the first quarter of 2026 reveals a stark divergence: demand for gold bars and coins surged 42% year-on-year to 474 metric tons, while jewelry consumption collapsed by 23%. The shift underscores a broader trend of gold being treated as a strategic store of value rather than a discretionary consumer good. Overall demand, including over-the-counter transactions, edged up 2% to 1,230 tons.

Yet on the macro front, gold faces headwinds that have curbed its upside. US consumer prices rose 3.8% in April from a year earlier – the hottest reading since May 2023 and above the 3.3% recorded in March. Producer prices also accelerated at their fastest pace since 2022. The data has effectively buried any near-term expectation of Federal Reserve rate cuts. According to CME FedWatch, the implied probability of a rate hike by December now stands at around 30%.

For a non-yielding asset like gold, the combination of a firm dollar and elevated bond yields is particularly punishing. The metal closed Thursday at $4,687.20 per ounce, down 0.7% over the past week and 2.63% lower over the last 30 days. Still, it remains up 7.96% year-to-date, a performance that reflects the underlying support from physical buying and geopolitical unease.

New York Fed President John Williams described monetary policy as being “in a good place” and saw no immediate need for a change, though he acknowledged rising short-term inflation expectations partly driven by Middle East tensions. The remarks did little to alter market perceptions that rates will stay higher for longer.

Geopolitical risk continues to provide a counterbalance. During a meeting between Donald Trump and Xi Jinping in Beijing, both leaders stressed the need to keep the Strait of Hormuz open, with Xi opposing its militarization and Trump noting that China had offered assistance and had not supplied military equipment to Iran. The market’s focus remains on whether energy flows stay stable. Brent crude traded at $107.05 a barrel on Friday, up more than 7% month-on-month, adding to inflationary pressure that could keep the Fed on hold.

Central banks are another pillar of demand. In the first quarter, official sector purchases totaled 243 tons, with emerging-market central banks leading the charge. Buying continued in May from the National Bank of Kazakhstan, Turkey, and Poland, as these institutions diversify away from dollar reserves.

On the demand side, India has tightened its gold import rules. Since May 14, the country has capped duty-free imports under the Advance Authorisation Scheme at 100 kilograms per licence, following a sharp increase in import duties on gold and silver. This move is likely to temper one of the world’s largest gold-consuming markets.

Technically, gold is showing a neutral posture. The price sits just below its 50-day moving average of $4,740.68, while the relative strength index at 49.8 signals neither overbought nor oversold conditions. The 30-day volatility stands at 18.2%.

Gold thus remains caught between two powerful forces: a demand revolution driven by investors and central banks that provides a resilient bid, and a macro environment of sticky inflation, a strong dollar, and rising real yields that caps the advance. Until the Fed signals a clear shift, the metal will continue to walk that tightrope.