Gold's Price Weakness Masks a Central Bank Buying Frenzy as Fed Hawks and Geopolitics Collide

Poland and China stockpile gold near record pace, but Fed rate hike expectations and strong dollar keep prices 27% below January all-time highs. Major banks slash forecasts.

Gold is caught in a tug-of-war that pits two powerful forces against each other. On one side, central banks in Poland and China are scooping up bullion at a furious pace, treating every dip as a bargain. On the other, the US Federal Reserve’s hawkish signals are keeping the metal pinned well below its January record, with traders pricing in another rate hike before year-end.

Poland’s central bank has emerged as one of the most aggressive buyers. President Adam Glapi?ski confirmed the institution added 18.5 tonnes of gold over the past month, lifting total reserves to 632.4 tonnes. Warsaw’s stated target is 700 tonnes, a level that would mark a significant milestone for a nation that has steadily rebuilt its gold holdings. China is following a similar playbook: its central bank purchased another 14.93 tonnes in the latest month, extending its buying streak to an unbroken 20 months. For both institutions, the strategy has already generated billions of dollars in unrealised paper profits.

Spot gold ended the week at around $4,115–$4,117 an ounce, a decline of roughly 1.5% to 1.66% from the previous Friday. On a month-over-month basis, the metal eked out a slim gain of 0.57%, but the longer-term picture remains sobering. Gold is now trading 26.82% below its all-time high of $5,626.80 reached in January. The distance to the 200-day moving average of $4,539.06 stands at 9.28%, while the year-to-date loss amounts to 5.16%. Technical indicators show no panicked selling: the relative strength index sits at 43.3, and annualised volatility remains elevated at roughly 27%.

The primary source of pressure remains the Federal Reserve. Minutes from the latest policy meeting showed that nine of the 18 committee members see a further rate increase as appropriate before the end of the year. Markets now assign a 65% probability to a September hike, a calculation that has hardened in recent weeks. New York Fed President John Williams singled out artificial-intelligence-driven demand as the biggest wildcard for inflation, reinforcing the central bank’s cautious stance.

Geopolitical tensions in the Middle East add a volatile undercurrent. The US and Iran have traded military strikes—US forces hit Iranian targets after attacks on vessels in the Strait of Hormuz, and Tehran retaliated against American bases in the region—yet diplomatic channels remain open. This alternating pattern of escalation and de-escalation has produced outsized daily moves in gold, with prices swinging by more than $40 an ounce within a single trading session.

The uncertain outlook has prompted a wave of forecast downgrades from major banks. HSBC cut its average price estimate for 2026 to $4,560 an ounce from $4,864, and lowered its 2027 target to $4,925 from $5,000. Goldman Sachs followed suit, trimming its end-2026 forecast to $4,900. Bank of America took an even more cautious stance, reducing its target to $4,360. All three banks cited a strong US dollar and the prospect of prolonged high interest rates as the main headwinds.

Yet the same institutions remain optimistic over the longer haul. Goldman Sachs sees gold climbing back to $4,900 by the end of this year, while UBS has set a long-term price target of $6,200 an ounce. The divergence between near-term caution and structural bullishness reflects the fundamental tension at work: central banks are buying for strategic reserve reasons, ignoring short-term noise, while speculative investors are waiting for clarity on rates.

The coming week could tip the scales. Fresh US consumer and producer price data are due for release, and any upside surprise would push a rate cut further into the distance. If inflation proves stickier than expected, the sell-off in gold could intensify. For now, the metal remains priced between two worlds—central bank accumulation on one side and hawkish monetary policy on the other—with the outcome dependent on which force eventually breaks the stalemate.