Gold’s Strange Paradox: Record Chinese Buying Spree Meets a Price Slide

Chinese bullion buying surges to 207 tonnes in Q1, but gold prices fall amid Fed hawkishness, rising oil, and weak jewelry demand.

The gold market is telling two starkly different stories at once. Chinese investors just bought more bullion than ever before in a single quarter, yet the metal’s price is sliding toward $4,600 an ounce. That tension — between surging retail demand and a deteriorating macro backdrop — defines the current moment for the yellow metal.

A Buying Frenzy in Beijing, a Hesitation Everywhere Else

The World Gold Council’s latest quarterly report, released Wednesday, reveals a market split down the middle. Global gold demand edged up 2 percent to 1,231 tonnes in the first quarter. In dollar terms, the picture is far more dramatic: total value surged 74 percent to $193 billion, reflecting how high prices have reshaped the market’s economics.

The engine of that growth is unmistakable. Bar and coin investment jumped 42 percent to 474 tonnes. China alone accounted for 207 tonnes — a record that eclipses the previous peak from the second quarter of 2013 by roughly a third. Europe and the United States also posted strong gains.

But the jewelry side tells a different tale. Consumption of gold jewelry collapsed 23 percent to 300 tonnes. Elevated prices are crushing discretionary buying, a classic pattern when the metal trades near all-time highs. The split between investment demand and consumer demand has rarely been this wide.

Why Safe-Haven Buying Isn’t Lifting Prices

Here’s the paradox: geopolitical turmoil is escalating, yet gold is falling. The price, at roughly $4,569 an ounce, sits about 6 percent below its 50-day moving average and roughly 16 percent below the January high of $5,450.

The culprit is a toxic cocktail of rising oil prices and Fed hawkishness. An escalating US-Iran conflict has kept the Strait of Hormuz effectively closed. Tehran offered via intermediaries to reopen the waterway, but President Trump rejected the proposal. Energy prices are climbing as a result, stoking inflation fears. That, in turn, reinforces expectations that central banks will keep interest rates elevated — a structural headwind for a non-yielding asset like gold.

Investors are rotating into US Treasuries instead, where yields hover near 4.4 percent. Before the Middle East escalation, markets had priced in two rate cuts for 2026. Those hopes have evaporated. Traders now see barely a single quarter-point move by December.

Powell Takes the Stage One Last Time

All eyes are on Jerome Powell this evening. The Federal Reserve concludes its two-day meeting, and it will likely be Powell’s final press conference as chair. Kevin Warsh takes over on May 15. The Fed is expected to hold rates steady, with the labor market remaining robust and inflation stuck above the 2 percent target for five years. There is simply no room for easing.

Since the Fed isn’t releasing new economic projections, traders will parse every word from Powell. Any hint of a dovish tilt could send gold racing back toward bank targets. A hardline stance would prolong the current headwind.

Analysts Stay Bullish Despite the Correction

The medium-term outlook remains remarkably optimistic. A Reuters poll of 31 analysts put the year-end target at $4,916 — the highest since the survey began in 2012. Goldman Sachs is calling for $5,400. J.P. Morgan and Wells Fargo see a path to $6,300.

UBS trimmed its near-term forecast to $5,200 by June but kept its year-end target at $5,900. The World Gold Council points to geopolitical risks, stagflation fears, and ongoing central bank buying as structural supports.

Central banks remain a powerful force. Emerging-market buyers are adding roughly 60 tonnes per month, according to Goldman, seeking to diversify away from dollar dependence. China’s central bank reported a record gold reserve level in the first quarter.

For now, the market is caught between record retail demand and a punishing macro environment. The Fed’s decision tonight — and Powell’s parting words — will likely determine which force wins out.