Gold Digs In Above $4,000 as China's Central Bank Adds 20.2 Tons

Gold closed Friday at $4,144.04 an ounce after a 3.4% weekly drop, with central bank reserve buying underpinning prices as ETF holdings and futures longs shrank.

Gold ended Friday at $4,144.04 an ounce, holding the psychologically significant $4,000 threshold despite a week that saw the metal shed 3.4 percent. The retreat was driven less by any change in gold's underlying appeal than by shifting conditions in the bond market, where rising US Treasury yields — compounded by firmer oil prices and a resurgent dollar — prompted a pullback in futures positioning.

Reserve Diversification Provides the Floor

Underneath the week-to-week noise, the strategic reallocation of foreign exchange reserves away from dollar-denominated assets remains the structural force keeping bullion elevated, according to Reuters. The People's Bank of China continues to lead that charge: the central bank reported an August purchase of 20.2 tons, its largest monthly addition since October 2023, lifting official holdings to 2,387 tons by the end of that month.

Smaller monetary authorities are following suit. Ghana's official gold reserves climbed from 24.4 tons in June to 25.2 tons in August, central bank governor Johnson Asiama said, with exporters having resumed regular deliveries after a temporary dip the previous month. The West African nation's stockpile stood at 33 tons a year earlier, underscoring how aggressively the central bank has been drawing down and rebuilding its holdings. Further clarity on emerging-market reserve policy arrives on October 7, when the South African Reserve Bank publishes fresh figures on its official gold and foreign exchange positions.

Speculators Retreat, ETFs Bleed

The softer tone in futures markets is visible in the numbers. Net long positioning among institutional asset managers fell to its lowest level since late July in the week through September 22, according to CFTC data — a sign that market participants have trimmed their bullish bets considerably.

Exchange-traded funds have mirrored that caution. Gold ETFs recorded outflows of 1.6 tons in the prior week, bringing total global holdings down to 4,249 tons, Reuters reported, citing the World Gold Council. The steady erosion of ETF demand removes a cushion that had softened earlier price declines.

Asia's Physical Market Sends Mixed Signals

On the demand side, the picture is uneven. Chinese buying interest faded ahead of the country's October 1–7 holiday period, with local premiums over the global benchmark weakening and ultimately falling to zero by the end of last week. Attention now turns to India, where StoneX analyst Rhona O'Connell pointed to the upcoming Diwali festival and wedding season as a traditional source of support — though she cautioned that elevated prices and a relatively weak monsoon could weigh on jewelry purchases.

Supply-side intervention is also shaping the landscape. Ghana's state gold buyer GoldBod suspended exports from August onward as the central bank prioritizes rebuilding foreign exchange reserves, governor Asiama said.

A Dovish Data Surprise, Briefly

Thursday brought a momentary reprieve. US employment rose by just 29,000 in September, down from a revised 133,000 the prior month, cooling expectations for Federal Reserve rate hikes after softer core inflation data had already eased pressure on the rate path. The relief rally faded by the afternoon as the dollar strengthened once more.

At Friday's close, gold sat 26 percent below its 52-week high of $5,598.58, set at the end of January. Even so, longer-term forecasts remain constructive. ICICI Bank projects a trading range of $4,200 to $4,600 an ounce for the remainder of 2026, and sees $4,600 to $5,000 as achievable in the first half of 2027 — citing private investors' hedging demand and, above all, continued central bank purchases as the primary drivers.