Gold's $4,000 Floor Holds, But the Bull Case Is Getting Harder to Read

Gold hovers near $4,000 despite record central bank buying, as dollar strength and ETF outflows offset safe-haven demand.

The gold market has settled into an uneasy equilibrium around the $4,000-per-ounce level, where buyers and sellers have been testing each other's resolve for weeks. Friday's close of $4,098.60 marked a 1.54 percent daily decline, leaving the metal roughly 27 percent below the January record of $5,626.80. Yet beneath the surface volatility, a remarkable structural shift is underway: central banks are accumulating bullion at a pace never before recorded.

Central Banks Are Hoarding Gold Like Never Before

The World Gold Council puts second-quarter net central bank purchases at 289 tonnes, a 62 percent jump from the same period last year. Poland led the charge with 51 tonnes, while China added 33 tonnes — its fastest monthly buying clip since late 2023. Russia, by contrast, offloaded 22 tonnes during the quarter. First-half global demand reached 2,522 tonnes, up 2 percent year-on-year and worth a record $380 billion in dollar terms.

The institutional enthusiasm stands in sharp contrast to what retail and investor channels are doing. Exchange-traded gold funds saw net outflows of 45 tonnes in the second quarter, while jewelry demand slumped 17 percent — though it held steady in value terms as buyers kept spending despite elevated prices. Industrial demand ticked up to roughly 80 tonnes. Perhaps most tellingly, a World Gold Council survey found 89 percent of central banks expect to keep expanding their gold reserves over the next twelve months. Gold has now overtaken US Treasuries as the largest reserve asset globally, accounting for about 27 percent of total reserves versus roughly 22 percent for US government debt.

Even the crypto world is getting in on the act: stablecoin issuer Tether added 14 tonnes of gold in the second quarter, bringing its hoard to more than 146 tonnes, or about 10 percent of its total reserves.

Geopolitics and the Dollar Are Pulling in Opposite Directions

The usual safe-haven triggers are firing, but the price isn't responding the way history would suggest. Escalating tensions between Washington and Tehran have prompted the State Department to warn US citizens in ten regional countries — including Israel, Iraq, Jordan, Kuwait, and Saudi Arabia — about potential flight cancellations and airspace closures. President Trump has vowed to act "very hard" if necessary, and a drone strike on gas ships at Egypt's Damietta port has reignited concerns about Suez Canal security. Such developments typically drive investors toward gold, yet the metal has failed to catch a bid from any of it.

The culprit is the dollar. A firmer greenback has been applying steady downward pressure on the dollar-denominated metal, and the interest rate outlook is doing it no favors either. The Federal Reserve has held its benchmark rate at 3.50 to 3.75 percent, but the new chair, Kevin Warsh, has scrapped the central bank's forward guidance and largely avoided public commentary on inflation — a shift Bank of America has dubbed an "inflation credibility shock." Warsh has also floated reducing the number of Fed meetings from eight to as few as four per year, which observers describe as the biggest operational overhaul at the central bank since 1981. Three Fed members voted for a rate hike at the last meeting, and while market pricing for a September increase has eased from 80 percent to 67 percent, the direction of travel is clear. Meanwhile, 30-year Treasury yields have climbed to 5.2 percent, their highest level since 2007.

A Market Split Down the Middle

The analyst community is offering little in the way of consensus. A recent survey found 29 percent of experts expecting further gains, 35 percent anticipating declines, and the remainder looking for sideways action. Raiffeisen's chief investment officer Matthias Geissbühler sees the $4,000 level as a firm floor and targets $4,500 by year-end — a roughly 10 percent advance from current levels. The World Gold Council considers prices above $4,500 likely only if global growth cools meaningfully.

At the more exuberant end of the spectrum, JPMorgan's Jamie Dimon has reportedly called a move to $10,000 per ounce "easily" possible. Bridgewater's Ray Dalio, meanwhile, is warning investors away from cash altogether, pointing to a $2 trillion annual gap between US government spending and revenue that he says is pushing the country toward a "point of no return" on debt. Gold, he argues, remains the essential hedge — and the metal's 126 percent appreciation over the past five years supports that case.

For now, the metal sits about 2 percent below its 50-day moving average of $4,199.84, suggesting the recent stabilization hasn't yet morphed into a genuine uptrend. The September Fed meeting looms as the next potential catalyst, and until then, the $4,000 line looks set to remain the battleground where gold's dueling narratives — record central bank accumulation versus dollar and rate headwinds — fight it out.