Gold's Institutional Floor Holds Firm Even as the Price Sags

The World Gold Council has trimmed its full-year forecast for growth in gold investment demand to 200 tonnes, down from an earlier estimate of 400 tonnes — yet at the same time it has raised its projection for central bank purchases. That split verdict captures the market's current shape: official-sector and fund buying is providing a solid base, but it has not been enough to engineer a durable price recovery against a wall of tightening-rate expectations.

The demand data published today lay out a market pulling in two directions. Central banks and exchange-traded gold funds are adding metal at a healthy clip, while bars, coins and jewellery are losing ground. Strength among a few buyer groups, in other words, does not mean the whole market is expanding at the same pace.

Official buyers and ETFs pick up the slack

Central banks bought a net 321 tonnes in the third quarter of 2026, according to the World Gold Council — a 42% jump on the same quarter a year earlier and the strongest quarterly tally since the end of the year before last. The Council now expects full-year official purchases to come in at least at last year's level, a raised assessment that sits in sharp contrast to the cut to its investment-demand growth forecast.

Physically backed gold ETFs also drew inflows of 211 tonnes during the quarter, lifting their holdings to a record 4,256 tonnes. Inflation worries, the state of public finances and political uncertainty were among the demand drivers in Europe, the Council said.

That fund appetite shows gold is still being sought as a hedge despite the recent price weakness. Other buyer groups, by contrast, are proving more sensitive to the elevated price level — a divergence that comes into sharpest focus when investment products are set against jewellery and retail coin and bar demand.

Worldwide demand for bars and coins fell 19% in the quarter to 268 tonnes, while jewellery consumption dropped 17%. The Council expects jewellery demand to stay soft while prices remain high.

The rate picture still calls the tune

The demand ledger on its own does not explain where the price is heading. In the near term, expectations for US monetary policy dominate. Reuters reports that higher energy prices are stoking inflation fears once again, reinforcing the case for higher rates.

According to CME FedWatch, market participants are pricing a 74.9% probability of a 25-basis-point rate hike in December. The World Gold Council attributes the recent unwinding of gold positions to mounting expectations of tighter policy, which have made bonds relatively more attractive.

ING strategists Warren Patterson and Ewa Manthey do expect a partial recovery after the correction, but they see the near-term outlook as difficult. Higher rate expectations and a firmer dollar, in their view, are capping any sustained move higher.

The spot market bears that caution out. Gold settled at 3,904.98 USD per troy ounce, a daily change of -1.0%, with the buying from central banks and funds failing to prevent another leg down.

Oil, Iran and the next catalysts

Yesterday's bounce had been built on lower crude prices and hopes of a diplomatic thaw between the US and Iran. Today, reports of US strikes on the Iranian island of Qeshm pushed escalation and supply concerns back to the fore. The renewed climb in oil makes it harder to win relief on inflation expectations.

The Council flags the outcome of today's US midterm elections and the upcoming October US labour market data as the next potential catalysts. For investors, the key distinction is between stable demand and an actual turn in the price: central banks and ETFs are already underpinning the market. A more durable recovery, by ING's reckoning, requires the pressure from rate expectations and the dollar to ease.

Elections add a fiscal wildcard

Today's midterms catch gold in that fragile recovery phase, with the result capable of moving both the dollar and Treasury yields. What matters for gold investors is not simply which party controls Congress, but the consequences for government spending, deficits and the financing of the US.

Citing Reuters, a continued Republican hold could favour further tax cuts and higher defence outlays, bringing added deficit risk. Divided control, by contrast, could complicate budget negotiations and sharpen conflict over the debt ceiling — with Reuters pointing to possible clashes next year. The dollar's reaction is ambiguous: higher US yields could support it in the short run, while growing deficit financing could weigh on the currency over time.

The uncertainty is mirrored in a vulnerable gold price. Spot closed at 3,909.43 USD per troy ounce, down -0.9%, showing that yesterday's recovery has yet to find a stable footing. There is no simple line from election winner to gold price; what counts more is how the bond and currency markets judge future fiscal policy, with rate expectations remaining a central influence.

A hawkish backdrop and forced selling

Reuters reported a 73% market-implied probability of a December rate hike on CME FedWatch. The Federal Reserve left its target range unchanged at 3.75–4% on 28 October.

The latest economic signals offer little prospect of rapid relief either. US manufacturing was sturdier in October than the month before, lending fresh support to expectations of tighter policy. The ISM manufacturing purchasing managers' index rose to 55.5 points in October from 54.5 in September. Today's JOLTS job openings and the 6 November US employment report are the next tests.

Behind the recent slide in gold, meanwhile, lie sales aimed at raising liquidity, with media reports also pointing to sales of liquid metals to cover margin calls. Yesterday's relief came from falling oil prices and hopes of diplomatic progress in the Iran conflict, as cheaper energy damped inflation worries and supported gold — though ING cautions against assuming de-escalation is a done deal.

The durability of any rebound therefore rests on several conditions at once: easing liquidity pressure, less hawkish rate expectations and a political path that does not generate fresh inflation impulses. The election result provides an important nudge. Whether it turns into a lasting re-rating will depend above all on how the dollar and US yields respond — and on the labour market data still to come.