Gold's Two-Track Market: Central Banks Hoard While Traders Brace for the Fed

Gold rebounds to $4,423 as weak ADP data cools Fed hike bets, while central banks keep buying at record pace.

Gold is navigating an unusually divided landscape. On one side, central banks are stockpiling bullion at a historic pace, treating it as a strategic anchor for their reserves. On the other, short-term traders are fixated on Federal Reserve policy, where a single speech or jobs report can swing the price by several percent in a matter of hours.

The spot price climbed 0.8 percent on Thursday to $4,423.28 per ounce, extending a rebound that began a day earlier when bullion jumped 1.4 percent to close at $4,387.23. That recovery followed a sharp midweek sell-off, triggered by hawkish comments from Fed Chair Kevin Warsh, who said the central bank still has "work to do" on inflation control.

Central Banks Keep Buying, Whatever the Price

The structural picture could hardly be more different from the daily noise. The World Gold Council reported net central bank purchases of 289 tonnes in the second quarter, and the buying has shown no sign of letting up.

China added another 20 tonnes in July, lifting its holdings to a record 2,377.5 tonnes, according to financial portal XTB. That brings Beijing's accumulation this year to 60 tonnes. Poland has been even more aggressive, adding 82 tonnes in 2026 to reach 632 tonnes.

The Netherlands has taken a different approach to reserve management. Between March and August, the Dutch central bank DNB relocated 86 tonnes of gold from New York and Canada to London — 27 tonnes moved physically, with the remainder handled through sales and repurchases. DNB President Olaf Sleijpen said the goal was to improve the usability and tradability of the reserves amid rising geopolitical tensions.

The transfer reshapes the geographic distribution of Dutch holdings: New York's share falls from roughly 31 percent to 18.5 percent, Canada's from 19.7 percent to 18.5 percent, while London now holds 32.1 percent of the country's 612.4 tonnes of gold, valued at €72.2 billion at the end of 2025. The move echoes 2014, when the Netherlands repatriated around 112 tonnes from New York.

Germany, by contrast, sees no need for similar action. The Bundesbank, which holds a far larger 3,350 tonnes, keeps 51 percent in Frankfurt, 37 percent in New York and 12 percent in London.

A Hawkish Fed Spooks the Market

The volatility that marked this week's trading stems largely from shifting expectations about the Fed's next move. Warsh's remarks reinforced the case for a rate increase ahead of the September meeting, and the market responded accordingly.

According to the CME's FedWatch tool, traders now price in a 66.4 percent probability of a 25-basis-point hike, with 33.6 percent expecting rates to stay unchanged. Higher rates raise the opportunity cost of holding gold, which pays no interest — a classic headwind for the metal.

That dynamic played out on Tuesday, when a firmer dollar and rising bond yields overwhelmed the usual safe-haven buying triggered by US airstrikes on targets in Iran. Tehran's pledge of retaliation marked the most serious escalation between the two countries in weeks, according to Trading Economics, yet gold and silver still fell sharply. A closely watched gold proxy lost 2.86 percent that day.

Weak Jobs Data Shifts the Calculus

Relief arrived in the form of the ADP employment report. The US private sector added just 38,000 jobs in August — the weakest gain since January and well below the 47,000 expected. The data, based on payroll records covering more than 26 million workers, pushed the dollar and Treasury yields off their recent highs.

The yield on ten-year US government bonds slipped from 4.81 percent to 4.79 percent. For gold, that was enough to trigger a relief rally. The probability of a September rate hike fell to 64 percent, according to FedWatch.

New York Fed President John Williams added to the dovish undertone, pointing to signs of cooling inflation as tariff effects fade and energy prices show little pass-through to services costs. The self-described monetary dove signaled support for the July pause.

The metal remains bruised despite the rebound, however. Over seven days, gold has lost 4.7 percent, though it still stands 7.6 percent higher over 30 days and 1.6 percent up year-to-date. At $4,387.23, it sits roughly 22 percent below the year's high of $5,598.58, reached in late January.

Geopolitics Cuts Both Ways

The Iran situation remains a double-edged sword for bullion. Escalation typically drives safe-haven demand, but the associated rise in oil prices also fans inflation concerns — which in turn strengthens the case for tighter monetary policy.

A comment from US President Trump that the Iran war is "pretty much over" sent crude prices sliding on Thursday, with Brent losing 5.2 percent and WTI dropping more than 7 percent.

All eyes now turn to Friday's official nonfarm payrolls report for August, which will likely serve as the decisive input for the Fed's September 15-16 meeting. Until then, gold remains caught between the steady hands of central bank buyers and the jittery speculation of rate-focused traders.