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Central Banks Fuel Gold Demand Despite Fed Fears
17 Jul
Summary
- Central banks purchased 81 tonnes of gold in May.
- Goldman Sachs predicts central bank buying to continue for years.
- Geopolitical risks drive central banks to diversify reserves.
Central bank gold acquisitions in May reached an estimated 81 tonnes, signaling a substantial increase from historical averages and suggesting a price floor for gold. This robust buying trend is expected to persist for multiple years as nations diversify their reserves to mitigate geopolitical and financial uncertainties.
Goldman Sachs anticipates this trend to continue, projecting average monthly purchases of 50 tonnes in 2026 and 40 tonnes in 2027. This strategy is anchored by emerging market central banks diversifying their holdings following past reserve freezes. Despite anticipated temporary downward pressure from Federal Reserve policy expectations, the bank forecasts no Fed rate hikes, which could reverse near-term headwinds.
Over the medium term, the outlook for gold prices appears to be skewed upwards. Gold's limited presence in private portfolios, coupled with recent geopolitical developments, may further encourage diversification by private investors, complementing central bank actions.
