Gold price returns above $4,000, driven by central bank buying

Gold prices have climbed back above $4,000 per ounce, driven by renewed central bank purchasing interest. This resurgence follows a dip in June, where the gold ER index fell 12.07% and spot gold briefly dropped below the $4,000 mark. Federal Reserve Chair Jerome Powell's recent comments eased inflation concerns, and weaker-than-expected non-farm payroll data for June, which showed only 57,000 new jobs compared to a forecast of 113,000, reduced the urgency for an immediate interest rate hike.

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Inflation risks have somewhat cooled, and non-farm payrolls in June were only 57,000, far below market expectations of 113,000, indicating no urgent need for an immediate rate hike.

However, financial institutions have adjusted their gold price targets downward. JPMorgan Chase lowered its third-quarter average gold price forecast to $4,300 per ounce and its fourth-quarter forecast to $4,500, a significant reduction of 20-25% from previous estimates. Taiwan Bank also predicts gold prices will trade within a range of $3,500 to $4,500 per ounce. This uncertainty has left individual investors questioning the market's bottom and the opportune moment to invest.

Despite these short-term fluctuations, a report by the World Gold Council (WGC) indicates strong long-term support for gold. The survey revealed that 89% of central banks expect their gold reserves to increase in the next 12 months. Looking further ahead, 74% anticipate a decrease in U.S. dollar holdings within five years, while 84% foresee a rise in gold's proportion of total reserves. This suggests a sustained demand from central banks will underpin the gold market.

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89% of respondents believe global central bank gold reserves will increase in the next 12 months.

In May, central banks collectively added 41 tons of gold to their reserves, marking the second-highest monthly increase this year. Poland was the largest buyer, adding 18 tons, followed by China with 10 tons. Uzbekistan and Kazakhstan continued their recent trend of increasing holdings, while Singapore made its first net purchase of 4 tons since September 2025. The WGC's findings highlight a clear trend of central banks re-entering the gold market.

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74% of respondents believe the U.S. dollar's share in total reserves will decrease moderately or significantly in the next five years.

Despite the positive outlook from central bank activity, the Yuan Taifoo S&P Gold ETF research team cautions investors. They highlight the increased volatility in the precious metals market due to unpredictable information flow and strongly advise investors to maintain strict operational discipline, including setting profit-taking and stop-loss points.

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84% of respondents believe gold's proportion in total reserves will increase moderately or significantly in the next five years.