Central banks worldwide are acquiring gold at an unprecedented pace during the second quarter, rebounding sharply from the weakest first-quarter buying in over a decade.
The latest Global Gold Demand Trends Report from the World Gold Council (WGC) for the second quarter of 2026 reveals that central banks and other official institutions added a net 289 tonnes of gold to their reserves. This represents a 62% year-on-year increase and sets a new record for any second quarter. The figure is more than five times the revised first-quarter total of 57 tonnes.
Meanwhile, gold prices have staged a strong recovery, supported by the Federal Reserve's decision to hold interest rates steady and a cooling in the US Personal Consumption Expenditures (PCE) price index for June. COMEX gold futures for August delivery settled 1.58% higher at $4,100.10 per ounce on Thursday, marking the largest single-day gain since July 22. Spot gold closed at $4,100.34 per ounce, staging a V-shaped reversal from an intraday low of $4,028 to trade above the $4,100 mark.
The 57-to-289 Tonne Shift: A Demand Reassessment Driven by Data Revision
The most notable adjustment in the WGC's latest report is a significant downward revision to its first-quarter central bank gold purchasing data. The industry body lowered its initial estimate of 244 tonnes to just 57 tonnes, a reduction of 187 tonnes and the lowest first-quarter purchase level in over a decade. This revision reflects a reclassification of gold previously attributed to central banks and other official institutions into the "over-the-counter and other" category.
Following the revision, total net central bank demand for the first half of the year stands at 345 tonnes, the lowest first-half total since 2022. However, the scale of the second-quarter rebound has exceeded expectations. The 289 tonnes of net purchases not only dwarfed the first quarter but also surpassed all previous second-quarter records. The WGC attributes the strong second-quarter rebound to softer gold prices and ongoing geopolitical uncertainty.
Louise Street, Senior Market Analyst at the WGC, noted in the report: "The pullback from all-time highs has led to consolidation, but the market remains well-supported, reflecting gold's established role as a diversification tool and store of value."
Among specific buyers, the National Bank of Poland was the largest official gold purchaser globally in the second quarter, adding 51 tonnes, bringing its total net purchases for the first half to 82 tonnes. The People's Bank of China followed closely, purchasing 33 tonnes in the second quarter, continuing its accumulation trend.
A survey published by the WGC last month, the 2026 Central Bank Gold Reserves Survey, indicated that 45% of responding central banks expect to increase their gold reserves over the coming year. The WGC stated in its report: "Supported by the need for portfolio diversification, inflation hedging, and risk management, central banks are still on track for another strong year of net purchases, though full-year demand is expected to fall below the 2025 total."
PCE Cooling and Fed Inaction Push Gold Past $4,100
The rebound in gold prices has coincided closely with key macroeconomic data. The Federal Reserve's Federal Open Market Committee (FOMC) voted 9-3 on July 29 to hold the federal funds rate steady at 3.50%-3.75% for the fifth consecutive meeting. Although three regional Fed presidents dissented in favor of a rate hike, the decision to hold rates provided a reprieve for gold. The precious metal rallied quickly following the announcement, briefly breaching the $4,116 level during the session.
On the inflation front, data from the US Commerce Department released on July 30 showed the headline PCE price index fell 0.1% month-on-month in June, the first monthly decline since 2020. The annual rate narrowed to 3.7% from May's 4.1%. Core PCE, which excludes food and energy, rose only 0.1% month-on-month, below the market consensus of 0.2%, with its annual rate easing to 3.3% from 3.4%.
Bart Melek, Global Head of Commodity Strategy at TD Securities, commented: "The PCE data looks slightly better than the market expected, so the inflation environment is broadly stable for now." However, he cautioned that the conflict in the Middle East appears unlikely to end soon, suggesting that the inflationary pressures which had receded in recent months could resurface.
In this environment, COMEX gold futures settled 1.68% higher at $4,166 per ounce on Thursday, while spot silver rose 2.07% to $58.93 per ounce. Gold prices were consolidating above the $4,100 mark during Asian trading hours on Friday.
Divergent Demand Structure: Central Bank Support, ETF Outflows, Jewelry Weakness
Total global gold demand in the second quarter was flat year-on-year at 1,269 tonnes. Total demand for the first half of the year rose 2% year-on-year to 2,522 tonnes, with the total value of demand reaching a record high of approximately $380 billion. However, the internal structure of demand showed significant divergence.
Investment demand cooled. Global gold exchange-traded funds (ETFs) saw net outflows of 45 tonnes in the second quarter, the primary driver of the decline in investment demand for the period. Demand for gold bars and coins fell by only 3% year-on-year but remained 21% higher compared to the first half of last year. Over-the-counter investment remained active, driven by Asian investment demand, totaling 327 tonnes for the quarter, bringing the first-half total for this segment to 571 tonnes, a robust performance.
Jewelry demand continued to suffer. High gold prices continued to suppress consumption, with global jewelry demand falling to 278 tonnes in the second quarter, a 17% decline year-on-year. Consumers shifted towards lighter-weight products, though the value of jewelry consumption rose 14% year-on-year to $40 billion.
Supply remained steady. Gold mine production increased 2% year-on-year to 966 tonnes in the second quarter. However, recycled gold supply fell 6% year-on-year to 326 tonnes, suggesting a preference among consumers to hold onto their gold rather than sell it.
Market Outlook Diverges: Is $4,100 a Starting Point or a Peak?
With gold trading above $4,100, market opinion on its future direction remains sharply divided.
The WGC expects that, supported by asset allocation diversification and inflation hedging needs, investment demand will remain the core engine for global gold demand growth this year. However, it does not anticipate a repeat of the exceptionally strong demand seen in 2025.
Representing the bullish camp, Wells Fargo has reiterated its long-term price forecast, predicting gold will reach $5,300 to $5,500 by the end of 2026, and climb further to $5,800 to $6,000 by the end of 2027. State Street Bank expects prices to trade in a range of $4,750 to $5,500 over the next six to nine months. Morgan Stanley is also bullish, forecasting a price of $5,200 for gold in the second half of 2026. Bernstein has raised its year-end target to $4,375.
Leading the bearish view, Bank of America recently warned that gold still has significant room for a correction this year, advising investors to only complete their allocation when prices fall to the $3,250 to $3,450 range. JPMorgan Chase has taken a more conservative stance, lowering its forecast for gold at the end of 2026's fourth quarter to $4,500.
Jia Shuchang, Head of Asia-Pacific Research at the WGC, stated during the report's release that current gold prices already reflect investor expectations for one Fed rate hike this year. Given the pressure of the mid-term elections facing the Trump administration in the second half of the year, he expects the Fed's first rate cut of the year might be delayed until December. However, if the Fed raises rates by 25 basis points each in September and December, this would put further downward pressure on gold prices.
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