Gold Breaks Its Range as Central Bank Demand and Fed Signals Pull in Opposite Directions
Published on 08/05/2026 at 15:41 | Redaktion boerse-global.de
Gold has spent weeks trapped in a familiar corridor, oscillating between $4,000 and $4,100 per ounce as traders waited for a catalyst strong enough to break the deadlock. That moment arrived midweek, with the precious metal surging to $4,260.30 — a 3.05 percent jump from Tuesday's close of $4,134.20. The move puts bullion comfortably above its 50-day moving average of $4,180, a technical level that had been acting as resistance.
The breakout lands in a week packed with market-moving events: US jobs data, diplomatic overtures in the Gulf, and a Federal Reserve sending mixed signals about the path of interest rates.
Jobs Data Takes Center Stage
All eyes are on the US labor market, with the ADP private payrolls report for July due later in the day serving as a warm-up act for Friday's official employment figures. Economists expect the ADP number to show 70,000 new jobs added, a slowdown from the 98,000 recorded the previous month. A weaker reading would reinforce expectations of Fed rate cuts — a scenario that historically benefits gold by reducing the opportunity cost of holding the non-yielding metal.
Diplomacy and Oil: An Unlikely Ally for Bullion
Meanwhile, developments in the Middle East are rippling through energy markets and, by extension, into gold. US Treasury Secretary Scott Bessent indicated that a deal to reopen the Strait of Hormuz could be reached as early as this week, with a Qatari foreign ministry spokesman confirming that negotiations remain active. De-escalation in the region has been declared a top priority.
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The connection to gold runs through inflation expectations. Cheaper oil translates into lower energy-driven price pressures, which in turn reduces the urgency for the Fed to tighten policy. As rate hike expectations fade, real yields become less attractive, and gold gains an edge over government bonds.
Market pricing reflects this shifting calculus. Futures now assign a 55 percent probability to a Fed rate hike in September, down from roughly 65 percent the previous day, according to the CME Group's FedWatch tool. The secondary source puts the figure slightly higher at 59 percent, down from 67 percent a day earlier — a discrepancy that underscores just how quickly sentiment is evolving.
The Fed's Hawkish Undercurrent
Not everyone is ready to declare victory on inflation. New York Fed President John Williams cautioned that while price pressures are gradually trending lower, policymakers would not hesitate to raise rates if inflation persists. Three Fed officials dissented at last week's policy meeting and have since reiterated their view that further tightening is necessary.
This hawkish undertone complicates the bullish case for gold. The metal's recent correction — still roughly 26 percent below its late-January record high — has been driven in part by expectations of higher-for-longer rates. Yet the structural demand picture tells a different story.
Central Banks: Buying at Record Pace
The World Gold Council's latest data reveals that central banks purchased a net 289 tonnes of gold in the second quarter — a record for any Q2 and a 62 percent increase year over year. June alone saw 51 tonnes of net buying, led by Poland with 19 tonnes, followed by China at 15 tonnes and Uzbekistan with 9 tonnes. Russia and Turkey, by contrast, trimmed their holdings.
China's central bank continues its remarkable accumulation streak, adding gold for the 20th consecutive month — the longest run on record — bringing official reserves to 2,346 tonnes. The secondary source cites slightly different figures of 2,331.52 tonnes and 19 months of consecutive buying, reflecting the timing of data releases.
South Korea's Long-Awaited Return
Perhaps the most striking development came from Seoul, where the Bank of Korea announced it would resume physical gold purchases for the first time since 2013. The central bank plans to initially invest in overseas gold ETFs while building infrastructure to acquire domestically mined gold through the Korea Exchange and Korea Securities Depository, working with producers LS MnM and Korea Zinc. The target is four to five tonnes annually from domestic production, with central bank official Jeong Hee-sup signaling a "gradual increase" in purchases over the medium to long term.
The rationale: geopolitical risks and a desire to diversify away from dollar dependence. The Bank of Korea currently holds just 104.4 tonnes of gold, a mere 1.1 percent of its $427.36 billion in foreign reserves — far below the allocation of many major central banks. Korea's earlier foray into gold between 2011 and 2013, when it bought roughly 90 tonnes near what was then a record high, has since proven highly profitable.
China's ETF Outflows Tell a Different Story
Institutional demand from Asia presents a more nuanced picture. Chinese investors pulled a record $2.91 billion from domestic gold ETFs in June, with the Huaan Yifu Gold ETF accounting for approximately $1.14 billion of those outflows. Across Asia, June saw $2.3 billion in withdrawals — the region's weakest month on record.
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The driver appears to be a rotation into equities. A rally in Chinese stock markets and a stronger yuan have diminished gold's appeal as a safe haven. Additionally, hawkish comments from new Fed Chair Kevin Warsh at last month's meeting pushed real yields and the dollar higher, further dampening gold's attractiveness.
Yet the half-year picture remains robust. Asian gold ETFs recorded net inflows of $12 billion in the first half — the strongest H1 on record for the region.
Paulson Bets on Miners Over Bullion
On the investor side, hedge fund veteran John Paulson is positioning for what he calls the start of a long-term gold bull market — but he's choosing miners over physical metal. Paulson has acquired a 40 percent stake in the Donlin Gold project in Alaska via a share transaction and will become co-chairman of NovaGold. Existing NovaGold shareholders will hold 65 percent of the combined entity, with Paulson controlling 35 percent. The Donlin project boasts roughly 40 million ounces of resources, and NovaGold carries a market valuation of about $4.2 billion.
Divergent Forecasts for the Road Ahead
Analysts remain sharply divided on where gold heads next. The World Gold Council projects prices around $4,100 for the second half of the year, though it sees potential for a climb to $4,500–$5,000 if geopolitical tensions escalate. The "In Gold We Trust" report is far more bullish, envisioning prices as high as $8,900 by the end of the decade. OANDA's Kelvin Wong sees further upside if tensions in the Middle East continue to ease.
In the near term, Friday's US jobs report looms as the decisive catalyst. Combined with developments in the Hormuz negotiations, it will likely determine whether gold's breakout has legs — or whether the metal retreats back into the range that held it captive for so long.
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