Central Banks Keep Buying Gold Despite Short-Term Market Weakness

Gold markets entered June under pressure as improving risk sentiment, easing geopolitical tensions, and stronger expectations for higher-for-longer interest rates weighed on prices. Gold declined during May, with the LBMA Gold Price PM falling approximately 1.4%, as investors reduced safe-haven exposure and rotated toward risk assets. A potential US-Iran agreement lowered crude oil prices and inflation expectations, while stronger economic data reduced demand for defensive assets.

Despite short-term weakness, the strategic case for gold remains supported by central bank accumulation and reserve diversification. The 2026 Central Bank Gold Reserves Survey showed continued confidence in gold, with 89% of central banks expecting global gold reserves to rise over the next 12 months. Nearly half of respondents expect their own holdings to increase, reflecting gold’s role as a hedge against geopolitical uncertainty, inflation, and currency risks. Central banks have averaged roughly 1,000 tonnes of annual gold purchases over the past four years, double the previous decade’s pace.

Investor demand softened in May, with global gold-backed ETFs seeing around US$2 billion in outflows and Chinese ETFs recording their first monthly decline since August 2025. However, China’s central bank continued buying, adding 10 tonnes in May for its 19th consecutive month of purchases.

Silver followed gold’s weaker trend but remains supported by industrial demand from technology, electrification, and renewable energy sectors. While near-term volatility may continue due to rates and geopolitical developments, strong official-sector demand and ongoing macro uncertainty provide long-term support for precious metals.