Why Central Banks Are Buying Gold at Record Levels

Gold catching a fresh bid as the geopolitical landscape shifts once again.

President Trump announcing an interim agreement between the US and Iran to potentially reopen the Strait of Hormuz while in New York morning trade.

We are looking at spot gold hovering right around the 4348 ounce level.

Still gold does remain lower since the conflict began weighed down by the threat that energy-driven inflation could force rates higher for longer.

Meanwhile, global.

Largely staying on the sidelines when it came to gold back ETFs last month.

But despite the recent pullback, the structural case for gold is accelerating.

Now a new survey from the World Gold Council does reveal nearly 90% of reserve managers expect global central bank gold reserves to increase over the next 12 months with a record 45% of central banks planning to boost their own institutions holdings.

Well joining us live here at the New York Stock Exchange is Joe Caton senior market.

Strategist and the head of the US public policy at the World Gold Council, Joe, great to have you here.

Thank you so much for joining me.

Thanks for having me back.

Well, here we are about to head into the second half, and what a year it's been for all asset classes, but in particular for gold.

So how will the geopolitical situation affect gold prices moving forward, and what is the catalyst you're paying attention to?

So I think it's a great way to start the conversation.

I think the geopolitical Tensions and the landscape will continue to be volatile, at least very volatile at most, because I think it's hard to gauge and understand exactly where the administration's policies are leading, how they're turning into negotiations and actually impact overall on the market.

So what we've had over the course of the first half of the year has been the political and geopolitical moves that has taken us to a conflict between the US and Iran.

And the obvious outcome from that, which you've already mentioned is the unexpected and exemplary kind of level of inflationary pressure that would be put on the market that in the shorter term is going to be a pressure point for the gold market, but with the of an agreement being signed on Friday, it looks like we have some relief on the gold market.

So right now we're keeping a close watch on the geopolitical landscape and those unknown.

Events that could develop over the course of the next 6 months, but I think what's really key now is keeping a close watch on how developed central banks are going to handle their monetary policy.

So we've got a new Fed chairman.

He's speaking today for the first time.

We're having markets expecting a hold at a minimum, maybe a rate hike.

We'll see what he has to say.

But right now he's going to be using those levers at the Fed to manage what the economy looks like and how it's going to heat up or cool off, and that's going to be.

More important for Western investors in particular, you talk about ETF flows.

You'll see it there first, but Western investors and their interest in adding, holding, or reducing their overall holdings to gold.

And Joe, today is Fed day, and President Trump is over in Evian, France alongside other G7 leaders, and there are also other bilateral meetings that are taking place during this summit.

But when it comes to the role of gold as an asset class, Seeing interesting relationships, corelationships with other commodities.

So where does the role of gold in today's market stand?

So it's pretty unique in terms of an asset class.

It's clearly a commodity, but it's really a financial asset in many ways.

So it's really a monetary metal.

So it moves on economic data, wealth and wealth creation and wealth destruction over time.

It also moves in lockstep with the CPI and other conditions of growth.

So what I think is important to understand is that when it's clear for the market to understand economic conditions and looking at our gold demand trends report to get a gauge of where investors, central banks, jewelry consumption, all of that comes together, you can see the economic conditions moving the market, helping grow the market, increasing levels of interest and demand, or maybe even putting some.

Short term pressure on the market.

So for us right now, we think the most important factors for people to continue to watch.

We have central bank report out, and I think we'll talk about that.

But more important, watch how investors short term understand the conditions of economies and watch how they're going to continue to allocate to gold to give diversification.

So we're seeing a lot more.

Gold correlating more with equities, that's a condition of the environment today.

It's not necessarily what you have from the gold market over the long term.

You have growth over the long term.

You have the right kind of diversification benefits, but short term when risk assets are selling off and people are utilizing liquid instruments like gold, we have correlation behavior that comes up and it looks similar.

And finally, Joe, we have time for one last question.

So I do want to hone in on central banks, what the banks are doing right now when it comes to buying, but also in terms of the role of currencies, because given the rising energy prices, we know this has affected the FX. as well as rate differentials.

So what are we seeing when it comes to the central banks and also emerging markets, right?

So you mentioned our survey.

We have 76 banks that participated in our annual survey, a very highly sought after report that we publish every year.

I encourage everybody to take a look at it.

The key developments and the key signals that they're giving us is gold is going to continue to play a significant role in the reserve portfolio going forward.

Most, if not the majority of central banks are looking at gold over the next five years, somewhere between 78 plus an additional 5 between moderate increases.

And significant increases in gold as a reserve asset and component of the total over the next 5 years.

So there is going to be a continued interest and need to hold US dollars, but what is key is that the replacement or the substitute or the additional asset to bring into the reserve portfolio. is being signaled to us by the central banking community that gold is going to be the asset of choice.

It actually has liquidity that they need.

It can help them on the home front when they need to utilize it if there's an issue with their current account reserves or their currency onshore, but it also gives them the ability to be internationally engaging in broader conversations around economy, trade, etc.

So gold's really got a key component to play in the central bank reserve portfolios.

Again, you mentioned some of the statistics around growth of 45% in terms of overall.

Central bank levels adding to their portfolio.

Near 90% saying it's going to continue to be relevant and significant, and those are all the stats that are in the report.

They see the liquidity.

They see the ability to utilize the asset in risk moments, as well as preserving asset value when things are calm.

And that's why I think it's going to be a key role in the reserve portfolio going forward.

Well, Joe, always great having you on the show.

Thank you so much for joining me on Fed Day and also as we head into the second half of 2026.

Thanks.