Gold Returns to the Macro Conversation

Gold is back in focus as shifting rate expectations, rising US fiscal concerns and persistent geopolitical risks reshape the macroeconomic backdrop and support renewed demand.

Gold
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Gold Reassesses the Macro Backdrop

Earlier this year, gold entered a more complicated phase after one of its strongest multi-year rallies. As tensions in the Middle East ebbed and flowed, so did gold, often in the opposite direction to expectations, falling as tensions escalated and recovering as the prospect of peace (re)emerged. This appeared to challenge the conventional relationship between gold and geopolitical risk.

Since then, the picture has shifted. Gold fell below $4,000/oz in June and July as higher oil prices fuelled inflation concerns. Markets had moved from pricing in further Federal Reserve interest rate cuts towards possible rate rises, weighing on gold.

Fiscal Risks Return to Focus

By the end of August gold was back trading above $4,600/oz[1]. Fiscal concerns are increasing in the US, where the national debt has passed $40 trillion and the statutory debt ceiling stands at $41.1 trillion[2]. With the gap narrowing, the debt ceiling is likely to become a more prominent political issue as the US approaches the November midterm elections. On the current trajectory, it could be reached sometime in 2027[3].

That makes the midterms particularly relevant to the outlook for US fiscal policy, and gold. A divided Congress could make negotiations over the debt ceiling more difficult ahead of the 2028 presidential election cycle. Any renewed confrontation could add to uncertainty around US borrowing and Treasury markets, at a time when markets are already contending with elevated long-term yields and a rapidly expanding debt burden.

The Iran conflict adds another layer. With the conflict still unresolved, energy prices, inflation and monetary policy remain intertwined with geopolitical risk. Recent developments have pushed oil higher and complicated the Federal Reserve’s policy outlook. Against this backdrop, gold’s recent recovery is notable, suggesting investors are looking beyond the immediate direction of interest rates and towards gold’s broader role as a portfolio diversifier.

Central Banks Keep Buying

Central-bank behaviour reinforces that interpretation. The World Gold Council’s Q2 Gold Demand Trends reported 289 tonnes of central-bank purchases, a 62% increase year-on-year and a sharp rebound from Q1[4]. The World Gold Council expects central banks to remain significant buyers through the second half of 2026[5].

Its latest Central Bank Gold Reserves Survey points to continued structural demand. A record 45% of respondents expect to increase their gold holdings over the next 12 months, while 89% expect global central-bank gold reserves to rise[6]. Some 83% believe gold will represent a higher share of total reserves in five years[7].

While central bank purchases have been a strong market feature, this is no guarantee of future price support. Official-sector demand can vary, and central banks typically adjust their reserve mix in response to domestic policy needs rather than market signalling.

Retail Market Remains Resilient

Demand extends beyond central banks. The World Gold Council found bar and coin purchases remained resilient in Q2, down just 3% year-on-year, while first-half demand was 21% higher than the same period in 2025[8].

The Royal Mint’s transaction data may indicate retail behaviour during the correction. When gold fell below £3,000/oz, the weight purchased through the mint’s website was 29% above the quarter’s daily average, while sales fell 29%[9]. Customers bought five times more gold than they sold in a single day[10].

These trends point to a gold market supported by diverse demand. Central banks continue to accumulate bullion, with some using price weakness to add exposure, potentially seeking diversification against fiscal, geopolitical and monetary uncertainty.

Gold remains influenced by bond yields, US dollar strength and monetary policy, but the breadth of demand points to a broader strategic role. As attention returns to fiscal, geopolitical and diversification concerns, these longer-standing drivers may come into sharper focus.

Investors can gain gold exposure through various methods such as holding physical gold directly or through financial instruments such as gold ETPs, though gold can be volatile and its price can move sharply over short periods.

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IMPORTANT INFORMATION: This material does not constitute a marketing document. It is not an invitation to invest but to be read for educational purposes only. Past performance and forecasts are not reliable indicators of future results.

  1. Committee for a Responsible Federal Budget, ‘Upcoming Congressional Fiscal Policy Deadlines,’ 28.07.2026.
  2. Public Law 119-21, §72001, 139 Stat. 332 (2025); Congressional Research Service, The Debt Limit Since 2011, R48611 (2025).
  3. Ibid.
  4. Ibid.
  5. World Gold Council, Gold Demand Trends: Q2 2026, 30.07.2026.
  6. World Gold Council, Central Bank Gold Reserves Survey 2026, 16.06.2026.
  7. Ibid
  8. World Gold Council, Gold Demand Trends: Q2 2026, 30.07.2026.
  9. Ibid.
  10. The Royal Mint, Investors Respond to Precious Metals Price Correction as Demand Increases Towards Quarter-End, 28.07.2026.
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