Headline: Central Bank Demand Puts a Floor Under Gold as ETFs Stay Cautious
Introduction: Gold’s reputation as a portfolio diversifier remains intact, even as its traditional inverse relationship with risk assets has weakened. The latest market insight points to official-sector buying as the dominant force supporting bullion prices—and a key reason the metal keeps outperforming model-based fair values.
While financial-market positioning has become less reliable for timing moves in the gold market, sustained purchases by central banks and reserve managers are creating a structural backstop for prices. These buyers have repeatedly stepped in during periods of weakness, reinforcing gold’s defensive appeal at a time of elevated macro uncertainty and shifting correlations with equities and bonds.
By contrast, ETF flows have been slower to respond. With realized volatility still high, both retail and institutional investors appear less inclined to “buy the dip,” muting the influence of flow-driven demand on short-term price action. That divergence underscores a market increasingly led by strategic reserve accumulation rather than speculative positioning.
Against this backdrop, the outlook remains strategically bullish. Ongoing official-sector accumulation continues to explain gold’s persistent premium to fair-value models, and there are upside risks to projections for the medium term. The forecast for a 2026 average price of around $4,000 per ounce could prove conservative if central bank buying stays robust and volatility keeps sidelining ETF flows.
Key Points: – Gold still functions as a portfolio diversifier despite weaker negative correlation with risk assets. – Central banks and reserve managers are the primary drivers of bullion demand. – Official-sector buying on price dips is creating a structural floor for the gold market. – ETF investors remain cautious amid elevated realized volatility, dampening dip-buying. – Strategically bullish outlook persists, with upside risk to a 2026 average price near $4,000/oz.
