Gold prices forecasted to escalate in the second half of the year, primarily fueled by interventions from central banks
In recent years, a significant shift has been observed in the global financial landscape, with central banks increasingly turning to gold as a means of reducing their reliance on the U.S. dollar. This trend is particularly evident in the actions of China, the world's largest gold producer, but very little of whose output is exported.
China, which currently holds the seventh-largest gold reserves globally, has been a significant player in this gold-buying spree. Other nations, such as India, the United Arab Emirates (UAE), and Qatar, are also following suit, aiming to reduce their dependence on the U.S. dollar.
While the demand for gold in the jewelry sector has been slumping due to high prices and trade uncertainties, particularly in major markets like China and India, central banks, including China, continue to buy large amounts of gold as a strategic hedge against inflation, currency risks, and geopolitical uncertainties.
In 2025, jewelry demand fell sharply, with China and India, historically the two largest consumers, seeing their combined market share drop below 50%. On the other hand, central banks, despite a temporary decline in quarterly purchases, are forecast to purchase substantial amounts of gold this year.
According to J.P. Morgan forecasts, central banks, particularly China, are expected to buy approximately 900 metric tons of gold in 2025. This accumulation reflects a broader strategic move to strengthen portfolio resilience amid ongoing monetary uncertainty and global geopolitical tensions.
The price of gold has soared to just over $3,300 per troy ounce, and experts predict that it could reach $4,000 by mid-2026, according to Goldman Sachs. This gold rally is largely attributed to sustained buying by central banks, particularly China's.
In fact, many analysts believe Beijing's actual gold holdings are far higher than the reported 2,292 tons. Michael Eubel, head of precious metals trading at BayernLB, believes that as long as central banks continue to build up gold reserves, prices will keep moving north.
Moreover, in 2025, Poland has been the most active gold buyer, purchasing more than 48 tons so far, according to the World Gold Council. The World Gold Council also predicts that gold prices will keep climbing, albeit at a slightly slower pace.
The price of gold is expected to continue rising into the second half of the year, reflecting the strategic shift in global financial dynamics and the increasing role of gold as a stable asset in volatile markets. This trend is particularly significant for China, which aims to end U.S. dominance and holds significant gold reserves as a key component of great-power status.
The increasing gold buying by central banks, particularly China, is shaping up as a significant factor in the global economy, with forecasts expecting Chinese banks to buy approximately 900 metric tons of gold in 2025. This accumulation of gold is seen as a strategic move to strengthen portfolio resilience amid ongoing monetary uncertainty and global geopolitical tensions, serving as a hedge against inflation, currency risks, and geopolitical uncertainties.
As the price of gold continues to rise and experts predict it could reach $4,000 by mid-2026, this gold rally is largely attributed to sustained buying by central banks, particularly China's, due to their aim to reduce dependence on the U.S. dollar and secure financial stability in the business world.
