The gold rally, having reached a record high above $3,500 per ounce in April, has since stalled and requires a new catalyst to drive further gains.
Despite recent sluggishness, the price of the precious metal has risen by approximately 28% this year. This rally is primarily attributed to the global trade war, geopolitical risks, and central bank purchasing.
ETF inflows slows, net longs in futures fall
“Meanwhile, ETF buying, which has been another key driver this year, has been slowing down in recent weeks, indicating cooling investor sentiment,” Ewa Manthey, commodities strategist at ING Group said in a commentary.
Positive flows were significant in the first half of the year, representing the strongest semi-annual performance since the first half of 2020.
Typically, as gold prices increase, investor holdings in gold ETFs also tend to rise, and conversely, they fall when gold prices decline.
Despite this, current ETF holdings are still below their 2020 peak, suggesting potential for further accumulation, according to ING Group.
Source: ING Research
Central bank demand firm
Still, central bank demand remains robust, with consistent monthly purchases observed through May of this year.
Global gold reserves saw a net increase of 20 tonnes in May, attributed to central bank acquisitions. While this marks an increase from the previous month, it remains below the monthly average of 27 tonnes over the past year, as reported by the World Gold Council.
This month, the National Bank of Kazakhstan was the primary buyer, acquiring 7 tonnes. Turkey and Poland followed, each with net purchases of 6 tonnes.
In contrast, the Monetary Authority of Singapore (MAS) reported sales of 5 tonnes during the same period.
In June, the People’s Bank of China continued its trend of increasing official gold reserves, marking the eighth consecutive month of such acquisitions.
The central bank’s gold holdings expanded by 70,000 troy ounces last month.
Since November of last year, when the current series of purchases commenced, China’s gold reserves have grown by approximately 1.1 million troy ounces (around 34.2 tonnes).
Source: ING Research
Central bank to continue purchases
“We believe central banks are likely to continue to add gold to their reserves given the still-uncertain economic environment and the drive to diversify away from the US dollar,” Manthey said.
The World Gold Council’s 2025 Central Bank Gold Reserves Survey indicated a strong positive outlook on gold.
A significant 43% of central bankers plan to increase their gold reserves, and 95% anticipate an overall rise in official gold holdings within the next year, primarily due to gold’s role as a diversifier and hedge against crises and inflation, the survey showed.
Since the outbreak of the Russia-Ukraine war in 2022, central banks have doubled their annual gold purchases, increasing from approximately 500 metric tonnes to over 1,000 metric tonnes per year.
Source: ING Research
Central banks collectively purchased 1,045 tonnes of gold last year, making up approximately one-fifth of the total demand. The World Gold Council identified Poland, India, and Turkey as the leading purchasers in 2024.
Bullish drivers remain
“Still, the bullish drivers remain intact for gold, including central bank and safe-haven demand amid geopolitical and trade tensions,” Manthey said.
But with ETF demand cooling and net longs in gold futures declining, gold will need a fresh catalyst to lift it out of the current trading range.
Trade uncertainty persists as US President Donald Trump recently threatened new tariffs, including a 30% levy on the EU effective August 1, should a new agreement not be reached.
However, Trump indicated he is open to more trade talks, including with the EU.
“With global trade risks likely to stay elevated, creating an uncertain market environment, safe-haven demand is likely to remain a support factor,” Manthey said.
Should trade negotiations worsen, gold prices could once again reach an unprecedented high.
Conversely, consistently elevated gold prices might dampen consumer demand, thereby limiting gold’s upward potential, according to Manthey.
For now, gold is stuck in a range, in need of a fresh catalyst, and with trade and geopolitical tensions heating up again, it might not take much to reignite that rally.
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