Gold Rebounds as Central Banks Expand Their Reserves

Gold prices recovered from a two-month low to close Friday at $4,196.07 an ounce, gaining 1.5% as a weaker US dollar and declining Treasury yields eased pressure on the precious metal. The rebound followed an earlier pullback, while continued central bank purchases and strong investment demand provided additional support, according to Reuters and the World Gold Council.

Beyond the daily price recovery, official reserve accumulation and investment flows remain important features of the market. The Federal Reserve's interest rate outlook continues to influence gold prices because expectations of persistently restrictive monetary policy can weigh on the non-yielding asset.

The People's Bank of China reported that its gold reserves reached 77.47 million ounces at the end of September. The central bank added 740,000 ounces during the month, extending its net-buying streak to 23 consecutive months.

Global physically backed gold exchange-traded funds recorded $31 billion in net inflows during the third quarter, setting a quarterly record, according to the World Gold Council. September accounted for $10 billion of those inflows, while total holdings increased by 67 metric tons to a record 4,256 metric tons.

European funds attracted $14 billion during the quarter, while North American funds received $12 billion. These regional figures highlight the breadth of investment demand despite recent fluctuations in gold prices and changes in financial market conditions.

Central bank buying has also remained part of the broader demand picture. Reuters reported that two central bank officials speaking Monday at the LBMA conference in Italy described gold as a strategic reserve asset despite elevated bond yields, citing sovereign debt levels and geopolitical uncertainty.

Morgan Stanley expects gold to remain supported over the medium term, with the potential for further gains over the next twelve months. Analyst Amy Gower expects prices to find support above $4,000 an ounce and potentially rise above $5,000 in the second half of 2027.

Gower identified exchange-traded fund inflows and central bank purchases, including those by China and Poland, as key drivers of the outlook. However, the forecast remains subject to changes in bond yields, currency movements and monetary policy expectations.

Investors are now watching upcoming US consumer price data for signals about the Federal Reserve's next policy steps. Inflation that remains higher than expected could strengthen expectations that interest rates will stay restrictive for longer.

Technical indicators also remain in focus. The 50-day moving average stands at $4,346.27, a level market participants are monitoring as a potential upside reference following Friday's recovery.