Gold has lost about a quarter of its value since peaking at $5,589 an ounce in January, yet demand from some of the world's biggest buyers has held up. Who is buying, and what do they see?

Who is buying

The People's Bank of China (PBoC) has bought gold for 22 consecutive months through August, lifting its gold reserves to roughly 2,387 tonnes, about 9% of its total foreign exchange reserves. China's net gold imports reached 764 tonnes in the first half of 2026, up 138% year on year. Goldman Sachs estimates that China also bought around 88 tonnes through London's over-the-counter market in May and June, which suggests official figures understate its total purchases.

Meanwhile, Hong Kong is set to expand its gold vaulting tenfold, from about 200 to over 2,000 tonnes by 2030, with a new central clearing system for physical gold.

It's not just central banks that are buying. By January 2026, the State Oil Fund of the Republic of Azerbaijan (SOFAZ) held around 200 tonnes of gold, 38% of its portfolio, though it sold about 22 tonnes in the first quarter as it neared its own limit on gold holdings. The Bank of Korea disclosed a $250 million stake in a gold ETF in June, its first gold-linked purchase in 13 years. Indonesia's state bullion banks, Pegadaian and Bank Syariah Indonesia, gathered about 153 tonnes in 17 months, alongside an estimated 1,800 tonnes held by households, far more than Bank Indonesia's own 87 tonnes.

Individuals are buying too. Global bar and coin demand hit 784 tonnes in the first half of the year, one of the strongest on record.

Why they might be buying

Reserve diversification: 74% of reserve managers surveyed expect the dollar's share of reserves to fall within five years. Central banks bought about 1,000 tonnes a year in 2022-2025, double the previous decade's average.

Investment allocation: Wealth funds and other investors hold gold as part of their portfolios, positioning for higher prices.

Price: Some of China's import surge was linked to lower gold prices and a stronger yuan, so part of the buying is opportunistic.

The tug-of-war

What's pulling gold down: Higher oil prices, linked to US-Iran tensions around the Strait of Hormuz, are keeping inflation worries alive and interest rates elevated. The US Federal Reserve (the Fed) raised rates in September, and the two-year Treasury yield rose from about 4.1% to 4.9% in five weeks, making gold, which pays no interest, less attractive.

What's pulling it up: Gold has dipped to around $4,000 several times, hitting $3,959 on 24 June and $3,994 on 29 July, but has bounced back each time. Long-term buying has stepped in on each dip, including steady purchases by China's central bank. The US Treasury has also doubled its long-bond buybacks to $4 billion per operation, aimed at capping yields, which would likely weaken the dollar over time and support gold.

What to watch

Warsh's Fed review: Kevin Warsh, who became Fed Chair in May, has set up five task forces to rethink how the Fed operates, including how it judges inflation. They are due to report at the end of 2026. If their conclusions point to lower inflation, that could clear the way for rate cuts, which would help gold, with 2027 the earliest. Warsh hasn't said which way rates will go.

Inflation data: A September 2026 update to how the US Bureau of Economic Analysis (BEA) calculates the Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, is estimated to lower measured core inflation by around 0.2 percentage points. That could strengthen the case for rate cuts and support gold. Part of the apparent easing, however, reflects the new method, not slower price rises.

China's pace: China's central bank may slow its buying if gold approaches its all-time highs.

US-Iran conflict: If the conflict eases, oil prices and inflation should fall, giving gold more room to rise.

A rebuilding $4,000 floor, China’s structural demand and the US’s cyclical rates tailwind are currently pointing the same direction. Reserve diversification links all three, and Warsh’s 2027 framework review stands out as the catalyst that could re-rate gold sharply higher. However, oil, interest rates and Fed policy could still sway it in the near term. Whether that level holds is the question to watch.