Gold climbs toward $4,000 as central bank buying underpins demand

Gold edged higher in early Asian trading on Thursday but remained below the psychologically important $4,000 an ounce level, as sustained central bank buying continues to provide a structural floor under prices.

"Central bank buying is likely to remain a structural driver for gold demand," according to a note from UBS's chief investment office, which called for gold to hit $5,200 over the next 12 months and described recent trading levels as an opportunity for underallocated investors.

Spot gold traded at $3,987.40 an ounce as of 09:30 Hong Kong time, up 0.3% on the session. The precious metal has traded in a narrow range around $4,000 since the start of the second half, leaving it down more than 5% year to date. Silver traded at $58.72 an ounce, down nearly 20% in 2026.

The consolidation comes even as geopolitical tensions around the Strait of Hormuz have re-escalated, a scenario that historically would have boosted haven demand. Higher interest rate expectations have offset those tailwinds, with markets pricing in at least one Federal Reserve rate hike this year after June's consumer price index showed headline inflation at 3.5%, still above the Fed's 2% target.

Central Bank Demand Provides a Floor

Central banks have added more than 1,000 tonnes of gold annually for the past three years, according to World Gold Council data, with purchases concentrated among emerging-market central banks in China, Poland and India diversifying reserves away from the US dollar. That structural bid has helped gold hold above $3,800 even as the dollar strengthened and real yields rose.

VanEck precious metals portfolio manager Imaru Casanova described the recent pullback as noise, noting gold remains up roughly 22% from a year ago when it traded near $3,300. Mining equities have gained about 46% over the same period, compared with the S&P 500's 22% advance, she said in a note.

Mining Stocks Offer Value as Gold Consolidates

Gold miners offer 12% earnings yields, the highest of any sector, and trade at the cheapest valuations relative to the S&P 500 in two decades, according to Bank of America analysts. With all-in sustaining costs for the sector estimated below $2,000 an ounce in 2026 and gold averaging about $4,700 an ounce so far this year, margins remain strong even at current prices.

Consensus mean estimates compiled by VanEck project average annual gold prices of $4,700 for 2026 and 2027, and above $4,000 through 2029. The next catalyst for prices could come from the Fed's July 30-31 policy meeting, where any signal of a prolonged pause would support the case for lower real rates.

This article is for informational purposes only and does not constitute investment advice.