Spot gold closed above $3,400 per troy ounce for the first time on Friday, settling at $3,412.70 in late New York trading after a 2.1% intraday advance. The move extends the metal’s year-to-date gain to 28.4% and cements 2026 as the strongest year for gold since 1979, according to data compiled by the World Gold Council.
The rally is no longer a simple safe-haven trade. It is increasingly a story about sovereign balance sheets repositioning away from the US dollar — and doing so faster than most Western analysts expected.
Central banks are back in the market, in size
The World Gold Council’s Q1 2026 demand report, published earlier this week, showed official-sector buying of 324 tonnes in the first quarter alone. That is the highest quarterly total on record and already nearly one-third of 2025’s full-year pace. China’s People’s Bank of China added gold reserves in 18 of the last 20 months, while Poland, India, Turkey, and Kazakhstan all increased allocations during the quarter.
“We are watching a structural shift, not a tactical rotation,” Krishan Gopaul, senior analyst at the World Gold Council, told the Financial Times. “Central banks are treating gold as a neutral reserve asset in a way we have not seen since Bretton Woods.”
The BRICS summit in Kazan last October accelerated the narrative. Eight member and partner economies committed to exploring a gold-backed settlement mechanism for cross-border trade, and Russia’s finance ministry confirmed this month that initial commodity settlements with India have already used the framework.
Tariffs and Middle East risk on top
The official-sector bid is not the only driver. The Trump administration’s April tariff package — which the IMF warned last week could shave 0.8 percentage points off 2026 global growth — has revived inflation hedging flows. US five-year breakevens climbed to 2.71% on Friday, their highest since 2023, and ETF gold holdings are net positive for the year after three consecutive years of outflows.
Meanwhile, escalating tensions between Israel and Iran have pushed Brent crude back above $92, adding another layer of stagflation anxiety to the macro backdrop.
What comes next for the dollar
The DXY dollar index has fallen 6.4% year-to-date, and the Japanese yen’s break through 165 earlier this week is only one symptom of the broader pressure. Goldman Sachs raised its 12-month gold target to $3,700 per ounce on Thursday and warned that “if central bank demand continues at Q1’s pace, we will need to lift again.” JPMorgan’s commodities team went further, sketching a bull case of $4,000 should Federal Reserve Chair Jerome Powell signal cuts at the June FOMC meeting.
Not every voice is bullish. UBS noted in a client report that speculative long positioning on COMEX is now at a two-year high, which historically precedes short-term pullbacks of 5% or more. Bank of America’s commodity desk also flagged the risk that any de-escalation in the Middle East could trigger a fast $100-plus correction.
But the structural picture is unambiguous. For the first time in a generation, major central banks are treating gold as a strategic alternative to dollar reserves — and the price is responding accordingly. The $3,500 handle, which looked distant at the start of the year, now looks like a question of weeks rather than months.
Discussion
Sign in to join the discussion.
No comments yet. Be the first to share your thoughts.