Global Central Banks' Gold Buying Hits Q2 Record High, Deeply Reshaping Gold Market Supply-Demand Pattern

1. Central Bank Gold Purchases Hit Record: Global Reserve Diversification Accelerates

The World Gold Council's Global Gold Demand Trends Report, released on July 28, 2026, shows that global central bank net gold purchases reached 286 tons in Q2 2026, up 25% year-on-year, the highest for any second quarter on record. This figure far exceeds the quarterly average of 2018-2022 (about 140 tons), reflecting strong intentions among central banks to use gold as a strategic reserve asset amid geopolitical uncertainty and changes in the dollar credit system.

By region, emerging market central banks continued to dominate as buyers. The People's Bank of China added for the 18th consecutive month, purchasing 62 tons in Q2; the Reserve Bank of India followed suit with 47 tons; and Turkey, Poland, the Czech Republic, and others maintained steady purchases. Notably, some developed European central banks also quietly increased holdings; for example, the Hungarian central bank added 9 tons of gold reserves in Q2, its largest quarterly increase in nearly a decade. Analysts note that this phenomenon of "synchronized buying by both East and West" is historically rare, signaling profound changes in the global monetary system.

2. Supply Side Under Continued Pressure: Mine Output Growth Lacks Momentum, Recycled Gold Cannot Fill the Gap

In contrast to robust official demand, gold supply faces growth bottlenecks. Report data shows global gold mine production in Q2 2026 was about 845 tons, up a marginal 1.2% year-on-year, with the main increase from expansion at existing mines in Canada and Australia, while output in old mining regions such as South Africa and Peru declined due to falling ore grades and rising operating costs. Additionally, recycled gold (secondary gold) supply was 317 tons, up 3% quarter-on-quarter, but still insufficient to cover the demand gap. World Gold Council market analyst Emily Zhang stated in the report: "Gold mining requires a 5-10 year upfront investment cycle. Despite current high prices, output cannot increase significantly in the short term. Supply rigidity is becoming a key factor supporting gold prices in the long run."

Supply-demand tension is directly reflected in inventory changes. Total gold inventory at major global exchanges (including the Shanghai Gold Exchange, COMEX, and LBMA) fell to about 11,200 tons by end-Q2, the lowest since 2020. COMEX registered inventories declined for three consecutive months, raising concerns among some traders about delivery pressure, further exacerbating price spreads between physical gold and futures markets.

3. Investment Demand Diverges: ETF Outflows Coexist with Physical Buying

Unlike persistent buying by central banks and ordinary consumers, institutional investors showed clear caution in Q2. The report shows global gold ETFs (exchange-traded funds) saw net outflows of about 53 tons in Q2, a second consecutive quarterly outflow. Fund outflows were concentrated in North American and European markets, with some large funds reducing holdings at high levels to lock in profits. However, gold ETFs in Asian markets, especially China and India, saw inflows, with combined net additions of 19 tons, indicating strong safe-haven preferences among retail investors.

This pattern of "Western outflows, Eastern inflows" reflects differing expectations among investors across markets. In the West, expectations of another Fed rate hike within the year dampened gold's short-term appeal; in the East, pressure from local currency depreciation and a prolonged real estate downturn prompted ordinary households to increase gold allocations. Senior gold market analyst Martin Krueger comments: "Gold investment demand has shifted from a single safe-haven logic to a diversified allocation logic. The buying behavior of emerging market consumers is changing the traditional demand cycle."

Additionally, demand for gold bars and coins rose 8% year-on-year in Q2 to 281 tons, with India and China contributing 38% and 25% of the increase, respectively. The impact of India's tariff reduction on gold imports continued, pushing local gold bar sales to a five-year high.

4. Jewelry Demand Remains Weak: High Prices Suppress End-User Demand

As the largest component of gold demand, jewelry consumption was sluggish in Q2. The report shows global jewelry demand was 467 tons, down 12% year-on-year, declining for three consecutive quarters. The largest declines were in China and India, falling 18% and 15% respectively. Despite various promotions by jewelry retailers, high absolute prices deterred consumers. In India, gold prices remained above 60,000 rupees per 10 grams, causing most households to shift purchasing budgets to government bonds or bank deposits. In China, jewelry sales hit a new low since 2022, with younger consumers favoring lightweight products such as 3D hard gold and antiqued gold to control single expenditures.

However, structural changes in jewelry demand also brought new highlights. Sales of high-end custom and designer jewelry rose 7% year-on-year, indicating strong consumption resilience among high-net-worth individuals. Meanwhile, gold used in industrial production and technology remained stable at 81 tons in Q2, driven mainly by semiconductor packaging demand in the electronics industry.

5. Outlook: Short-Term Consolidation, Long-Term Bullish Logic Unchanged

Based on the above supply-demand analysis, the World Gold Council has a neutral-to-bullish outlook for the gold market in the second half of 2026. The report notes that sustained central bank buying and steady industrial demand will provide solid support for gold prices, but volatility in investment demand and monetary policy uncertainty could lead to wide fluctuations in the $2,220-$2,380 per ounce range. If the Fed unexpectedly raises rates in Q3 or geopolitical tensions ease, gold prices may briefly dip toward $2,180; conversely, if global recession risks increase or central bank buying accelerates, prices could return above $2,400 and hit new highs.

Longer term, many analysts believe the bull market foundation remains strong. Global debt expansion, de-dollarization trends, and diversification of central bank reserve structures will continue to drive official gold demand. Supply-side constraints will push the central price level higher over time. For individual investors, gold allocation at this point should focus more on strategic holding than short-term speculation, considering regular investment in physical gold bars or gold ETFs to smooth price volatility risks.

Notably, the gold market is undergoing a return from "financial asset" to "monetary asset". The fact that central banks continue to buy heavily even in a high-interest-rate environment indicates a fundamental shift in gold's role in global portfolios. As Carsten Monk, commodity analyst at Julius Baer, puts it: "We are witnessing the start of another structural bull market in gold history, and the Q2 2026 demand data is merely a footnote to this process."