Gold Hits Two-Month High on US Jobs Report, Central Bank Buying

2026-08-11

Funds are flowing back into gold. A weak US jobs report has eased expectations of further US rate hikes, while buying by central banks including China has continued, lifting prices to a two-month high. Fading confidence in the US dollar, the world reserve currency, is also supporting the metal.

What Pushed Prices Higher

London spot gold, one of the international benchmarks for the metal, rose to $4,371 per troy ounce, or about 31.1 grams, on the 7th, its highest since June. New York futures for the front-month contract also touched $4,432, a two-month high. The latest buying trigger was the US jobs report released on the 7th.

Nonfarm payrolls fell by 23,000 from the previous month, against market expectations for an increase of 83,000, prompting investors to scale back bets on further rate hikes by the Federal Reserve as the labor market weakens. Gold does not pay interest, so it tends to become more attractive when expectations for tighter monetary policy ease.

Inflow and Central Bank Buying

Kochiro Kamei, head of Market Strategy Institute, said institutional investors managing multiple assets such as stocks and bonds have started buying gold again.

The pause in the dollar's strength also helped. A joint Japan-US currency intervention at the end of July drove a correction in yen weakness and dollar strength, and the dollar index, which measures the greenback's overall strength against major currencies, fell below the key 100 level. Tim Waterer, chief market analyst at CFD broker KCM Trade, said gold and the dollar have historically moved in opposite directions, and the currency intervention has helped underpin gold prices.

Capital returning to gold-backed funds has also become clearer. Holdings of SPDR Gold Shares (GLD), one of the world's largest exchange-traded funds backed by physical gold, increased by $11 billion, or 9%, equivalent to about 1.7 trillion yen, in the week through the 7th, while the amount of gold held as backing rose by 10 metric tons.

At the root of the bullish shift in investor sentiment is central bank buying of gold. China is the leading example. According to the balance sheet released by the People's Bank of China on the 7th for the end of July, its gold holdings rose by 20 tons from the previous month. The increase was the largest since a 23-ton rise in October 2023. The latest buying extended a streak of monthly purchases to 21 straight months, the longest since December 1999, and buying has also accelerated since February, when the US and Israel launched military attacks on Iran.

According to the World Gold Council, a global research organization, central banks worldwide were net buyers of 288.9 tons of gold in April-June 2026, the largest for any comparable period since data going back 10 years. Poland, China and Uzbekistan led the buying.

What to Watch

Yom Grimm, director of foreign exchange and commodities sales at Australia and New Zealand Banking Group, said that in addition to bargain hunting at lower prices, the military clash between the US and Israel and Iran is boosting central bank demand for gold.

Since the US military began attacking Iran in February, there were also periods when gold came under pressure as rising oil prices increased expectations for further US rate hikes. Still, the view remains strong that the US has undermined the international order by changing the status quo through force. Kamei said the worsening fiscal position caused by ballooning war costs will further shake confidence in the dollar as the reserve currency.

In a survey by the World Gold Council of central banks worldwide from Feb. 5 to May 19, 84% of respondents said the share of gold in foreign exchange reserves would increase over the next five years, up from 76% a year earlier. By contrast, 74% said the dollar share would decline over the same period.

Even so, prices may not keep rising indefinitely. Conditions in the Middle East remain uncertain, and there is still a risk of a sharp spike in oil prices. Nicholas Frappell, global head of institutional markets at ABC Refinery in Australia, said London spot gold could rise as high as $4,420 in the near term, but added that investors would again watch US inflation data and crude prices closely as they gauge further upside for gold.

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