Gold

Central Banks Keep Buying, but Gold Keeps Falling

co-produced by AI08. October 2026, 13:26

Close-up of stacked gold bars — Gold bars. © Jingming Pan / Unsplash

In the middle of a full-blown geopolitical crisis, the classic crisis currency is losing value: Gold now costs only about $4,100 (about €3,650) an ounce, down roughly seven percent since early September, according to data from the financial data provider LSEG. Compared with its record high of nearly $5,600 (about €4,980) at the end of January, the precious metal has lost about 27 percent. The reason is a chain reaction of oil prices, inflation and interest rates, as the latest market report from the Austrian precious metals dealer philoro shows.

September Brought the Correction

After a strong August, many had hoped gold would break through $4,700 (about €4,180). Instead, it lost about 6.5 percent in dollar terms in September. Year over year, it is still up about 14 percent, according to philoro. Silver fared similarly: It fell about 6.4 percent in September but remains more than 30 percent higher than a year ago.

“September shows that geopolitical uncertainty does not automatically support gold. When it leads to higher interest rates through oil prices and inflation, the gold price also comes under pressure in the short term,” said Rudolf Brenner, managing partner of philoro.

Three Central Banks Tighten

Monetary policy applied the most pressure. Three major central banks raised their key interest rates in September:

E.C.B.: The European Central Bank raised its key rate to 2.5 percent.
Fed: The U.S. Federal Reserve followed a few days later with an increase to 3.75 to 4 percent, its first hike since 2023.
Bank of Japan: It raised its key rate to 1.25 percent, the highest level since 1995.

That is a headwind for gold, because the precious metal itself pays no interest. “When government bonds, savings products or other interest-bearing investments offer higher returns again, gold becomes less attractive to some investors in the short term,” the philoro report says. A strong dollar adds to the pressure by making gold more expensive for buyers outside the United States.

Oil Pours Fuel on the Fire

Behind the rate hikes is the conflict in the Middle East. The Bab al-Mandab Strait, the key gateway to the Red Sea and the Suez Canal, has become a risk point, and the Strait of Hormuz remains a source of uncertainty. The effect shows up in oil: At the end of June, a barrel of Brent crude cost just under $74; by the end of September, it was back near $100, according to philoro. Diesel also became significantly more expensive.

Higher energy prices are driving inflation. In the eurozone, inflation rose to 3.2 percent in August from 2.9 percent, and in Austria to 3.2 percent from 2.8 percent. Germany reported 2.9 percent, with energy prices up 10.5 percent and heating oil up almost 50 percent. In September, eurozone inflation had already climbed to 3.8 percent, according to a flash estimate. The O.E.C.D. expects average inflation of 4.1 percent this year across the G20 countries, with global economic growth of 2.9 percent. “The picture thus remains split: more growth than feared, but more stubborn inflation,” philoro writes.

Gold is not the only asset hit by the oil shock. Bitcoin, which some call digital gold, recently fell below $84,000.

Central Banks and E.T.F.s Keep Buying

Still, the gold price is not in free fall, because big buyers remain in the market. Central banks added a net 39 tons to their reserves in August, according to the World Gold Council, bringing reported net purchases since the start of the year to 170 tons. China was once again the largest buyer with 20 tons, followed by Uzbekistan and Poland with eight tons each. Poland now holds about 640 tons of gold, 90 tons more than at the start of the year, according to philoro. Through these purchases, central banks are reducing their dependence on the U.S. dollar and other Western currencies.

Investors are buying, too. Gold E.T.F.s took in about $10 billion (about €8.9 billion) in September alone, according to the World Gold Council, and inflows for the third quarter as a whole reached a record $31 billion (about €27.6 billion). Demand was strongest in Europe and North America.

So far, these purchases have slowed the downtrend without stopping it. Market watchers warn that the short-term risk remains: If prices keep falling, the new E.T.F. buyers in particular could sell out of disappointment and deepen the correction. Philoro says the long-term outlook for gold remains intact nonetheless.