Central banks have been consistently adding to their gold reserves for years, propelling the price of the precious metal to a historic high of $5,600 per ounce. The latest survey from the World Gold Council also indicates that official sector purchasing intentions remain elevated.

However, Societe Generale has issued a note of caution, suggesting that stated central bank buying intentions may not fully materialize. Geopolitical tensions in the Middle East and volatility in energy markets could hinder the pace of gold purchases. The bank, using short-term forecasts, UK gold trade data, and London vault inventory figures, estimates total central bank purchases for the remainder of the year will be between 100 and 120 tonnes. It also notes that U.S. Treasury real yields will influence investment demand for gold, and that the metal lacks strong momentum for a significant short-term price rally.

Survey Signals Optimism, Central Bank Buying Intentions Hit Record High

This year, a record 79 central banks participated in the World Gold Council's special survey. Among the reserve managers surveyed, 89% believe global central bank gold reserves will continue to grow over the next 12 months. Forty-five percent of institutions plan to actively increase their gold holdings, a slight rise from 43% in 2025, also setting a new survey record.

While the market widely views strong official sector buying expectations as a core support for gold prices, Societe Generale's commodities team remains cautious. The bank's analysts state that ongoing geopolitical uncertainty in the Middle East, combined with supply-demand imbalances in the global energy market, presents multiple obstacles for reserve asset allocation by various countries.

Geopolitical Environment Depresses Gold's Priority, Short-Term Forecasts More Relevant

The analysts note that only with a de-escalation in the Middle East and a stabilization of energy prices can central banks once again prioritize physical gold purchases as a core allocation target. At present, various needs for safety and exchange rate stability are diverting funds. The analysts add that even amid external uncertainty, central banks retain some room for modestly increasing their gold holdings.

The institution proposes a new observation framework: rather than relying on full-year purchase plans, analyzing central bank buying behavior over a six-month short-term cycle aligns more closely with actual transaction patterns. An analyst stated, "Asset allocation institutions can only clearly plan their short-term holdings; it is difficult to accurately predict full-year asset allocation. Therefore, data on short-term intentions holds higher reference value." Based on this logic, the bank estimates global central bank purchases for the rest of the year will total 100-120 tonnes, roughly double the total purchases of the first four months, fitting the overall judgment of a gradual recovery in official buying.

Physical Trade and Vault Inventories Confirm Recovery, Asian Major as Core Inflow Market

Societe Generale stated that this forecast is corroborated by UK gold import-export data and London Bullion Market Association vault inventory figures.

The pace of UK gold exports has accelerated significantly, with total exports reaching 35 tonnes in April, a substantial increase from 13 tonnes in March, though still below the historical average for the period. The average April export since 2022 is 47 tonnes, and the average since 2015 is 53 tonnes. A major Asian nation is the primary destination for UK gold exports, with 25 tonnes shipped there in April, significantly above the historical average for the period.

Changes in LBMA vault inventories simultaneously confirm the increase in exports, directly reflecting a substantive recovery in physical purchasing demand from global central banks.

U.S. Treasury Real Yields Constrain Investment Demand, Gold Price Neutral for Summer

The institution distinguishes between official purchases and market investment demand, stating that central bank buying will be resilient throughout the year. However, the willingness of ordinary investors to allocate to gold depends primarily on the opportunity cost of holding it.

An analyst said, "Our baseline forecast indicates that the ten-year U.S. Treasury real yield will remain above 2% through the third quarter, only gradually declining from year-end into the first half of 2027. As a result, the overall gold market trend this summer is biased towards neutrality. Only when U.S. Treasury real yields fall and the opportunity cost of holding gold decreases can a better window for price appreciation emerge towards year-end."

Summary

In summary, the long-term trend of central banks increasing gold reserves has not reversed. However, Middle East geopolitics and energy volatility will slow the pace of short-term purchases, meaning one should not be overly bullish on gold prices based solely on optimistic survey expectations. Physical trade data confirms a recovery in buying, but persistently high U.S. Treasury real yields continue to suppress investment demand. Gold is likely to remain range-bound during the summer, with its year-end trajectory highly dependent on changes in U.S. bond yields.