Hawkish Fed Minutes and Oil-Driven Inflation Squeeze Gold Despite Record Central Bank Demand

Gold slumped to $4,043.60 an ounce on Thursday, extending its weekly loss to 2.25%, after the release of Federal Reserve minutes revealed a more aggressive tightening stance than markets had anticipated. The precious metal has now surrendered 6.87% since the start of the year, leaving it just 3.65% above its 52-week low of $3,901.30.

The minutes from the latest Federal Open Market Committee meeting, the first under Chair Kevin Warsh, showed policymakers determined to keep interest rates elevated to combat stubborn inflation. Several members even floated the possibility of additional rate hikes, dashing hopes that had supported gold earlier in the year for imminent easing. Traders quickly priced in a greater chance of a move at either the July or September gathering.

A key driver of the Fed’s hawkish posture is the inflation backdrop. US consumer prices climbed to 4.2% in May 2026, the highest reading in three years, largely due to soaring energy costs. Since late February, a blockade of the Strait of Hormuz has disrupted a significant portion of global oil and gas shipments, keeping fossil fuel prices elevated and adding to cost pressures.

Ordinarily, such geopolitical turmoil would funnel capital into safe-haven assets like gold. But this time the effect has been muted — the rising inflation expectations have reinforced the narrative of higher-for-longer rates, boosting the dollar and pushing up bond yields. A stronger greenback makes dollar-denominated bullion more expensive for overseas buyers, while higher yields increase the opportunity cost of holding the non-yielding metal. Investors have responded by rotating into cash or interest-bearing instruments, triggering substantial outflows from physically backed gold ETFs.

Should investors sell immediately? Or is it worth buying Gold?

The technical picture has darkened considerably. Gold is now trading 7.78% below its 50-day moving average and 10.91% below the 200-day moving average. Analysts highlight the formation of a so-called “death cross,” where the short-term average has slipped beneath the long-term trend line — a pattern often interpreted as a signal of sustained downside momentum. The relative strength index has fallen to 38.4, flirting with oversold territory, while 30-day volatility stands at nearly 28%, underscoring persistent nervousness.

Yet against this bearish tide, central banks continue to accumulate gold at an extraordinary pace. The People’s Bank of China added roughly 480,000 fine ounces to its reserves in June, marking the 20th consecutive month of purchases and the largest increase since October 2023. A survey by the World Gold Council conducted in June 2026 found that a record 45% of central banks intend to raise their gold holdings within the next twelve months. Analysts view the buying as a vote of no confidence in fiat currencies, with lower prices seen as buying opportunities by sovereign buyers.

The resulting tension between robust official-sector demand and deteriorating market sentiment has left gold in a tight range. From its 52-week peak of $5,626.80 set in January, bullion is now off by 27.9%. All eyes are on the $4,000 psychological threshold; a decisive break below that level could open the path toward the next support zone near $3,500, based on technical levels cited by strategists. Upcoming US inflation data due later today will be the next test — a further upside surprise would likely add to the selling pressure.