Central banks are increasingly turning to gold as protection against financial crises, inflation, and geopolitical risks, according to a World Gold Council survey highlighted Tuesday by market commentator The Kobeissi Letter. The survey of 69 central banks found that 90% of respondents cited gold's performance during periods of crisis as a primary reason for holding the precious metal. This trend was even stronger among emerging market and developing economy central banks, where 92% identified crisis performance as a primary driver, compared with 81% of advanced economy central banks.

Crisis Protection Drives Gold Demand

Beyond crisis protection, 84% of respondents cited gold's role as a long-term store of value and hedge against inflation. The survey also found that 85% of emerging market central banks viewed gold as a hedge against geopolitical risks, compared with 56% of advanced economy central banks. Central banks have remained among the largest buyers of gold in recent years, helping support prices as countries diversify reserves amid geopolitical and economic uncertainty.

Accumulation Trends and Forecasts

A separate World Gold Council survey published on June 16 found that central banks bought an average of 1,000 metric tons of gold annually over the past four years, double the previous decade's pace. Additionally, 89% of central banks expect global reserves to rise over the next 12 months. Economist Mohamed El-Erian stated that renewed, consistent central bank buying is the primary factor needed to reverse gold's recent weakness. He noted that lower oil prices could support this trend by easing pressure on many countries' foreign exchange reserves, potentially allowing central banks to resume accumulating gold.

Market Context and Price Action

Spot gold prices were trading around $3,973 an ounce at publication time, hovering near an eight-month low as higher interest-rate expectations weighed on the metal. The decline represents a notable shift from the record highs of approximately $5,600 per ounce reached in January 2026. The metal had previously rallied on geopolitical tensions, strong central bank demand, and expectations for lower interest rates. However, the Federal Reserve's hawkish stance on interest rates has recently outweighed support from easing geopolitical tensions.

Divergent Bank Forecasts

Major financial institutions hold differing views on gold's trajectory for the remainder of the year. Goldman Sachs lowered its year-end 2026 gold price target to $4,900 an ounce from $5,400, citing a more hawkish Federal Reserve and weaker-than-expected demand for gold-backed exchange-traded funds. Conversely, UBS continues to forecast gold at $6,200 by year-end, while JPMorgan maintains a more bullish target of about $6,300.

ETF Performance

The most popular ETF benchmark, SPDR Gold Shares (NYSE: GLD), has fallen for four consecutive months since the record high in January 2026. GLD has declined 7.24% so far this year. On Tuesday, GLD closed 0.05% lower at $368.38 and fell further by 0.24% in after-hours trading. CMC Markets analyst Daniel Kostecki noted that higher real Treasury yields have increased the opportunity cost of holding non-yielding assets such as gold, making Federal Reserve policy a bigger influence on prices than geopolitical developments in the near term.

Gold has spent much of the past few years benefiting from geopolitical uncertainty, central bank buying and growing concerns over government debt. But heading into the second half of 2026, analysts say another factor has become even more important: interest rates. According to Daniel Kostecki, market analyst at CMC Markets, rising real yields have become the dominant force driving gold prices, overshadowing many of the geopolitical catalysts that traditionally fuel demand for the precious metal. For investors in SPDR Gold Shares (NYSE: GLD), iShares Gold Trust (NYSE: IAU) and gold miners such as Newmont Corp. (NYSE: NEM) and Barrick Mining Corp. (NYSE: B), that could make the Federal Reserve a bigger catalyst than global headlines over the coming months.

Gold's Biggest Headwind Is Rising Real Yields

Gold's long-term investment case remains intact. Central banks continue accumulating bullion, while geopolitical tensions and fiscal concerns have helped support prices in recent years. However, Kostecki argues that markets have increasingly shifted their attention toward real interest rates.

"As inflation expectations have eased and U.S. Treasury inflation-protected securities (TIPS) yields have moved higher, the opportunity cost of holding a non-yielding asset has increased," he wrote. "That has taken some of the momentum out of gold's rally."

Unlike bonds, gold generates no income. When inflation-adjusted Treasury yields rise, investors can earn higher real returns from fixed-income assets, making gold comparatively less attractive.

The Fed May Matter More Than Geopolitics

The recent pullback in gold does not necessarily signal weakening confidence in the metal. According to CMC Markets, exchange-traded fund flows have moderated rather than reversed sharply, while central bank demand remains supportive. Instead, investors appear to be becoming more selective after aggressively buying gold earlier this year.

For that reason, Kostecki believes the Federal Reserve's next moves may prove more influential than geopolitical developments. "For H2, the outlook for gold will depend heavily on the path of interest rates," he wrote. "A decline in real yields could provide the catalyst for another move higher, while a stronger dollar and persistently elevated rates may continue to limit upside."

His conclusion is straightforward: "Gold retains its role as a defensive asset, but for now the price of money matters more than geopolitics."

What It Means For Gold Investors

The implication is that investors may need to pay closer attention to inflation data, Treasury yields and Federal Reserve policy than they have in recent years. If real yields begin to decline alongside Fed rate cuts, gold could regain momentum as the opportunity cost of owning the metal falls. If rates remain higher for longer, however, gold may continue finding support from central bank buying while struggling to deliver the powerful rallies investors have grown accustomed to.

For now, the long-term bull case for gold remains intact. The next major catalyst simply may come from Washington rather than the world's geopolitical hotspots.