Gold Demand Surges 18% as Central Banks Accumulate, Dollar Weakens

Analysts have highlighted that gold is likely to experience its strongest market phase ever, driven by a combination of central bank accumulation and the weakening of the US dollar. This bullish outlook is supported by several key factors currently shaping the global economic landscape.

Central banks around the world have been actively increasing their gold reserves, a trend that has been gaining momentum. This accumulation is seen as a strategic move to diversify their holdings and hedge against potential risks associated with fiat currencies. The increased demand from central banks is expected to provide a significant boost to gold prices, as these institutions are typically long-term holders and are less likely to sell their gold holdings in the short term.

According to analysts, gold funds witnessed approximately $8 billion in net inflows three weeks ago, a record-setting total that suggests a continued flight to safety. As a result, the four-week moving average of inflows jumped to approximately $4 billion, also an all-time high. This is likely the strongest gold market of all time.

The analysts also note that gold holdings as a percentage of global reserves have surged to approximately 18%, the highest in 26 years. This indicates a significant shift in global reserve management strategies, with more countries opting to hold gold as a stable and reliable asset.

The weakening of the US dollar is another critical factor contributing to the bullish sentiment surrounding gold. A weaker dollar makes gold more affordable for buyers using other currencies, thereby increasing demand. This dynamic is particularly relevant in regions where the local currency has been depreciating against the dollar. The widespread weakness of the US dollar has been more pronounced this year, exacerbating the trend and making gold an attractive safe-haven asset.

Safe-haven buying, driven by geopolitical uncertainties and economic instability, is also fueling the surge in gold prices. Investors are turning to gold as a reliable store of value in times of uncertainty, further boosting demand. This trend is evident in various markets, where gold is seen as a hedge against inflation and other economic risks.

The combination of these factors—central bank accumulation, US dollar weakness, and safe-haven demand—is creating a perfect storm for gold. Analysts forecast that these conditions are likely to sustain and even amplify the upward trajectory of gold prices, potentially leading to the strongest market phase in history. The current environment is characterized by a confluence of factors that are driving gold demand from multiple directions, making it a highly attractive investment option for both institutional and retail investors.