Goldman Sachs: Recent Gold Price Volatility May Temporarily Slow Central Bank Gold Purchases

Bloomberg Finance App has learned that last month, gold prices temporarily surged past a record high of $5,500 per ounce. While investor demand was certainly a driving factor, the largest buyers were undoubtedly central banks from various countries. In recent years, central bank purchases have directly pushed up gold prices, but recent sharp fluctuations in gold prices may temporarily slow this demand. Goldman Sachs commodity analysts Lina Thomas and Daan Struyven noted in a report last week that “during discussions with market participants, reserve managers of central banks remain willing to buy gold to hedge geopolitical and financial risks, but they are more inclined to delay purchases until prices stabilize.”

Goldman Sachs pointed out that increased market volatility is driven by diversified demand from the private sector, much of which is reflected through leveraged gold options structures that amplify price swings. This volatility has made some emerging market central banks more hesitant to actively buy at current prices, even though they remain optimistic about the market.

According to the World Gold Council, central banks net purchased about 1,000 tons of gold in 2023 and 2024. This figure dropped to around 900 tons in 2025, but their purchase prices were higher compared to the past two years.

Gold prices briefly fell to $4,400 earlier this month but rebounded to around $5,100 by Monday morning at 10 a.m., closing at $5,167.

Goldman analysts believe that the structural backdrop has not changed. Since the Russia-Ukraine conflict in 2022 led to the freezing of foreign exchange reserves, central banks have reassessed the risks of holding dollar assets and have begun buying gold as an alternative. Assuming private sector diversification does not further surge, Goldman’s baseline forecast is that market volatility will ease, and central bank buying will accelerate again, roughly in line with growth in 2025.

The bank also stated that with increased demand from private investors related to potential Federal Reserve rate cuts, gold prices could rise to $5,400 per ounce by the end of 2026.

However, if diversification demand accelerates further—especially amid growing concerns over fiscal risks in Western economies—market volatility could remain elevated. This is particularly true if capital flows continue through options. In such a scenario, even with larger price increases, short-term demand from central banks could be suppressed.