Gold has moved slightly higher, helped by central bank buying and geopolitical tension in the Middle East. Demand linked to US-Iran military escalation has supported safe-haven flows.
China’s central bank continued to add to its gold reserves in April. This marked the 18th consecutive month of purchases.
Peoples Bank Of China Buys More Gold
The People’s Bank of China increased official gold reserves by 260,000 troy ounces, or about 8 tonnes. This was its largest monthly purchase in over a year and the biggest monthly addition since December 2024.
The purchases reflect China’s move to diversify reserves and reduce holdings of US Treasuries. Central bank activity has supported the market, while some buyers such as Turkey’s central bank have recently sold gold to help support domestic currencies.
Gold’s near-term rise has been limited by elevated real yields and a firm US dollar. Expectations for near-term US Federal Reserve easing have also declined.
Gold remains caught between two powerful forces, a dynamic we saw throughout 2025. We see a strong price floor provided by persistent central bank demand, particularly from China, which is strategically moving away from US Treasuries. This structural buying continues to absorb market dips.
Implications For Traders And Positioning
The latest World Gold Council data for the first quarter of 2026 confirms this trend, showing central banks collectively added another 250 tonnes to global reserves. This ongoing accumulation solidifies our view that this demand is a long-term feature, providing a reliable tailwind for the market. This makes aggressive short positions particularly risky.
However, the restrictive macro environment that capped gains last year is showing signs of easing. With the latest April 2026 inflation data coming in slightly cooler at 2.9%, talk of a potential Federal Reserve rate cut later this year is intensifying. As a result, the Dollar Index has softened from its recent highs, now trading around the 104.5 level.
For derivative traders, this environment suggests the upside is becoming less capped than it was in 2025. We believe using call spreads on gold futures is a sensible approach to position for a gradual grind higher while defining risk and managing premium costs. This strategy capitalizes on a potential rally without requiring a sharp, immediate breakout.
We should also remember the pattern from late 2018, when a pause in Fed tightening eventually led to rate cuts in 2019 that ignited a major gold rally. Given that implied volatility is currently moderate, buying longer-dated call options could present an attractive opportunity. This would position traders for a more significant price move if the Fed signals a clear policy pivot.
