The National Bank of Poland led central bank gold buying in April, purchasing 14 tonnes and taking its year-to-date total to 45 tonnes, according to World Gold Council (WGC) data. That pace put it ahead of Uzbekistan and China in the annual ranking. Poland’s gold holdings have risen to 595 tonnes, representing about 30% of total reserves, as central banks globally returned to net purchases in April after net sales in March.
Gold prices, however, have stayed under pressure despite official-sector demand. The metal almost doubled in 2025 and reached an all-time high of around $5,600 per troy ounce in January, but it has fallen about 23% since then to roughly $4,300. The decline has pushed gold below its 200-day Simple Moving Average, a move in place since October 2023, after a strong US May jobs report led markets to price in interest-rate increases by the Federal Reserve and lifted global bond yields.
Market Drivers and Investment Strategies
We see the recent price drop to around $4,300 as a direct result of elevated global bond yields and the market pricing in more interest-rate hikes. The strong US jobs report for May, which showed the addition of 310,000 nonfarm payrolls, has pushed the 10-year US Treasury yield to a firm 4.85%. This makes holding a non-yielding asset like gold costly for the immediate future.
For the coming weeks, we are considering buying put options to protect current holdings or to speculate on a further move down towards the $4,000 level. Selling out-of-the-money call options is another strategy we are deploying to collect premium, as we believe upside is limited until the Federal Reserve’s July meeting. The market is currently pricing in a 75% chance of a rate hike, which will continue to act as a headwind for gold.
Central Bank Demand and Volatility Considerations
However, we are closely watching the strong physical demand from central banks, particularly Poland’s purchase of 45 tonnes this year. This consistent buying provides a significant floor under the market, making us hesitant to take on overly aggressive short positions. This demand acts as a strong buffer against the current negative sentiment driven by monetary policy.
The conflict between bearish macro drivers and bullish central bank activity suggests volatility is likely to increase. Implied volatility on gold options has already climbed to 22 on the GVZ index, and we are looking at strategies like straddles that can profit from a large price move in either direction. This allows us to remain neutral on direction while taking a view on increased price swings.
We will watch for any sign of a pivot from the Federal Reserve or a weakening in economic data as a signal to shift our stance. Historically, gold tends to perform well when markets begin to anticipate the end of a hiking cycle. We are therefore cautiously accumulating long-dated call options for early 2027 to position for the eventual turn in policy.
