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In August, international gold once again became the most eye-catching performer among global macro assets. On August 5, spot gold in London surged more than 4% in a single day to $4,247 per ounce, posting its biggest one-day gain in recent times; on August 6, it briefly broke through the $4,300 round-number level; on August 7, spot gold continued to hold above $4,300. Meanwhile, the latest data released by the People's Bank of China showed that China's gold reserves rose to 76.08 million ounces at the end of July, up about 640,000 ounces from end-June, meaning the central bank has added gold for the 21st consecutive month.
Behind the price movement, a more compelling question arises: Why buy gold? From global central banks' net purchases of 289 tonnes in Q2, up 62% year on year and a record high for the period, to China's 21-month uninterrupted buying, and to the World Gold Council's view that gold is shifting from a traditional safe-haven asset to a strategic allocation—the logic of buying gold is undergoing profound qualitative change. This article uses three sets of key data to unpack the deep drivers behind the latest gold-buying wave.
Data Set 1: 289 Tonnes and 62%—Why Have Central Bank Purchases Become the 'Ballast Stone'?
According to the World Gold Council's latest Gold Demand Trends report, global central banks bought about 289 tonnes net in Q2 2026, up 62% year on year, the strongest second quarter on record; net purchases in H1 totaled about 345 tonnes, still above the ten-year average of 317 tonnes. Poland's central bank led with 51 tonnes, lifting its reserves to 632 tonnes; China's central bank added 33 tonnes in Q2, its largest quarterly increase since Q4 2023.
More symbolic was the Bank of Korea resuming purchases after 13 years—though limited, it shows economies long absent from the gold market are reassessing gold's role in foreign exchange reserves. The World Gold Council's annual survey shows 89% of central bank respondents expect global official gold reserves to rise further over the next 12 months, while a record 45% expect their own reserves to increase.
Why are central banks so persistent? Insiders point out that central bank buying is essentially a strategic choice for foreign reserve diversification, prioritizing asset safety and risk diversification over chasing short-term price movements; they often add during pullbacks. This slow-moving buying does not create short-term spikes, but it genuinely raises gold's price floor and limits deep downside—key to gold's resilience even in a high-interest-rate environment. Global gold demand in Q2, including over-the-counter trading, was flat year on year at 1,269 tonnes; H1 demand of 2,522 tonnes was up 2% year on year, with a value of roughly $380 billion, a record high.
Data Set 2: 21 Months—Why Is China's Central Bank 'Never Interrupted'?
By end-July, China's central bank held 76.08 million ounces (about 2,366 tonnes) of gold, adding for 21 consecutive months. Behind this pace lies a long-term narrative of reserve diversification and 'de-dollarization': since the Russia-Ukraine conflict, the dollar-dominated international financial and settlement system has shown tail risks of unilateral financial sanctions under extreme geopolitical conflicts, prompting Global South and emerging-market countries to reassess the spillover effects of dependence on a single financial system and the liquidity and safety of reserve assets.
Structural gaps provide more room for imagination: developed-economy central banks' gold accounts for an average of about 30% of foreign exchange reserves, while emerging-market central banks average only about 15%. In the long process of converging with developed-economy reserve structures, emerging markets will continue to generate enormous gold purchasing demand. This embodies gold's value without sovereign backing—it is issued by no country, carries no sovereign credit risk, and offers global liquidity and long-term store-of-value attributes. Against high concentration of dollar assets and rising geopolitical risks, its reserve value is being rediscovered.
Data Set 3: 9% and 8.8%—Does Gold's Long-Term Return Beat Stocks and Bonds?
For ordinary investors, the most relevant question: Why buy gold? The World Gold Council's long-term data gives a compelling answer. Over the past 20 years, RMB-denominated gold (Shanghai Gold AU9999) has delivered a compound annualized return of about 9%, outpacing domestic stocks and bonds over the same period; from the collapse of the Bretton Woods system in 1971 to June 2026, dollar-denominated gold returned about 8.8% annualized, also beating global stocks and bonds. As economic growth shifts gear and domestic interest rates trend downward over the long run, lower rates reduce the opportunity cost of holding gold and amplify its allocation appeal.
Three attributes underpin this long-term return. First, inflation hedging. Gold maintains real purchasing power across inflation cycles and protects household wealth; for emerging-market central banks and households, its role in mitigating geopolitical risk and guarding against purchasing-power erosion is irreplaceable. Second, low correlation. Gold has low correlation with traditional assets such as stocks, bonds and foreign exchange, and can effectively hedge portfolio risk and stabilize risk-adjusted returns during volatile markets—historical data show that during several periods of surging geopolitical risk, gold was among the few assets with positive returns. Third, safe-haven and credit insurance. With the irreversible expansion of U.S. fiscal deficits and continued overextension of dollar credit, gold is being endowed with 'sovereign credit insurance' value, and its pricing logic is shifting from meticulous opportunity-cost considerations to a revaluation of credit insurance value.
The World Gold Council therefore argues that the global political and economic order is shifting from unipolar dominance to multipolarity, and gold is transforming from a traditional safe-haven asset into a strategic allocation, gradually becoming the 'new base holding for a multipolar era'. For households, allocating to gold also opens a new path for wealth management: some capital is moving from low-yield deposits to capital markets, valuations are being pushed up and risks are accumulating. Gold, with its scarcity, risk-hedging attributes and high global recognition, has become an important vehicle for preserving and growing wealth and for intergenerational transfer.
Buying Gold Is Not Chasing Highs: Four Reminders for Rational Allocation
However, after a 4% one-day surge, the risk of chasing highs cannot be ignored. Many institutions warn that after a rapid short-term rally, gold may need to digest gains through volatility or a pullback; in the next phase, key points include the $4,500 per ounce resistance level, U.S. employment and inflation data, and policy signals from the Jackson Hole global central bank symposium. Overall, gold now sits in a window where macro expectations, geopolitical conditions, capital flows and central bank allocation are all resonating, but investors still need to remain rational in their positioning.
- Watch the pace: For medium- and long-term allocation funds, build gold positions in batches during pullbacks rather than chasing highs at once; trend-trading funds should wait for confirmation of key support or an effective breakout above the $4,500 resistance before following.
- Watch the signals: Falling real interest rates, a weaker dollar, sustained net inflows into gold ETFs and continued central bank buying are four key indicators of trend durability; if several of them weaken, be alert to a deeper correction.
- Watch the instruments: Physical bullion, gold ETFs, paper gold and gold-mining stocks have different risk-return profiles. Conservative investors may prefer highly liquid, low-fee gold ETFs and physical bullion, and should note the differences in financial and industrial attributes among gold, silver, platinum and palladium.
- Watch the risks: Historically, central banks have not always been net buyers; from the 1990s to the early 2000s, they were net sellers overall. If central banks later turn to net selling and valuations are already stretched, a prolonged price decline cannot be ruled out; position management matters more than direction calls.
Overall, the 2026 gold market is staging a multi-factor rally: central bank buying underpins the price floor, while ETF inflows and retail allocation demand provide upside flexibility. The long-term logic of gold as the 'new base holding for a multipolar era' offers increasingly solid answers to 'why buy gold'. For ordinary investors, understanding the logic behind buying gold is far more important than predicting the next price point—in the coordinate system of asset allocation, gold's value has never been about any single day, but about long-term protection across cycles.
