Gold had a rough Q2, but central bank demand will push prices higher through 2026 – Invesco

While Q2 was the worst quarter for gold in 12 years, with spiking energy prices raising inflation expectations and introducing the possibility of rate hikes, central bank demand will help gold finish the year on a positive note, according to the new quarterly gold outlook from Invesco.

The authors said this constituted the worst quarter for gold since Q2 2013, when the price fell by 22.7%, but pointed out that these kinds of pullbacks “are not uncommon when any market has risen so strongly for a sustained period, and this latest price correction might prove healthy given gold is still up by 21.3% over the past 12 months.”

They warned, however, that downside risks to the gold price remain. “The next few months could be pivotal for gold, as we watch to see how the Fed reacts to inflation – and whether inflation is sticky or comes down with lower oil prices – and if the US Dollar firms further versus other major currencies,” they said. “Higher interest rates and a stronger USD are generally negative for gold, as the former increases the opportunity cost of holding a non-yielding asset and the latter makes gold more expensive for international (non-US) investors.”

The authors wrote that several headwinds drove the gold price lower during the quarter. “Inflation emerged as a threat that could potentially...