Gold: The yellow metal is rebounding, but is still down 4.3% since January
After four months of decline, gold rebounded by more than 4% on August 6 on hopes of an agreement between Washington and Tehran. This surge encapsulates the current situation: a market under monetary pressure, but fundamentally supported by central bank purchases and a shift in physical demand toward Asia.
On the morning of August 6, the price of gold jumped 4.31% to $4,253.70 per ounce, its highest level since mid-June. Three factors converged within 24 hours: hopes for an agreement between the United States and Iran on reopening the Strait of Hormuz, a weaker dollar at $1.1549 per euro, and disappointing private-sector job growth in the United States in July. This last factor led investors to revise their expectations for interest rate hikes and return to precious metals.
This rebound should not obscure the underlying trend. For the month of July, the price closed at 3,512 euros per ounce, down slightly by 0.58%, bringing the year-to-date performance to -4.31%. Gold therefore continues to underperform the stock markets: over the same period, the CAC 40 gained 1.26% in July and is up 4.42% year-to-date, excluding dividends. For an investor who shifted into gold at the beginning of the year as a hedge, the opportunity cost is real.
A July of Two Faces
The price action in July clearly illustrates the dynamics currently driving the gold market: it is not geopolitics that is calling the shots, but monetary policy. The first half of the month was dominated by a new military escalation between the United States and Iran. Contrary to intuition, this tension did not support gold: the surge in oil prices it triggered primarily fueled inflation expectations—and thus expectations that interest rates would remain high—an environment unfavorable to an asset that pays no income.
The trend reversed starting in mid-July, when U.S. inflation data—both CPI and PCE—came in more moderate than expected, reinforcing expectations of monetary easing. On July 29, the Federal Reserve confirmed the status quo on interest rates with a statement deemed less hawkish, allowing prices to stabilize by the end of the month. This is a lesson worth remembering for individual investors: over a horizon of a few months, gold reacts more to real interest rates than to geopolitical headlines.
This back-and-forth also explains why gold has disappointed some French investors who have recently invested in it. The price in euros has been hit twice: by the decline in the price of gold in dollars and by the strength of the euro, which automatically erodes the performance of an asset traded in New York and London. Currency hedging is available for certain paper instruments, but not for coins and bars held directly—a difference in treatment that is rarely explained at the time of purchase.
Central Banks and Asia Drive the Market
Amid short-term fluctuations, structural demand remains strong. Central banks remain the most consistent buyers: Poland accumulated 19 metric tons in June, solidifying its position as the top official buyer since the start of the year with an additional 82 metric tons. China’s central bank added 14 metric tons to its reserves, and the Bank of Korea announced plans to bolster its own reserves. More unexpectedly, the cryptocurrency firm Tether acquired 14 metric tons in the second quarter—a sign that new players are broadening the base of physical demand.
Meanwhile, the market’s center of gravity is shifting toward Asia. Gold imports into Hong Kong have reached their highest level in more than a decade, with net imports into China more than doubling year-over-year to 50.7 metric tons in June. The July 7 launch of a new centralized transaction clearing system in Hong Kong confirms Beijing’s ambition to wrest London’s position as the global hub for gold trading. This shift in liquidity could, over time, alter price formation for all holders, including individuals.
One final anecdote that says something about this period. U.S. Treasury Secretary Scott Bessent announced the issuance of one-dollar coins bearing President Trump’s likeness to mark the 250th anniversary of American independence. Aside from the controversy surrounding the American tradition that banknotes and coins should not depict a sitting president, the irony lies elsewhere: this so-called “gold” coin is composed of about 90% copper, with the remainder being zinc, manganese, and nickel. Not a single gram of gold. This serves as a useful reminder—at a time when physical gold is attracting new investors—that a coin’s color says nothing about its content, and that only the price based on the weight of fine metal is what matters.
