The World Gold Council reported on October 6 that central banks purchased 39 metric tons of gold in August, a figure significantly lower than Goldman Sachs’ estimate of 79 metric tons. This discrepancy suggests that the actual official demand may exceed disclosed buying numbers. Goldman’s estimate noted that August purchases were more than four times the pre-2022 monthly average of 17 metric tons, with China identified as the largest buyer at 25 metric tons.
Read More
The People's Bank of China (PBOC) increased its monthly purchases from 320,000 ounces in May to 740,000 in September. This move occurred as gold prices declined, allowing lower-cost, unhedged producers to maintain larger margins, which could buffer against potential sell-offs if the Federal Reserve raises interest rates in December.
Spot gold was priced around $4,137.80 per ounce, down 0.6% on that day and roughly 26% lower than its January peak of $5,589. Central banks have intensified gold buying since sanctions on Russian reserves began in 2022, viewing gold as a refuge from risks associated with foreign-currency assets. The rising U.S. 10-year Treasury yield, nearing 5.14%, presents competition for gold due to interest payments.
In September, gold prices fell 8.5% to $4,176 per ounce as the U.S. 10-year Treasury yield rose significantly, impacting gold's attractiveness. Speculative funds reduced their positions on COMEX gold futures by the equivalent of 84 metric tons, while physically-backed ETFs added 67 metric tons, bringing their total to a record 4,256 metric tons, indicating continued investment during the downturn.
The upcoming PBOC reserve update, expected around November 7, will be crucial to gauge whether the recent trend of increased Chinese buying continues. Purchases below the previous monthly figure of 320,000 ounces could signal a slowdown in buying rather than a reversal in global demand.
In terms of production costs, lower-cost, unhedged gold producers maintain larger profit margins compared to selling prices, which provides a buffer against inflationary pressures. The World Gold Council's recent cost analysis reported an average all-in sustaining cost (AISC) of $1,785 per ounce in the first quarter of 2026, a 16% increase year-over-year.
Mining companies are facing escalated costs; for example, Gold Fields reported a 40% rise in freight and consumables costs since the outbreak of the Iran war. The financial disclosures of producers will be essential to evaluate how well they manage margin changes as costs fluctuate.
While Goldman’s estimates of central bank purchases could be subject to revisions, the trend of central bank demand presents a counter-narrative to the downward pressure from higher yields. Effective cost control and lower-cost operations will be vital for miners to sustain themselves through potential gold price declines and to capitalize on any recovery.