What’s Driving Gold Higher?
Fed Rate-Cut Expectations and a Weaker Dollar
Gold has been supported by markets scaling back bets for a Federal Reserve interest rate hike in September 2026 – odds fell to around 35%, down from 40%, following a dovish US producer price index reading (Barchart). CNBC similarly reported gold hitting its highest level since June on weak US payrolls data and hopes for a Strait of Hormuz resolution. Lower rate expectations and a softer dollar typically make non-yielding assets like gold more attractive.
Geopolitical Risk (Strait of Hormuz Crisis)
A conflict involving the US, Israel and Iran that began on 28 February 2026 has repeatedly disrupted shipping through the Strait of Hormuz, a waterway that normally carries around a quarter of the world’s seaborne oil trade (IEA; US Congressional Research Service via Congress.gov, 2026). The crisis has driven periods of sharp gold volatility throughout 2026, with prices swinging on ceasefire hopes and renewed escalation in roughly equal measure – a reminder that geopolitical-driven rallies can reverse quickly.
Central Bank Buying
Beyond short-term catalysts, central banks have continued buying gold at a historic pace even at elevated prices. The World Gold Council reported net purchases of 244 tonnes in Q1 2026 and 289 tonnes in Q2 2026 – the strongest second quarter in its data series – underpinning demand over a longer horizon than day-to-day price swings.
