Gold's Wild Week: A 3.27% Friday Slump Erases 2026 Gains as Geopolitical Ceasefire Hopes and Central Bank Buying Fight Hawkish Fed Bets

A single trading session unravelled months of gold's advance. The precious metal crashed 3.27% on Friday after US payrolls smashed expectations, wiping out all the year's gains. By Monday's close, bullion had clawed back some composure at $4,359.50 an ounce — steadied by unscheduled talk of a possible ceasefire between Israel and Iran. But the macro headwinds that triggered the selloff remain firmly in place.

The US economy added 172,000 jobs in May, nearly double the consensus forecast. That seismic number sent shockwaves through rate expectations. According to the CME FedWatch Tool, the implied probability of the Federal Reserve delivering at least one rate hike by December has surged past 70%, up from 45% just a week earlier. Looking specifically at the December meeting, traders now assign a 43% chance of a hike — a sharp leap from 14% just a month ago. Higher bond yields and a strengthening dollar have made the yield-bearing alternatives to gold increasingly attractive, amplifying the opportunity cost of holding the non-interest-bearing asset.

The repercussions were swift. Citigroup slashed its short-term gold target to $4,000, citing the repricing of Fed rate expectations and stubbornly high energy prices that keep inflation elevated. That puts the bank at odds with the consensus on Wall Street, where Goldman Sachs maintains a year-end target of $5,400, JPMorgan sees $6,000–$6,300, Deutsche Bank pencils in $6,000, and UBS forecasts $5,900. All four institutions still see upside of 23% to 44% from current levels, underpinned by what they describe as structural demand factors that monetary policy alone cannot offset.

Should investors sell immediately? Or is it worth buying Gold?

Central banks continue to hoard the yellow metal at a record pace. Net purchases reached 244 tonnes in the first quarter, up from 208 tonnes in the prior quarter, according to the World Gold Council. Poland led the charge with 31.4 tonnes, followed by Uzbekistan (25.2 tonnes), Kazakhstan (12.6 tonnes), and China (7.2 tonnes). China extended its buying spree in May, adding nearly 10 tonnes for the 19th consecutive month. Goldman Sachs projects monthly central bank buying will average 60 tonnes in 2026, while the rolling 12-month average already stood at 50 tonnes in March. A BlackRock survey underscores the trend: 95% of central bankers questioned expect global gold reserves to rise further; not a single respondent anticipates a decline.

On the physical side, the picture is more nuanced. Indian buyers have pulled back of late, spooked by persistent price swings. Yet investment demand for bars and coins is on a tear — it surged 16% in 2025 to a 12-year high, and analysts expect it to overtake jewellery as the largest source of demand for the first time in 2026. This structural shift, combined with a steady rotation away from dollar reserves by sovereign wealth funds and a geopolitical risk premium that refuses to fade, provides the long-term backbone that keeps most major banks bullish despite the near-term correction.

The immediate catalyst lies ahead. This week's US inflation reports — both the consumer price index and the producer price index — will determine whether the Fed's hawkish repricing accelerates or if gold can mount a sustained stabilisation. If inflation prints hotter than expected, Citi's $4,000 target moves into striking distance. A softer reading, however, would give gold room to extend its bounce towards the 50-day moving average near $4,636. For now, the metal sits roughly 23% below its all-time high from January, caught between the gravity of rising rates and the magnetic pull of central bank accumulation.

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