Gold’s Biggest Buyers Aren’t Going Anywhere
Inflation is putting pressure on gold in the short term, while central bank demand continues to strengthen the longer-term case.
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Quote of the Week
“Gold is coming back into the system just by market forces… If you look at the central banks worldwide, they’re adding physical gold to their reserves in a massive way, around 1,000 tons every year. That’s one-third of world gold mine production.” – Willem Middelkoop
Our Take: The scale is what matters here. Central banks have averaged roughly 1,000 tonnes of gold purchases annually over the past four years, a major source of demand that has remained persistent through very different market conditions. Middelkoop’s broader point is that gold doesn’t need an official return to the monetary system for its role to grow. Central banks are already increasing their exposure on their own, and that continued accumulation remains one of the strongest pillars underneath the long-term gold story.
Chart of the Week
Gold is down just over 1% this week, with inflation and the Fed once again driving the short-term move. August PPI rose 0.4% month over month, in line with expectations, while the annual rate accelerated to 5.4%. CPI followed Friday with another 0.4% monthly increase, while core inflation rose 0.3%. Taken together, the reports showed inflation remaining stubborn enough to strengthen the case for a rate hike.
That repricing happened quickly. Markets entered the week still debating whether the Fed would hold rates steady at its September 15–16 meeting. Following PPI and Friday’s CPI report, expectations shifted heavily toward another hike, with markets now assigning roughly a 90% probability to that outcome. Higher rates and rising Treasury yields create an obvious short-term headwind for gold, and the metal’s slight pullback this week reflects that shift.
But the longer-term picture underneath the weekly move remains considerably more supportive. Central banks purchased 289 tonnes of gold in Q2, up 62% from a year earlier and the strongest second quarter on record. Poland led reported buying, while China increased its pace of accumulation. The World Gold Council’s latest reserve survey also found that 89% of respondents expect global central-bank gold reserves to increase over the next year, while a record 45% expect their own institutions to add more.
That creates an interesting setup heading into next week. Gold may have to absorb a more hawkish Fed in the short term, particularly if policymakers signal that rates could remain higher for longer. But the forces supporting the broader thesis haven’t disappeared because of one inflation report. Central-bank accumulation remains strong, geopolitical uncertainty remains elevated, and gold’s role as a reserve asset continues to grow.
Whatever happens around next week’s decision, the distinction is worth keeping in mind: rates are driving the trade right now, while the bigger gold story is still being built over a much longer horizon.
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Gain of the Week
Agnico Eagle (AEM) is down roughly 1% this week alongside gold, but the company made an interesting portfolio move of its own. On September 8, Agnico announced an agreement to sell its Delta and Helm Bay projects in Alaska to Vizsla Copper, turning two non-core assets into several different forms of potential future upside.
Under the proposed transaction, Agnico will receive shares representing approximately 20% of Vizsla Copper at closing, additional deferred shares subject to shareholder approval, and more than three million warrants exercisable at C$1.95. Agnico will also retain a 2% net smelter return royalty on Delta and a 3% royalty on Helm Bay, although Vizsla has the right to repurchase half of each royalty for C$5 million. The deal is expected to close in the fourth quarter, subject to the remaining conditions.
It’s a relatively small transaction for a company Agnico’s size, but the structure is what makes it interesting. Rather than continuing to allocate capital toward projects outside its core production plan, Agnico is handing them to a company focused on advancing them while maintaining exposure through equity, warrants, royalties and potential milestone payments. If the projects progress, Agnico still participates in that upside.
That fits with the broader capital discipline Agnico has demonstrated as it manages a much larger portfolio of operating mines and development projects. In a gold market where prices remain elevated but short-term macro volatility is still very real, maintaining flexibility while keeping exposure to future discoveries and development can be just as important as adding ounces outright.
Bottom line: Agnico is using two non-core assets to create multiple paths to future value while keeping its own capital focused on the projects that matter most to the company. It won’t transform Agnico overnight, but equity exposure, warrants, retained royalties and milestone payments give it several ways to benefit if Delta and Helm Bay advance from here.
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Honest Question:
What matters more for gold from here: the Fed’s next move or the longer-term debt story? Let us know what you think in the comments.
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Disclaimer: This content is for educational purposes only and is not financial advice. Do your own research and consider speaking with a licensed professional.
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