What Are Central Banks Really Doing?

The long-term narrative is that the central banks are buying gold. I understand that, but we also get that kind of information in a report that’s about 30 days late. Key factors that I would like to know is are they buying strength or are they buying weakness?

When I talk to gold traders, sometimes I get the feeling that they believe the central banks are in there every day, relentlessly buying gold with both hands, but I don’t think they are. If they are the market, then there should be no urgency on their part. I think they buy value rather than chase offers. If they’re accumulating for the long-run then they probably want to buy at their price, not at momentum’s price.

The Fed and Iran Call the Shots

Up until about February 17, gold traders weren’t paying too much attention to the simmering tensions between Iran and the United States. Before that, we saw mostly sideways action tied to the uncertainty surrounding the Fed and the timing of interest rate cuts. With March off the table, the focus shifted to June and now that is being questioned with the chances of a June rate cut dropping from 50.2% to 43.2% over the last several days. The market is now pricing in a 71% chance for July.

The initial response to Friday’s tariff story was bullish in the sense that it added to some of the buying from last Friday that was attributed to geopolitical concerns. I think the story is fading.

Fundamentally, I think gold traders should be focusing on new developments about Iran and the United States, and economic events that shift the odds of a Fed rate cut.

Thursday’s Talks: Break Down or Hold Together?

The recent price action suggests traders are watching the events unfold in the Middle East. The outcome of Thursday’s meeting between Iran and the U.S. could determine whether gold breaks out or pulls back. If talks collapse, the U.S. could attack Iran over the weekend. If talks continue then gold could stall.