Gold holds £3,307 as central bank demand shrugs off rate hike bets

Gold has held firm near £3,307 per ounce this week, outperforming silver as investors recalibrate expectations around interest rates and currency movements. The yellow metal's resilience underscores a fundamental divergence between the two precious metals: whilst higher interest rates typically pressure non-yielding assets, central bank demand for gold has proven remarkably insensitive to rate cycles.

The catalyst is straightforward. After stronger-than-expected US employment data on Friday, money markets repriced Federal Reserve policy to reflect a 60 per cent probability of a September rate hike. Silver, which is acutely sensitive to real yields and the cost of carry, fell 3 per cent to below $65 per ounce (approximately £46). Industrial demand concerns from the solar sector, which consumes roughly 58 per cent of global silver supply, added downward pressure. Gold, by contrast, barely budged.

Central bank buying explains the divergence. Goldman Sachs forecasts central banks will average 60 tonnes of gold purchases per month throughout 2026, with 45 per cent of all central banks telling the World Gold Council they intend to expand holdings within the next 12 months. Whether interest rates rise or fall, these institutions continue accumulating bullion as a hedge against currency debasement and geopolitical fragmentation. At £3,307 per ounce, the all-in cost for UK physical buyers includes dealer premium, VAT on allocated storage, and delivery fees. This is not financial advice.