Why Gold Is Rallying Again: ETF Flows, Central Bank Demand, and a US Labor Market Shock

The miss crushed any lingering rate-hike expectations and revived bets on Federal Reserve easing. Gold futures blew past $4,400/oz, and trading volume surged by $2.5 billion in a single session, recording the strongest day for gold futures in four months . Revisions to the prior two months erased another 103,000 jobs, deepening the narrative of a rapidly cooling economy .

Gold ETF Inflows Are Accelerating Sharply

Investors have been piling back into gold ETFs at a remarkable pace. The SPDR Gold Trust (GLD) gained 7.7% in a single week following the July jobs report, driven by macroeconomic uncertainty and the sudden shift in rate expectations .

This is part of a much larger trend. For full-year 2025, global gold ETF holdings grew by 801 tonnes—the second strongest year on record—while bar and coin buying hit a 12-year high . Total gold ETF inflows for 2025 reached $57.1 billion, with the iShares Gold Trust (IAU) attracting $8.6 billion and the SPDR Gold MiniShares (GLDM) pulling in $6.2 billion .

Analysts at State Street Global Advisors note that this ETF re-accumulation is now a key structural support for prices, alongside central bank demand . After nearly four years of net redemptions following the 2020 recession, the 2025 rebound in investor demand has fundamentally shifted the supply-demand balance.

Central Bank Buying Remains the Floor

Central banks continue to provide a powerful, unshakeable floor under gold prices. In 2025, global central banks purchased an estimated 863 metric tons of gold, with UBS forecasting purchases to accelerate to 950 tons in 2026 .

Two buyers stand out:

• Poland: The National Bank of Poland was the largest buyer for the second consecutive year, adding 102 tonnes in 2025, bringing its total gold reserves to 550 tonnes . Poland's buying accelerated significantly in Q1 2025 during a period of heightened global uncertainty .

• China: The People's Bank of China continued its multi-year purchasing campaign, adding a net 27 tonnes in 2025, with heightened buying in early 2025 driven by tariff risks, geopolitical tensions, and rekindled inflation concerns .

The broader motivation is clear: emerging-market central banks are diversifying away from dollar-denominated reserves . China's sovereign funds have been shifting out of U.S. private equity, and European investors have been buying physical bars, all as part of a quiet reallocation that signals deep systemic concern .

Structural Bull-Cycle Forces Are Still at Work

Beyond the immediate catalysts, several longer-term forces continue to support the rally:

• Growing macroeconomic and geopolitical unpredictability, as cited by the Amundi Research Center, including demographic shifts and structurally higher central bank demand .
• Expectations of Fed rate cuts, with two more cuts anticipated in 2026, which would weaken the dollar and reduce the opportunity cost of holding gold .
• Elevated stock/bond correlations and global debt concerns, which State Street Global Advisors flags as sustaining what it calls the "alternative fiat/global debasement trade" .
• A weak dollar environment, which historically correlates with rising gold prices .

All these factors have created a self-reinforcing cycle: higher prices attract more ETF inflows, which support higher prices, which encourage more central bank buying.

UBS Outlook: Bullish but Tempered by Headwinds

UBS has been among the most bullish major banks on gold throughout this cycle, though its targets have shifted as conditions evolved:

• January 2026 (peak bullishness): UBS raised its price target to $6,200/oz for March, June, and September 2026, with a projected pullback to $5,900/oz by year-end after U.S. midterm elections . The bank called gold an attractive long hedge and cited stronger-than-expected demand from investors and central banks.

• May 2026 (downgrade): UBS cut its year-end 2026 forecast to $5,500/oz and its near-term target to $5,200/oz, citing persistent headwinds from elevated Treasury yields, sustained U.S. dollar strength, and rising oil prices . However, the bank stressed this was a "reset rather than regime change" and that the structural bull market was not over .

• Current context (August 2026): Spot gold has pulled back from Q1 highs above $5,300 but remains well above $4,300. The May downgrade reflected dollar and yield pressures, but the July labor-market shock has rekindled the easing narrative, potentially giving gold a fresh upward tailwind. UBS still expects two more U.S. rate cuts in 2026 as a supportive factor .

The bank's full range spans an upside scenario of $7,200/oz if geopolitical tensions escalate, and a downside case of $4,600/oz if the Federal Reserve moves more aggressively on rates .

What to Watch Next

The gold rally has multiple legs. For the near term, the key variable is the trajectory of U.S. labor market data. If the July jobs miss proves to be the start of a broader weakening trend, rate-cut expectations will intensify, potentially pushing gold toward the $4,500–$4,800 range that UBS describes as the zone where "fundamentals reassert their influence" .

Central bank buying shows no signs of slowing. With China and Poland leading the charge and other emerging economies expected to follow, the structural demand floor should remain intact for the foreseeable future.

Gold's 64% rally in 2025 made it the best-performing major asset class of the year . The question for 2026 is whether the next leg of the rally will be driven by a weakening U.S. economy, continued central bank accumulation, or a resumption of the ETF inflow wave that powered 2025. The answer, so far, appears to be all three.