State Street’s latest Monthly Gold Monitor found spot bullion prices jumped nearly 10 per cent in August to mark their strongest monthly gain since January, as US Treasury Secretary Scott Bessent announced plans to boost buybacks of long-dated government debt.
Prices which had closed July below US$4,100/oz increased to US$4,650-4,700 during the month, while flows into five US-listed gold ETFs surged to US$7.9 billion, pulling year-to-date sector flows back to flat after March-to-June net redemptions of US$18.4 billion.
But gains cooled toward month-end, with prices losing steam to close around US$4,400.
The slight turnaround came after an “unequivocally hawkish” Jackson Hole speech from new US Federal Reserve (Fed) chair Kevin Warsh last week reversed momentum across the alternative-fiat complex, with silver and bitcoin’s robust rallies also fading.
Initially pricing a less than 30 per cent chance of a September hike in mid-August, the speech saw US money markets boost odds of a 25 basis point Fed move to around 67 per cent by the 31st. Higher policy rates can affect the gold price because they increase the opportunity cost of holding a non-yielding asset.
However, State Street remains confident that the structural drivers behind gold allocations in the post-pandemic regime “still appear intact.”
In the report, a team of strategists led by head of gold strategy Aakash Doshi pointed to the combination of record government debt burdens, persistent above-target inflation prints, a weaker greenback, higher term premia for long-end bonds, healthy central bank gold purchases and elevated stock/bond correlations.
“Though gold market gains lost steam entering September, the August rebound in spot price was critical to establishing [US]$4,000/oz as a firmer support level and putting [US]$5,000/oz back in play over the next 6 months. It also helped to reengage Western ETF Investors,” Doshi and his team wrote.
Global X had previously forecast that the gold price could hit US$5,000 as early as mid-September, before Warsh’s speech.
China retail demand
Diving into some gold price drivers, the team argued that Chinese retail demand for gold is “likely” to support a higher gold price environment.
“Gold imports into the China onshore market hit a record high 1,000 tonnes (t) in the first seven months of 2026 (January-July), up 78 per cent versus 2025 despite local prices averaging ~45 per cent higher on a y/y basis,” Doshi wrote.
“Demand has surpassed strong seasonal comps observed in 2018 and 2024 of 994t and 944t, respectively. In theory, non-monetary gold imports exclude People’s Bank of China [PBoC] reserve purchases, thereby reflecting robust retail and investor gold consumption trends.”
The team added that China consumer gold imports increased after the onset of the Iran war, with Chinese gold price premiums also higher in the first eight months of 2026 compared to 2025 (~0.4 per cent versus ~0.3 per cent.)
As such, they said a higher gold price in mainland China could incentivise physical traders to send more gold to its onshore market, possibly tightening supply in the rest of the world.
While Western gold ETF investment may ebb and flow with Fed repricing risk-on/risk-off sentiment, they argued robust Chinese retail gold demand can pick up the slack, especially when coupled with central bank buying.
Risk-off sentiment showed up again at the end of this week, with US Fed governor Christopher Waller saying he would be willing to support holding rates steady if price pressures continue to show signs of easing seeing spot gold trade at around US$4480 an ounce.
European and US ETF buying picks up
Beyond China, which along with Asian investors more generally was crucial in supporting the gold price around US$4,000 during the March-to-June correction — the period also saw an acceleration in broadening geographical demand.
“Global gold-backed ETFs brought in [US]$17.1B in August, lifting year-to-date (YTD) inflows to [US]$27.7B and marking a clear acceleration point for ETF demand. Importantly, the recent acceleration has also broadened geographically, with the flow story shifting from earlier Asia-led demand toward much broader regional participation,” the firm wrote.
In particular, they said European gold-backed ETFs helped underpin Western demand, recording US$7.7 billion of inflows in August and bringing year-to-date inflows to US$12.7 billion to close the gap with Asia’s US$14.7 billion yearly figure. The US followed closely with US$7.5 billion of inflows in August.
Even as gold ETF investors returned in force, a trend which was also seen in Australia, State Street said there is arguably still “room to grow”.
Higher bond yields point to regime change
Finally, while it was Bessent’s buyback plans that first sparked the jump in the gold price, higher yields — a traditional headwind for the precious metal — have remained a persistent worry.
But State Street argued that climbing term premia — reflected across bond markets in the US, UK, France, Germany and Australia — aren’t being driven by above-trend GDP growth or stronger corporate margins pushing up long-term interest rates.
Instead, fiscal and inflation risk are to blame, which the firm says actually “strengthens gold’s strategic case as a non-sovereign store of value.”
“The gold allocation implication is diversification, not a rate call. Term premia are elevated across the G10 simultaneously, pressuring the traditional flight-to-quality duration hedge of sovereign bonds and boosting local stock/bond correlations. That should enhance gold’s role as a left-tail and debasement hedge, particularly as fiscal credibility remains fragile with no signs of reversing as yet,” Doshi and his team concluded.
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