Central Bank Demand Supports Gold Despite Uncertainty in the U.S. Labor Market

Strong demand from central banks supported gold prices throughout 2025, but uncertainty surrounding the U.S. labor market is raising doubts about potential Federal Reserve rate cuts and complicating price expectations for the year. Meanwhile, rising silver prices are drawing significant volumes of secondary supply into the market, as individuals sell inherited jewelry and coin collections, according to precious metals analysts at Heraeus.

In their latest update, the analysts said gold prices have continued to benefit from sovereign demand.

“Central banks continued purchasing gold in December, buying 19 tonnes. This brings total purchases for 2025 to 328 tonnes (source: World Gold Council), slightly below the net purchases of 345 tonnes recorded in 2024.

The National Bank of Poland was the largest buyer, adding 102 tonnes to its reserves. Central banks in Kazakhstan and Brazil also made substantial purchases. Not all central banks added to their reserves, however, as Singapore, Ghana, and Russia were among the net sellers of gold last year.”

Turning to the latest U.S. employment data, the analysts said the figures send mixed signals about the likely path of interest rates.

“Nonfarm payrolls increased by 130,000 in January, according to data from the Bureau of Labor Statistics. The gain was significantly stronger than expected, suggesting on the surface that there is less need to support the economy through additional rate cuts. However, revisions to prior months were negative again, and 2025 job gains were revised down by more than one million compared to previous estimates, making the overall picture look far worse than the headline number implies.”

They added, “With the two-year Treasury yield approaching 3.5% — currently at the lower end of the Federal Reserve’s target range — it is unlikely that the Federal Reserve will change interest rates at its next meeting.”

On silver, Heraeus analysts noted that the Chinese market remains tight, although the Lunar New Year holiday could ease some of the pressure.

“The silver market continues to show signs of tightness in China, where futures in Shanghai are trading in backwardation. Domestic producers and traders are struggling to process accumulated orders, tightening metal availability. Reported declines in exchange inventories in Shanghai also point to limited deliverable supply.”

“However, there are early signs that speculative activity is easing, as open interest on the Shanghai Futures Exchange has fallen, with investors reducing exposure ahead of the holiday period beginning with the Chinese New Year on February 17. The exchange is also tightening position management ahead of delivery, a move that could slow withdrawals from Chinese exchange warehouses and ease local tightness.”

The analysts also pointed out that higher silver prices are beginning to attract meaningful volumes of secondary supply.

“In North America, dealers report a sharp increase in retail selling, as elevated prices have prompted households to liquidate coins, jewelry, and sterling silver flatware that were effectively long-term holdings.

The value of pre-1965 U.S. silver coins has nearly tripled year-on-year. This shift is already boosting scrap availability and bringing material into the market that would typically remain out of circulation.”

They concluded, “This highlights how quickly supply flows can change when prices rise sufficiently. Recent price action has been driven more by investment and liquidity factors than by underlying end-user demand. In the short term, silver is entering a consolidation phase following its sharp rally, and price volatility is expected to persist.”