On July 31, 2026, the latest quarterly report from the World Gold Council showed that global gold supply declined year-on-year for the third consecutive quarter. Total global gold supply in Q2 fell to approximately 1,130 tons, down 4% from the same period last year, with mine production down 2% and recycled gold supply plunging 7%. The data reignited market concerns about tightening gold supply and became a key factor supporting gold prices at elevated levels.
Supply-Side Tightening Across the Board: Mine Output and Recycled Gold Both Weaken
The report noted that global mine production in Q2 stood at about 890 tons, down roughly 18 tons year-on-year. The main declines came from traditional major producers such as South Africa, Australia and Russia. In South Africa, some legacy mines were forced to shut marginal capacity due to declining ore grades and rising extraction costs; Australia saw significantly lower operating efficiency at multiple mine sites due to labor shortages and extreme weather. Meanwhile, Russia's project commissioning lagged due to sanctions and equipment import restrictions, further constraining output growth.
On recycled gold, global supply in Q2 was only about 240 tons, down 7% year-on-year. The change mainly reflects strong holder reluctance to sell despite historically high prices—after several rounds of gains, many holders expect further upside and prefer to hold rather than take profits. In addition, in some emerging-market countries, rising economic pressure reduced household disposable income, lowering the volume of recycled gold jewelry.
Resilient Demand: Central Bank Buying and Asian Physical Purchases Form Dual Engine
On the demand side, although jewelry consumption pulled back under high gold prices in Q2, central bank gold buying did not pause. After Q1 posted a record high for the period, global central banks added about 285 tons of gold in Q2, with central banks in China, Poland and Singapore among the main buyers. The continued diversification of reserve allocation strategies provided a solid floor for gold prices.
In Asian markets, despite high gold prices, physical demand in India and China showed strong resilience in Q2. In India, jewelry consumption rose quarter-on-quarter thanks to seasonal festivals and the wedding season; in China, record-high investment demand for gold bars and coins offset part of the decline in jewelry consumption. The head of research at the World Gold Council's China office said: "Asian investors' allocation preference for gold is accelerating from a pure consumption attribute to an investment attribute, which is changing the demand structure and strengthening gold's ability to withstand pullbacks."
Supply-Demand Gap Widens; Institutions Raise Medium- and Long-Term Gold Price Forecasts
On a combined basis, the global gold market supply-demand gap expanded to about 55 tons in Q2 2026, versus a surplus of 20 tons a year earlier. Structural supply contraction combined with sustained strong demand pushed the gold market into a second consecutive year of undersupply. Several investment banks have raised their year-end gold price forecasts. Goldman Sachs said in its latest report that international gold prices could challenge $4,400 per ounce by the end of 2026, while Citi gave a more optimistic target of $4,500, with the core logic based on rigid supply constraints and continued central bank buying.
Falling Mine Grades and Underinvestment Become Key Constraints on Output
From a longer-term perspective, the global gold mining industry faces the challenge of "declining quality." Over the past decade, the average grade of proven global gold reserves has fallen from about 1.2 grams per ton to 0.9 grams per ton, with extraction difficulty and costs rising in tandem. According to Australian mining consultancy Surbiton Associates, capital expenditure on major global gold projects fell about 8% year-on-year in H1 2026, indicating very limited new capacity additions over the next three years. Mining companies are more inclined to return cash flow to shareholders than to pursue high-risk exploration and development, significantly reducing supply elasticity.
Recycled Gold Supply Elasticity Weakens; High Gold Prices Face New Variables
Recycled gold has always been the "regulator" of the gold market: when prices surge, recycled supply often expands noticeably, helping to smooth prices. This year, however, the response of recycled supply to prices has clearly dulled. Analysts attribute this both to the expansion of gold holdings among the emerging-market middle class and to a conceptual shift among some high-net-worth individuals who view gold as a long-term strategic asset rather than a short-term trading instrument. The "missing price elasticity" in recycled supply means that if gold prices spike in the future, supply may struggle to keep up quickly, amplifying volatility.
Asia-Session Trading Focus: Key Support Levels and Strategy
On the technical side, spot gold has recently been consolidating in the $4,080–$4,125 range. Resistance above is seen at $4,150; a breakout could open new upside space. Support below is concentrated at $4,050 and $4,010. This evening, the U.S. will release the June core PCE price index and weekly initial jobless claims. The market expects the data to influence the Fed's next policy path, triggering short-term volatility in gold.
For Asia-session traders, it is recommended to closely monitor the Bank of Japan's policy meeting minutes in the morning Beijing time and the impact of Australian trade data on the U.S. dollar index. If the dollar index retreats, gold may take the chance to break higher; otherwise, it may remain range-bound. In terms of strategy, consider building long positions in batches near support levels, strictly control position size, place stops below $4,000, and target the $4,150 area.
Outlook: Supply Logic Will Continue to Dominate Gold Pricing
Given the current supply-demand landscape, macroeconomic policies and geopolitical uncertainties, the medium-term trend for the gold market remains firm. Sustained supply tightening provides a solid "floor" for gold prices, while central bank buying and solid growth in Asian investment demand inject sustained momentum into upside. Although short-term prices may face disturbances from Fed policy changes and U.S. dollar swings, gold's scarcity premium will become increasingly prominent amid lackluster global mine capacity expansion and persistently low exploration investment.
As a market strategist at the World Gold Council emphasized: "Gold is evolving from a traditional inflation hedge into a strategically important asset in the reconstruction of the global monetary system. The rigid supply constraint determines that the foundation of this gold bull market is far more solid than in the past." In the coming months, whether macro data or geopolitical risk changes, they may be only brief ripples on gold's upward path; supply-demand fundamentals are the true hand guiding the direction.
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