Why Is Gold Price Rising? Japan’s Record Exports and Central Bank Hoarding Explain the Rally

Gold price dipped below 4,400 per ounce yesterday for the first time since late March. Bears thought the rally was over. But gold quickly bounced and recovered 2.5 4,500 per ounce.

Two powerful forces are at work: central banks and private investors are increasing their gold allocations, and Japan is seeing record gold export flows.

Let’s break down the data.

• Central Banks and Private Investors Are Both Buying Gold

• Japan’s Record Gold Exports – A Smuggling Clue

• What This Means for Gold Price

  • Middle East Tensions: A Double-Edged Sword for Gold

• FAQs

Central Banks and Private Investors Are Both Buying Gold

The Kobeissi Letter reported striking figures from the World Gold Council and Incrementum AG. Central bank gold reserves as a percentage of total reserves rose to 26.6% in 2025, the highest level since 1993. That proportion has surged 17 percentage points since 2013.

Central banks are diversifying away from dollar-denominated assets, buying gold at a pace not seen in decades. Meanwhile, private investor gold allocation increased to 2.7% of total portfolios last year, the highest since 1984. This percentage has more than doubled over the last five years.

Both groups are moving toward gold in tandem – a rare alignment. Chart analysis (provided): The chart from Bloomberg and Incrementum AG shows two lines. Central bank gold reserves (as % of total reserves) peaked near 40% in 1980, then declined to a low around 10% in 2010, and have since climbed back to 26.6% in 2025.

Source: X/@KobeissiLetter

Private investor gold allocation (right axis) peaked near 11% in 1990. It fell to near 2% in 2020, and then doubled to 4% by 2025. The upward trend in both lines since 2020 is clear.

Investors and central banks are accumulating gold at the same time.

Japan’s Record Gold Exports – A Smuggling Clue

The Kobeissi Letter also showed unusual gold movements in Japan. Japan’s gold exports surged 35.6% year-over-year in FY2025 (ended March 2026), reaching approximately 25.5 billion – the highest since data began in 1988. The average export price rose 48.7 117,400 per kilogram, driven by surging global gold prices.

At the same time, gold imports jumped 120% year-over-year to roughly 1.1 billion, also a record. As a result, Japan exported over 200 metric tonnes more gold than it imported in FY2025, valued at about 24.4 billion. up 37.9% year-over-year.

Japan’s domestic gold production is too small to account for this export growth, according to the Finance Ministry. The suspected mechanism is that gold is smuggled into Japan without paying the standard 10% consumption tax, sold domestically at tax-inclusive prices to generate a profit margin, and then re-exported overseas. This creates an artificial export surplus.

Source: X/@KobeissiLetter

The scale suggests a large, organized flow of physical gold passing through Japan to take advantage of tax arbitrage and global price differences.

What This Means for Gold Price

The combination of structural demand (central banks + private investors) and unusual physical flows (Japan) supports higher gold prices. Central banks are unlikely to stop diversifying. Private investors have room to increase allocations further – the 1984 high of 2.7% has been reached, but the 1990 peak was near 11%.

If sentiment continues, allocations could rise much more. The Japan situation indicates that physical gold is in high demand globally. Smuggling networks exist only when price premiums justify the risk.

The fact that Japan is exporting over 200 tonnes net indicates that gold price is moving to where it is most needed – likely to meet strong institutional and central bank demand in other markets.

The dip below 4,400 was temporary. Support has held. The next resistance is 4,600, then the all-time high near $5,000.

If central bank buying and Japanese flows continue, gold could retest those levels in June.

Middle East Tensions: A Double-Edged Sword for Gold

Gold has long been seen as the ultimate safe haven during times of war and geopolitical turmoil. Investors rush to the yellow metal when missiles fly, borders close, and uncertainty spikes. Conventional wisdom says gold should rally when the Middle East burns.

But the current Iran conflict has broken that rule. Since the war began on February 28, 2026, gold has fallen nearly 20% from its January all-time high near $5,590. During a conflict that shut down the Strait of Hormuz (a chokepoint for roughly one-fifth of global oil supply) the gold price went down.

The reason is counterintuitive but critical to understand. The war created an inflation chain, not a safe-haven bid. A closed Strait of Hormuz pushes oil prices higher. Higher oil feeds into broader inflation. Persistent inflation forces the Federal Reserve to keep interest rates high, or even raise them further. Higher rates lift Treasury bond yields, making yield-bearing assets more attractive and gold less so.

Every time tensions escalate, the dollar strengthens and yields rise, offsetting gold’s traditional safe-haven appeal. On May 28, fresh US strikes on Iranian military targets near the Strait of Hormuz pushed Brent crude higher, but gold dropped to a two-month low below $4,400.The paradox is real: bad news for the world is also bad news for gold in this environment.

Yet the geopolitical risk premium has not disappeared entirely. JPMorgan analysts note that the closure of the Strait of Hormuz continues to underpin inflation fears, and as long as the strait remains blocked, energy-driven inflation will keep central banks hawkish. The bank recently lowered its 2026 average gold price forecast to $5,243 per ounce but stressed that its constructive long-term thesis, based on fiscal risks, currency debasement concerns, and geopolitical fragmentation, remains intact, merely “on hold until more clarity arrives around a resolution of the Iran conflict.”

So where does that leave gold investors? The metal is caught in a tug-of-war. On one side, geopolitical anxiety supports safe‑haven demand. On the other, rising yields simultaneously erode the attractiveness of holding bullion. The outcome depends on which force wins. If the conflict escalates further and oil spikes dramatically, the inflation shock could overwhelm any safe‑haven bid.

Conversely, if a durable peace agreement emerges and the Strait of Hormuz reopens, oil prices would fall, inflation fears would ease, and the Fed could shift dovish, potentially triggering a powerful gold rally.

Read also: Robert Kiyosaki Makes Shocking Silver and Gold Price Predictions for 2026

FAQs

 **Why is Gold price up❓**

Central bank and private investor demand provided support. The Japan export data also showed strong physical flow.

 **Why is Japan exporting so much gold❓**

Suspected tax arbitrage: gold smuggled in without consumption tax, sold domestically, then re‑exported for profit. The scale indicates strong global demand.