Will multiple central banks continue to sell off gold? The key variable depends on the situation in the Middle East.

Ask AI · How the Middle East situation could shape the future direction of gold prices?

Some central banks have begun “tactical” gold sales.

Data released by the Central Bank of Turkey on April 2 showed that, to cope with energy shortages caused by the Middle East conflict and pressure from the depreciation of the local currency, the country dumped nearly 120 tons of gold in the two weeks ending March 28. The Central Bank of Poland also proposed in early March a plan to sell part of its gold reserves to raise about $13 billion in defense spending. In addition, according to statistics from the World Gold Council, the Russian central bank sold a cumulative 15 tons of gold in the first two months of this year.

As gold-buying strategies in multiple countries’ central banks shift, they have also disrupted some institutions’ plans to buy the dip. A new round of ongoing power struggles between long and short positions continues. London spot gold prices fell from $5,200 per ounce, at one point dropping to $4,098 per ounce on March 23, for a monthly cumulative decline of 11.5%. After that, the market saw some rebound. As of April 6, both gold futures and spot prices have broken above $4,700 per ounce.

However, the reduction in gold holdings by a small number of central banks is still “tactical” and “temporary,” and has not formed a systematic trend. Lianhe Minsheng Macro Research noted that the selling by central banks such as those of Turkey, Poland, and Russia is more driven by considerations of “following the trend” and “temporarily easing fiscal crises,” and does not affect the long-term logic that supports gold prices rising—namely “weakening confidence in the U.S. dollar and increased gold buying by central banks.”

Still, it is important to be alert to the risk that if the Strait of Hormuz is closed for long enough to become a longer-term issue and oil prices remain at high levels, it could trigger a chain reaction of gold selling. “Those economies that are highly dependent on crude oil imports, have tight foreign exchange reserves, and have a high share of gold reserves will become potential high-risk zones for selling.” A trading source told the reporter from First Financial.

Forced Gold Sales by the Main Buyers

According to data released by the Central Bank of Turkey, in the week ending March 28, the country’s gold reserves decreased by 69.1 tons, and the cumulative reduction over the prior two weeks totaled 118.4 tons. As a result, Turkey’s total gold reserves fell to 702.5 tons. Of this amount, more than half was completed through gold-for-foreign-exchange swap transactions—using gold as collateral to obtain dollar liquidity, and then redeeming it upon maturity.

The Central Bank of Turkey said that using gold transactions to reduce the economic impact of the U.S.-Israel-Iran conflict, much of the trading involves gold foreign-exchange terms—meaning that at maturity, this portion of gold will return to the central bank’s reserves.

Lianhe Minsheng Macro Research said that the oil-price supply shock has led to a worsening of current-account imbalances, Turkey’s lira has accelerated in depreciation, and this has forced the country’s central bank to sell gold to obtain foreign-exchange liquidity. The “see-saw effect” between foreign-exchange reserves and gold reserves is now unfolding.

Since the outbreak of the U.S.-Israel-Iran conflict, the U.S. dollar index has surged, and the Turkish lira has repeatedly hit historic lows versus the dollar, once falling to 44.35:1, while overseas capital withdrew sharply from its stock and bond markets. Meanwhile, Turkey imports about 90% of its crude oil. After oil prices broke above $100 per barrel, energy costs increased significantly.

As of March 30, Turkey had cumulatively used $44.3 billion in foreign-exchange reserves to stabilize the lira, resulting in a significant decline in its net gold reserves. In the week of March 20, the country’s total international reserves were $177.45 billion. After swap adjustments, its net reserves fell to $43 billion, indicating that the authorities were still continuously intervening in the foreign-exchange market.

This large-scale gold selling also contrasts sharply with Turkey’s active gold buying over the past four years. From 2022 to 2025, the Central Bank of Turkey accumulated an additional 325 tons of gold, bringing its gold reserves to 603 tons by the end of 2025, with a valuation of about $135 billion.

The Russian central bank, meanwhile, started selling gold as early as January this year. According to statistics from the World Gold Council, in January 2026 the Russian central bank sold 9 tons of gold, becoming the largest net seller of gold for that month. In February, it continued to net sell 6 tons.

The shifting strategy of Poland’s large gold buyer is also striking. On March 4, the Central Bank of Poland proposed raising funds of up to 48 billion zlotys (Poland’s official currency, about $13 billion) by selling part of roughly 550 tons of gold reserves to support defense construction.

Yet less than two months earlier, on January 20, the Central Bank of Poland had just announced that, for “reasons of national security,” it had approved a new gold purchase plan as large as 150 tons, aiming to bring total gold reserves to 700 tons and placing it among the world’s top 10 central banks by gold reserves. A World Gold Council report shows that the Polish central bank drove most of its gold buying activities in February, buying 20 tons and bringing its total gold reserves to 570 tons, with the share of gold reserves rising to 31%.

The Accumulation Trend Has Not Yet Reversed

Over the past four years, central banks across countries have been key buyers in the gold market.

World Gold Council data show that from 2022 to 2024, global central banks purchased more than 1,000 tons of gold on average each year for three consecutive years—about twice the average annual pace of the prior decade. Even in 2025, when gold prices hit new highs, global central banks’ gold purchases still reached 863 tons, about 17.3% of global gold demand that year.

Although some central banks have reduced holdings recently, they have not yet changed the overall gold-buying pattern. The February central bank gold-buying monthly report published by the World Gold Council on April 2, 2026 shows that central banks across countries net bought 19 tons of gold in that month—below the monthly average of 26 tons reported in 2025, but up from net purchases of 5 tons in January.

Some central banks’ pace of gold buying has not stopped. Among them, the Czech Republic has continued to net buy for 36 months in a row; China has also added holdings for 16 straight months, purchasing a cumulative 44 tons from November 2024 to February 2026; and Uzbekistan has maintained net purchases for five consecutive months.

In a research report released on April 2, UBS strategist Joni Teves judged that it is extremely unlikely that central banks will make a structural shift or conduct large-scale gold selling. UBS expects annual gold purchases in 2026 to be about 800 to 850 tons, slightly lower than the level in 2025, and it is more like “slowing down” rather than a reversal of the trend.

Hu Jie, professor at Shanghai Advanced Finance Institute of Shanghai Jiao Tong University and a former senior economist at the U.S. Federal Reserve, believes that for some countries, obtaining foreign-exchange gains through gold buying and selling operations can be one of the policy considerations. Against the backdrop of gold prices being elevated, appropriate trimming of holdings now can be viewed as a technical adjustment based on market volatility.

Hedge Funds Trim Holdings Ahead of Everyone Else

Some central banks have shifted from being “big buyers” to “big sellers,” directly impacting the gold market.

Throughout March, COMEX gold futures prices fell cumulatively by more than 11%, with the front-month contract reaching as low as $4,100 per ounce. Data from the U.S. Commodity Futures Trading Commission (CFTC) show that, as of the week ending March 24, asset management institutions led by Wall Street hedge funds reduced their net long positions in gold futures options by 1.3144 million ounces, setting the largest single-week reduction record for that month.

The signal to exit investments was equally clear. Since gold prices rose temporarily and then pulled back starting March 2, global major gold ETF holdings have continued to shrink. From March 2 to 26, four major gold ETFs—SPDR, iShares, PHAU, and SGBS—collectively reduced holdings by more than 75 tons. As market volatility increased, the experience of holding weakened, prompting investors to take profits and redeem, which aligned with institutions cutting positions.

The above-mentioned trading source analyzed to the reporter from First Financial that Wall Street hedge funds believe gold prices are facing dual pressure: first, pressure from cooling expectations for Fed rate cuts and a stronger dollar; second, gold selling by multiple countries’ central banks means they have lost a key layer of buy-side support.

A deeper concern lies in potential chain reactions. The source further pointed out that if the high oil prices driven by the Middle East conflict remain elevated, more crude-oil-importing countries may be forced to sell gold to obtain foreign exchange to stabilize their local currencies and purchase energy. Those economies with high crude-oil import dependence, tight foreign-exchange reserves, and a high share of gold reserves will become potential high-risk zones for selling. If more emerging market countries follow Turkey’s approach and treat gold as the last source of liquidity, market supply pressure could surge sharply.

However, China International Capital Corporation (CICC) believes the risk of the Turkey model spreading to Gulf countries is limited, and that geopolitical and strategic security demands have not been shaken as longer-term support for central banks’ gold buying.

As of April 6, COMEX gold futures’ front-month contract has rebounded to above $4,700 per ounce. But on whether gold prices can quickly recover their losses from March, institutional views differ.

UBS expects a gold price target of $5,400 per ounce by the end of 2026, but it noted that the key variable is the Middle East situation: if the conflict causes long-term damage to energy infrastructure, gold prices may face longer periods of consolidation and downside pressure; conversely, if energy costs fall rapidly, central banks’ willingness to buy gold could be rekindled.

In its CICC research report, it also pointed out that whether it is a pullback in oil prices driven by a downgrade in geopolitical conditions, a return to more accommodative monetary policy, or supply shocks intensifying the pressure of an economic recession—thereby triggering gold’s safe-haven attributes—both investment demand for gold and gold prices have room to move upward and repair.

(This article is from First Financial)