(Yicai) April 7 -- Although some central banks have begun selling gold, these moves are largely "tactical" and "temporary" and have not yet developed into a broader trend, analysts said. However, the situation in the Middle East needs to be watched closely as prolonged high oil prices could trigger a chain reaction of gold sales.

"Countries that are heavily dependent on crude oil, have tight foreign reserves and hold a high share of gold in their reserves will be high-risk candidates for selling," a trader told Yicai, after a number of central banks recently pared their gold holdings in response to energy shortages and currency depreciation pressures caused by the Middle East war.

The Central Bank of the Republic of Türkiye sold nearly 120 tons of gold in the two weeks leading up to March 28, according to data it released on April 2. Poland’s central bank also said early last month that it plans to sell part of its gold reserves to raise USD13 billion for defense spending. And Russia’s central bank offloaded 15 tons of gold in the first two months of the year, according to statistics from the World Gold Council.

Gold sales by the central banks of Türkiye, Poland and Russia are primarily driven by a desire to follow trends and to temporarily alleviate fiscal crises, according to a macroeconomic research report by Guolian Minsheng Securities. However, this does not affect the long-term logic driving gold prices up, such as the weakening of the US dollar's credibility and an increase in central bank gold purchases.

Türkiye's gold reserves decreased by 69.1 tons in the week ended March 28, with a total two-week decline of 118.4 tons, reducing the country’s total reserves to 702.5 tons, according to data released by Türkiye’s central bank. More than half of this was done through gold-for-foreign-exchange swaps, using gold as collateral to get US dollars, which are redeemed later.

Since the outbreak of the US-Israel-Iran conflict, the US dollar index has surged and the Turkish lira has repeatedly hit historic lows against the greenback, sinking as low as 44.35 to the dollar at one point. This has led to a significant withdrawal of foreign capital from the stock and bond markets. At the same time, Türkiye imports about 90 percent of its crude oil, and with oil prices now over USD100 per barrel, energy costs have risen substantially.

Oil price shocks have worsened Türkiye’s current account deficit, accelerated the depreciation of the lira and forced the country's central bank to sell gold in exchange for foreign exchange, resulting in a "seesaw effect" between foreign exchange reserves and gold reserves, according to the Guolian Minsheng report.

This large-scale gold sell-off stands in stark contrast to Türkiye’s active gold buying over the past four years. Between 2022 and 2025, the central bank added 325 tons of gold, raising its gold reserves to 603 tons by the end of last year, with an estimated value of USD135 billion.

Consistent Demand

Over the past four years, central banks have been key buyers in the gold market. From 2022 to 2024, central banks bought over 1,000 tons of gold per year on average, roughly twice the average annual purchases of the previous decade, according to data from the World Gold Council. Even in 2025, when gold prices hit record highs, central banks still bought 863 tons, accounting for approximately 17.3 percent of global demand that year.

Although some central banks have recently pared their holdings, the overall buying trend has not changed. Central banks made net purchases of 19 tons of gold in February, according to the World Gold Council's Central Bank Gold Buying Report released on April 2. This is less than 2025’s monthly average of 26 tons but a big jump from January’s net purchase of five tons.

A structural shift or large-scale gold sell-off by central banks is very unlikely, Joni Teves, strategist at Swiss banking giant UBS, said in a report released on April 2. Total gold purchases this year will be around 800 to 850 tons, slightly lower than the levels seen in 2025, which is more indicative of a slowdown rather than a trend reversal, she said.

UBS forecasts gold prices to be around USD5,400 per ounce by the end of this year, but notes that a key variable is the situation in the Middle East. If conflicts lead to long-term damage to energy infrastructure, gold prices might fluctuate within a narrow band or face downward pressure. Conversely, if energy costs drop rapidly, central bank demand could be reignited.

Whether it is a de-escalation in geopolitical tensions that lowers oil prices, looser monetary policy or intensified supply shocks boosting gold's safe-haven appeal, there is room for gold investment demand and prices to recover, according to a research report by China International Capital Corp.

Editor: Kim Taylor