Gold’s decline reveals a rare shift in the market. After years of relentless accumulation, some central banks are now selling bullion as pressure from Iran’s war forces them to scramble for cash. Spot gold prices, currently trading at around $4,838 an ounce, are down about 10% from their late January highs and are in correction territory even as geopolitical risks increase. The move marks a clear reversal from last year’s bull market, when central bank purchases helped support prices despite rising interest rates. Nicky Shields, head of metals strategy at MKS Pump, told CNBC: “We’ve seen a noticeable sell-off in central bank gold by some market participants.” Drivers are increasingly connected to wartime realities. Market watchers said high oil prices were putting a strain on the import-dependent economy, and currency fluctuations were forcing some central banks to intervene more aggressively in foreign exchange markets. Spending requirements are also an urgent consideration for central banks. “A lot of it was sitting in piggy banks at prices as high as $5,000 an ounce,” Shields said. Mr. Shields said some people are now using their gold reserves “to fund increased energy and defense spending or to protect against currency depreciation.” Emerging market central banks appear to be at the forefront of this change. A stronger US dollar and higher borrowing costs are compounding the pressure on the currency, increasing the need for intervention. “As far as gold is concerned, weakening currencies in emerging markets have led some central banks to sell gold to stabilize their currencies,” said Steve Bryce, chief investment officer at Standard Chartered. You bought gold in case of a crisis. Now the crisis has struck. BullionVault Adrian Ash Hard data on central bank sales tends to be delayed or obscured, but the signs are emerging. The most notable seller so far this year has been Türkiye. According to a report published by Metals Focus last Thursday, the company’s official gold holdings fell by 131 tonnes in March through swaps and outright sales as authorities sought to stabilize the lira. The Turkish lira has fallen further to a new record since the start of the Iran war, losing about 1.7% against the US dollar since the conflict began. Similar patterns are seen elsewhere. Russia has reduced its gold holdings in recent months to cover budget shortfalls, and Ghana has also sold its reserves to increase foreign currency liquidity, according to data from Metals Focus. Poland’s central bank governor also briefly considered selling some of its gold reserves to fund defense spending. The Central European country was the largest buyer of gold by central banks in 2024 and 2025. Strong demand pillars This shift is significant because central banks have been one of the most powerful pillars of the gold market in recent years. Their steady purchases helped offset outflows from Western investors and supported the bullion’s rally to record highs. Now, it looks like both of these drivers are going backwards at the same time. Central banks have become a dominant force in the gold market in recent years, purchasing more than 1,000 tonnes a year from 2022 until 2024, when annual demand for gold by central banks hit a record high, according to the World Gold Council. Central bank purchases fell to 863 tonnes in 2025 as market participants weathered record price fluctuations. “Our view is that behind the decline, some central banks are likely selling gold to defend their currencies or to finance energy purchases,” Natixis said in a note, citing rising oil prices and a strong dollar as key stressors. Emerging markets appear to be driving the recent sell-off, but major reserve holders such as the Reserve Bank of India, People’s Bank of China and Deutsche Bundesbank remain largely opaque about their gold activities, highlighting limited visibility into public sector capital flows. Natixis added that retail investors exiting their gold positions and some central banks turning net sellers were also among the main reasons for the recent decline. Natixis also pointed to rising U.S. Treasury yields as another factor in outflows, noting that higher returns on fixed income assets are making non-yielding bullion less attractive. Similarly, Adrian Ash, director of research at BullionVault, said the logic is simple: gold purchased as insurance in advance of a crisis could become a source of funding once a crisis occurs. “You bought gold for a crisis, and now there is a crisis,” he said. “Global increases in oil and gas, as well as the US dollar and borrowing costs, mean many central banks will need to increase foreign exchange reserves, potentially defending their currencies,” Ash said. Still, industry veterans caution that these moves are often tactical rather than structural. As an example, the sale highlights gold’s role as a reserve asset in times of stress, said Xiaokai Huang, global head of central banks at the World Gold Council. “It really emphasizes why central banks hold gold. Gold is a highly liquid asset that typically performs well in uncertain times and can be deployed as needed,” he told CNBC. Additionally, major consumers such as China have historically stepped in when prices have fallen, and Natixis senior commodity analyst Bernard Darda said he expects opportunistic buying to reemerge if prices fall further, potentially forming a bottom.
