Original author: Zhao Ying

Original source: Wall Street News

The hottest question in the market recently is: Are global central banks selling gold? Has the official "gold hoarding trend" that has lasted for 15 years come to an end?

According to Feng Trading Desk, UBS strategist Joni Teves provided a clear judgment in the latest precious metals research report released on April 2: The likelihood of a structural shift in central bank policies and large-scale gold sell-offs is extremely low. Official institutions will still maintain a net buying stance, although the pace of purchases will moderately slow down - it is expected that the total amount of gold purchased in 2026 will be about 800 to 850 tons, slightly lower than the approximately 860 tons expected for 2025.

The report targets the most eye-catching example recently - the news that Turkey "sold about 50 tons of gold in a few weeks." Teves believes that the official gold data from Turkey contains signs of commercial bank positions and swaps, and inferring that "the central bank has started to sell" based solely on the headline is highly risky, and it should wait for more detailed breakdown data before making a judgment.

On the price front, UBS defines the short term as "full of noise": the news cycle surrounding geopolitical situations will continue to cause fluctuations and adjustments in gold prices; however, the mid-term logic still points to new highs, and the average annual gold price forecast for 2026 has been downgraded to $5,000 (from the previous $5,200, mainly due to adjustments in the first quarter), maintaining the year-end target price of $5,600 (set at the end of January).

Using "central bank selling gold" as evidence for this round of retraction is not solid; 800-850 tons seem more like "slowing down."

The specific scenario that the market is concerned about is: If the Middle East conflict prolongs, oil prices rise inflation, growth weakens, and the local currency depreciates, some central banks may be forced to sell gold to cope with pressure. The report does not deny that "individual central banks selling off" may happen, but it emphasizes that this does not equate to a trend reversal in the official departments.

A key reminder given in the report is that in the past 15 years of continuous gold accumulation by official departments, there have been instances of "selling" in individual months, which is not uncommon. The reasons could also be practical - central banks that bought at low prices might take some tactical profits outside their core positions; surging gold prices trigger rebalancing; and the "natural inflow" from gold-producing countries may shift to exports at certain times. In other words, selling can be an action, not necessarily a stance.

The baseline judgment is that net buying is still ongoing, but at a slower pace. The nuance here lies in the trading habits of official departments: they are more like "physical buyers," often providing support during pullbacks, allowing the market to stabilize more quickly at a higher platform; conversely, official departments typically do not chase rising prices and prefer to re-enter when prices are more suitable and fluctuations are tighter.

This also explains why the market may suddenly feel that "central banks are missing" when volatility increases. The observations mentioned in the research are that recent official departments and other longer-term holders are more inclined to watch from the sidelines rather than immediately reinforce positions during each dip.

The narrative of Turkey selling "50 tons" has been exaggerated, and gold prices are more short-term influenced by the dollar and real interest rates.

The case of Turkey is sensitive because it seems to align with the narrative of "central banks starting to sell gold." However, Turkey has certain peculiarities: some of the changes may be due to swaps rather than direct sales; more importantly, the Central Bank of Turkey has long treated gold as a policy tool used to support liquidity management in the domestic banking system.

A portion of the total gold disclosed by the Turkish central bank corresponds to commercial bank positions. Coupled with policies allowing banks and other entities to use gold within the financial system more since 2017, the "changes in total data" do not equate to "the central bank selling in the market." The report's suggestion is clear: wait for more detailed data that can be broken down before discussing trends.

The trading environment in March exhibited "dual uncertainty": on one hand, as news related to Iran fermented, gold prices were already seeking a new stable range after sharp rises and falls in January-February; on the other hand, the impact of the Middle East conflict on macroeconomic and asset pricing is non-linear, and long-term funds are reluctant to make quick bets.

When "buying the dips" strategic money is absent, gold prices are more likely to return to traditional frameworks in the short term: a stronger dollar and rising real interest rates exert pressure on gold prices; bulls are further squeezed out, and even a certain level of short selling emerges. Moreover, Chinese demand supported prices during this phase, allowing gold to stabilize around $4,500 before returning and fluctuating around the $4,700 line.

The underlying logic of central bank gold holdings: buying means not selling.

The World Bank's "Fifth Biennial Reserve Management Survey Report (2025)" explains a more fundamental question: how do central banks actually think about gold? The survey covers holdings up to December 2024, with participation from 136 institutions, the highest in history, and for the first time, a separate chapter on gold was established.

Several numbers clarify the boundaries of central bank behavior: about 47% of central banks make gold holding decisions based on "historical legacy," about 26% based on qualitative judgments; only about a quarter incorporate gold into a formal strategic asset allocation framework.

More importantly, only about 4.5% will make short-term tactical adjustments to gold reserves, while the investment style for gold is primarily buy-and-hold (about 62%). This profile suggests that even if the buying pace slows down, the official departments are not like a group of traders who are driven by news and frequently flip positions.

Regarding the motivation for increasing holdings, more than half list "diversification" as the main reason; local gold purchase plans account for about 35%, geopolitical risk about 32%; only about 6% consider "liquidity needs" as a reason. The rationale for official departments regarding gold has not become invalid due to recent fluctuations.

Short-term fluctuations are inevitable, but "new highs are not over" remains the main line.

Returning to the trading aspect, gold does not follow a straight upward path: it may continue to consolidate and experience ups and downs in the coming weeks, as the market continuously reassesses geopolitical risks. However, it believes that the two lines driving funds to allocate gold in the medium to long term - a combination of growth and inflation risks and the persistence of geopolitical tensions - are making "diversification into gold" a more common portfolio action.

Within this framework, the pricing anchor provided in the report is: an average annual gold price of $5,000 in 2026, and a year-end target of $5,600. It also mentions that speculative positions have become "cleaner," while long-term participants are still underweight; if a pullback occurs again, it is closer to a "strategic accumulation window," rather than a signal of trend termination.

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