Gold prices face short-term downward pressure; institutions remain optimistic about long-term investment value

In recent times, international gold prices have been fluctuating at high levels. As the geopolitical situation in the Middle East heats up, the U.S. Dollar Index strengthens on a temporary basis, and some central banks’ short-term selling creates disruptions, gold prices have come under pressure and pulled back.

According to the World Gold Council’s latest data, in February global central banks net bought 19 tons of gold, a significant increase from January. Emerging-market central banks continued to increase their holdings, while the central banks of Russia and Turkey became the main net sellers.

Institutional sources believe that the selling by a small number of central banks is more of a tactical move and has not changed the overall main direction of global central banks’ gold purchases; under the long-term trend of weakening U.S. dollar credit, the logic for allocating gold as a tool for reserve diversification and a credit-hedging asset remains solid. A short-term pullback does not alter the medium- to long-term upward trend. After the market is oversold, gold has medium-term allocation value.

Gold price faces pressure in the short term

Since March, the intraday range of international gold prices has widened noticeably, and differences between long and short sides have intensified. According to Wind data, COMEX gold futures prices fell by more than 10% cumulatively during March. On April 1, it closed at 4784.60 U.S. dollars per ounce. On April 2, COMEX gold futures briefly dipped to 4580.4 U.S. dollars per ounce intraday, with the highest point reaching 4825.90 U.S. dollars per ounce; afterward, prices remained range-bound.

As of 15:35 on April 7, COMEX gold futures were down slightly by 0.13%, at 4677.9 U.S. dollars per ounce.

Liu Shiyao, an analyst at Zijin Tianfeng Futures, said: “In the short term, gold prices are pressured by the suppression caused by the U.S. dollar strengthening after oil prices have surged due to the Middle East conflict. Gold therefore shows a clearly pressured trend. The transmission mechanism among oil prices, the U.S. dollar, and gold mainly unfolds along two core paths: first, oil price increases raise inflation expectations, compressing the space for the Federal Reserve to cut rates, which boosts U.S. Treasury yields and in turn supports the U.S. Dollar Index; second, from the perspective of the petrodollar system, oil price increases raise global demand for U.S. dollars.

‘While the U.S.-Iran conflict has not yet shown a clear picture, the market may be experiencing an irrational selloff,’ Liu Shiyao said.

At the same time, some central banks’ short-term selling behavior has also created disruptions to market sentiment.

According to the World Gold Council’s latest released report, the central banks of Russia and Turkey became the two most significant net sellers of gold in February. Specifically, the Russian central bank sold 6 tons of gold that month. Since the beginning of the year, it has been in a clearly net selling range, making it one of the main official net sellers of gold.

The World Gold Council’s calculations show that Turkey’s gold reserves decreased by 8 tons in February, mainly due to changes in the gold reserves held by the Ministry of Finance, rather than direct selling by the central bank. However, in March, the Turkish central bank appeared highly active; it is estimated to have used about 50 tons of gold reserves to enhance liquidity and carry out interventions in the foreign-exchange market.

Fatih Karahan (Fatih Karahan), Governor of the Central Bank of Turkey, said: “A large part of these transactions are similar to gold-currency swap futures. In other words, after they mature, the related gold will return to our reserves.”

Regarding the recent gold-selling behavior by some central banks, the macro team of Guolian Minsheng Securities believes this is more of a tactical than strategic move. There are three core reasons: first, “follow-the-trend” institutional behavior—central banks also play the role of institutional investors in the gold market, often selling during periods of consolidation and increasing holdings during accelerated price rises; second, fiscal deficits rise quickly in the short term, leading central banks to passively sell gold to meet liquidity expenditure, and both the central banks of Turkey and Russia fall into this category; third, the back-and-forth between central banks’ gold reserves and foreign-exchange reserves—after geopolitical conflicts push up oil prices, some countries face greater currency depreciation pressure, forcing central banks to sell gold to increase foreign reserves.

Most central banks are still increasing holdings

Although countries’ central banks have slowed their pace of gold buying amid elevated gold prices, overall, in February most global central banks were still adding to their gold reserves.

World Gold Council data shows that in February, global central banks combined net bought 19 tons of gold, up somewhat from January’s low, but still below the level of 26 tons per month on average in 2025. In the first two months of 2026, global central banks accumulated 25 tons of gold purchases, about half of the amount purchased in the same period last year.

Looking at specifics, Poland’s National Bank was the main force behind gold purchases in February. That month, it added 20 tons of gold, which was the largest gold-buying amount among central banks for a single month, and also its largest single-month scale since it increased holdings by 29 tons in February 2025. After the increase, Poland’s gold reserves rose to 570 tons, and the proportion of gold in total official reserves increased to 31%, bringing it further close to the previously disclosed long-term target of 700 tons.

Demand for gold purchases in Asia is also steady. The central bank of Uzbekistan has increased its holdings for the fifth consecutive month; in February it bought another 8 tons. Its gold reserves are now 407 tons, with gold accounting for 88% of its official reserves. Since the beginning of the year, it has increased holdings by 16 tons in total. The People’s Bank of China has increased its holdings for the 16th consecutive month; its latest reserve size has risen to 2308 tons, accounting for 10% of total official reserves. The Czech National Bank has continued its streak of increasing holdings for 36 consecutive months; its gold reserves are currently 75 tons. The Bank Negara Malaysia entered for the second consecutive month; in February it increased holdings by 2 tons, bringing total purchases since the beginning of the year to 5 tons.

What deserves attention is that more and more African central banks are beginning to view gold as a strategic hedging instrument. In March 2026, the Bank of Uganda officially launched a domestic gold purchase program, planning to purchase at least 100 kilograms of gold from its country’s artisanal, medium-sized, and large-scale producers between March and June, with the aim of replenishing reserves and addressing risks arising from volatility in international financial markets.

The logic for an upward move over the medium and long term remains unchanged

In the face of gold price pullbacks, most institutions believe that the medium- to long-term upward logic for gold has not been substantially shaken; short-term fluctuations are more like staged disruptions rather than a trend reversal.

Guolian Minsheng Securities believes the main trend of gold’s long-term rise has not changed. On one hand, in March, the global central bank sector as a whole remains in a net buying position, with gold purchases totaling 14.7 tons. Among them, the euro area increased holdings by 43.1 tons, far higher than the selling amounts by Turkey’s central bank and Russia’s central bank. On the other hand, the long-term trend of weakening U.S. dollar credit has not been reversed; after the U.S. government’s leverage ratio broke 110% in 2025, the weakening trend in dollar credit will continue. Historical experience shows that during the U.S. dollar credit weakening phases in 1977–1979 and 1999–2008, even if major economies sold gold on a large scale, gold prices still showed an upward trend. Tactical selloffs by a small number of “non-core” central banks do not affect the long-term logic of “weakening U.S. dollar credit → increased central bank gold purchases → gold price uptrend becoming consolidated.”

Liu Shiyao believes that from a long-term perspective, the U.S. fiscal situation continues to deteriorate; combined with geopolitical games weakening global trust in the safety of U.S. dollar reserve assets, the allocation logic for gold—as an asset that hedges and serves as a substitute currency system credit-risk—actually becomes even stronger. After an oversold condition, gold has medium-term allocation value.

Cao Xiaojun, an analyst at Hua’an Futures, also said that in the medium and long term, factors such as the global central banks’ gold-purchasing trend and shocks to currency credit stemming from public debt issues still provide strong support for gold prices. However, looking ahead to the second quarter of 2026, due to the impact of rising international oil prices, there is a risk that U.S. inflation could rebound again. The Federal Reserve may temporarily pause rate cuts, and the U.S. dollar is likely to maintain a range-bound but relatively strong pattern, which would form a short-term drag on gold prices. Still, the uptrend over the medium and long term remains unchanged.

(Editor: Zhang Yan)

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