United Nations Minsheng: How Much Does the Central Bank's Gold Sell-Off Impact? Early Doubts About the Logic of the Gold Bull Market

Why Are Central Banks Selling Gold?

Since the outbreak of the Iran-Iraq conflict, the market has been paying close attention to some countries’ selling off of gold, and doubts have started to emerge about the bull-market logic for gold supported by “central bank gold purchases.” As shown in Figure 1, as of March 2026, the central banks of Turkey and Russia have already begun selling gold, while Poland plans to sell gold to support defense construction. So why are some central banks “passively” selling gold? Does selling gold by central banks really imply a bearish outlook for gold prices?

We believe that the recent selling of gold by some central banks is more “tactical” rather than “strategic,” and the core reasons are as follows in three aspects:

First, “trend-following” behavior by institutions. In essence, central banks also play the role of “institutional investors” in gold. Taking the central bank of Turkey as an example: when gold prices are in a period of range-bound consolidation, the central bank of Turkey often sells gold; conversely, when gold prices accelerate upward, the central bank of Turkey is also accelerating its gold purchases.

Second, the fiscal deficit rises rapidly in the short term, and the central bank “passively” sells gold to meet liquidity spending. For example, in Turkey: after Turkey’s fiscal deficit rises rapidly, the central bank—or “reluctantly” sells gold to obtain U.S. dollars. For example, in Russia: after Russia’s fiscal deficit rose rapidly in 2025, the Russian central bank also began “passively” reducing its gold holdings to support funding needs related to the Russia-Ukraine conflict.

Third, the “rise and decline” between central bank gold reserves and foreign exchange reserves. Taking the central bank of Turkey as an example, the transmission path of the seesaw effect between “foreign exchange reserves” and “gold reserves”: oil-price supply shock → oil-price rises → greater current-account imbalance → the lira depreciates faster → the central bank sells gold to increase foreign reserves. After the Iran-Iraq conflict broke out, due to concerns that the trade deficit would accelerate and expand—causing the lira to depreciate too quickly—the central bank of Turkey sold nearly 60 tons of gold in March.

Why the grand narrative of “gold rising in the long run” has not changed

We believe that the main trend of “gold rising in the long run” has not changed. The core reasons include four dimensions**:**

First, in March the world was still “net buying” gold, and some central banks’ selling off does not affect the main rhythm of “central bank gold purchases.” After the Iran-Iraq conflict broke out, in March 2026 global central banks’ gold purchases reached 14.7 tons. Of this, the euro area was the “main buyer” for the month (43.1 tons), and the amount of gold accumulated by other central banks far exceeded the amount of gold sold by Turkey and Russia. In summary, the “selling off” behavior of some central banks does not affect the overall tone of “central bank gold purchases.”

Second, the trend of weakening long-term U.S. dollar credit has not been reversed. If the United States is compared to a “company,” then U.S. dollar credit is like the company’s “debt-repayment capacity.” Treat the debt expansion in which the U.S. federal government’s leverage ratio before 1991 was below 60% as “benign expansion.” Treat the debt expansion after 1991 in which the leverage ratio broke through or approached 60% as “looser fiscal discipline.” The former corresponds to strengthening U.S. dollar credit, while the latter corresponds to weakening U.S. dollar credit. After the Trump administration’s “Big and Beautiful Act,” the U.S. government’s leverage ratio exceeded 110% in 2025, and the trend of weakening U.S. dollar credit continued.

Third, even if global core central banks sell gold “strategically” in the long term, the gold price can still rise. As shown in Figures 7-8, 1977-1979 and 1999-2008 happened to be in the period of weakening U.S. dollar credit (for the stage classification method, refer to the previous section). Even if the United States, the European Union, and other core economic entities sell gold on a large scale, gold still follows an upward trend. Under the premise of weakening U.S. dollar credit, even if in February-March 2026 some central banks’ “reductions” cause gold prices to experience short-term “ups and downs,” the upward trend may not have been reversed.

Fourth, short-term “tactical” selling of gold by “non-core” central banks does not affect the long-term upward trend in gold prices. Taking the U.S. dollar credit weakening stage from 2016-2026 as an example, global central bank gold reserves recorded a cumulative net increase of 3,517 tons. In the short term, “non-core” central banks such as Turkey, five Central Asian countries, and the Philippines selling gold caused a certain pullback in gold prices in the short run (see Figure 11), but they did not reverse the broader trend of gold prices rising from 2016-2026.

In summary, we believe that the recent selling of gold by a small number of “non-core” central banks, such as those of Turkey, Russia, and others, is a “tactical” reduction made when choosing among options such as “following the trend” and “temporarily alleviating the fiscal crisis,” and it does not affect the long-term logic of “weakening U.S. dollar credit → increased central bank gold purchases → the consolidation of the gold price upward trend.”

Risk warning:

The Federal Reserve in 2026 may start pricing in rate hikes beginning from expectations of no rate cuts;** the closure of the Strait of Hormuz and the medium-to-long-term trend of oil prices staying high or continuing to rise, or experiencing high-level volatility, may impact the global economy;** Wach is expected to take office as Federal Reserve chair, and there is a possibility that the Federal Reserve may advance the process of “balance sheet reduction.”.

(Source: Guolian Minsheng)