Gold Market Shift: Central Banks Turn to Selling Amid War and Energy Pressures

After years of intense buying and record highs, the gold market is undergoing a notable shift, as some central banks have begun liquidating part of their reserves under growing financial pressures driven by the war with Iran and rising energy and defense costs, in an effort to raise liquidity.

Spot gold has declined by about 10% from its peak recorded at the end of January, trading currently near $4,838 per ounce, entering a corrective phase despite ongoing geopolitical tensions. This drop reflects a sharp reversal compared to last year, when strong central bank demand supported prices even amid rising global interest rates, according to CNBC.

Nikki Shields, Head of Metals Strategy at MKS PAMP, said there are clear signs that some central banks have recently been selling gold.

Market observers link these moves directly to the impact of the war, as rising oil prices increase pressure on import-dependent economies, while currency volatility intensifies, forcing central banks to intervene more actively in foreign exchange markets.

Rising public spending requirements—particularly on energy and defense—are also adding pressure. Shields noted that several central banks were sitting on profitable gold reserves as prices approached $5,000 per ounce, before starting to use these holdings to finance higher energy costs and defense spending, or to support weakening local currencies.

Emerging market central banks appear to be at the forefront of this shift, amid mounting pressures from a strong U.S. dollar and higher borrowing costs, which increase the need for currency stabilization interventions.

Standard Chartered Chief Investment Officer Steve Brice said weakness in emerging market currencies has prompted some central banks to sell gold in an effort to stabilize monetary conditions.

On actual movements, Turkey has emerged as the largest seller since the start of the year, reducing its official gold holdings by 131 tonnes in March through swaps and direct sales to support the lira, according to Metals Focus.

Since the outbreak of the war with Iran, the Turkish lira has continued to hit record lows, falling about 1.7% against the U.S. dollar.

Data also shows that Russia has reduced its gold reserves in recent months, likely to finance budget deficits, while Ghana has also sold part of its holdings to boost foreign currency liquidity.

In Poland, the central bank governor has indicated consideration of selling part of the country’s gold reserves to fund defense spending, despite Poland being one of the largest gold buyers among central banks in 2024 and 2025.

These developments are particularly significant given that central banks have been one of the strongest pillars of gold demand in recent years. Their sustained purchases helped offset Western investment outflows and pushed prices to historic highs. However, this dynamic now appears to be reversing alongside weakening retail investor interest.

According to the World Gold Council, central banks bought more than 1,000 tonnes annually between 2022 and 2024, the highest level on record. However, purchases fell to 863 tonnes in 2025 amid heightened price volatility.

Natixis noted in a research memo that the decline in demand is likely due to some central banks selling gold to defend their currencies or finance energy imports, amid rising oil prices and a strong dollar.

The bank also pointed out that rising U.S. Treasury yields have added pressure on gold by reducing the appeal of the non-yielding asset.

In the same context, Adrian Ash, Head of Research at BullionVault, said that gold bought as a hedge before crises can turn into a source of funding once the crisis actually materializes, stating: “I bought gold expecting the crisis… and now the crisis has arrived.”

However, experts caution against interpreting these moves as a permanent structural shift. Shaokai Fan, Head of Central Banks at the World Gold Council, said the trend highlights gold’s essential role as a highly liquid reserve asset that can be used when needed during periods of stress.

At the same time, analysts note that major consumers such as China often take advantage of price dips to resume buying. Natixis senior commodities analyst Bernard Dahdah expects opportunistic buying to return if gold continues to decline, potentially providing a floor for prices.