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 U.S.-Iran conflict, the market has been paying close attention to some countries’ selling of gold, and doubts have begun to emerge about the logic behind the gold bull market supported by “central bank gold purchases.” As shown in Figure 1, in March 2026, the central banks of Turkey and Russia have already started 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 mean a bearish signal for gold prices?

We believe that the actions of some central banks in selling gold this time are more “tactical” than “strategic.” The core reasons are as follows in three aspects:

First, institutional behavior of “following the trend.” 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 sideways trading and consolidation, the Central Bank of Turkey often sells gold; conversely, when gold prices accelerate upward, the Central Bank of Turkey also accelerates gold purchases.

Second, the fiscal deficit rises rapidly in the short term, and central banks “passively” sell 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 dollars. For example, in Russia: after Russia’s fiscal deficit rises rapidly in 2025, the Central Bank of Russia also begins to “passively” reduce its gold holdings to secure financial support for the Russia-Ukraine conflict.

Third, the “counteracting and offsetting” relationship 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” is: oil price supply shock → oil price rises → worsening current account imbalances → the lira depreciates faster → the central bank sells gold to increase foreign reserves. After the U.S.-Iran conflict broke out, fearing that concerns about the trade deficit accelerating would cause 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 long term” has not changed

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

First, in March, the world still remains in a “net buying” of gold, and some central banks’ selling does not affect the main theme of “central bank gold purchases.” After the outbreak of the U.S.-Iran conflict, in March 2026 global central bank gold purchases reached 14.7 tons. Of this, the euro area was the “main force” in purchases this month (43.1 tons), while the amount of gold added by other central banks far exceeded the amounts of gold sold by Turkey and Russia. In summary, the “deleveraging” 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 we compare the United States to a “company,” then the U.S. dollar’s credit is like the company’s “debt repayment ability.” Viewing the U.S. government’s debt expansion with leverage ratios below 60% before 1991 as “benign expansion,” and after 1991, when the U.S. government leverage ratio breaks above or approaches 60%, as “looser fiscal discipline,” the former corresponds to strengthening U.S. dollar credit, while the latter corresponds to weakening U.S. dollar credit. In 2025, after the Trump administration passed the “BIG and Beautiful Act,” the U.S. government leverage ratio exceeded 110%, and the trend of weakening U.S. dollar credit continued.

Third, even if global core central banks “strategically” sell gold for the long term, gold prices 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 (see the method of phase classification in the previous paragraph). Even if the United States, the EU, and other core economies massively sell gold, gold still breaks out of an upward trend. Under the premise of weakening U.S. dollar credit, in February–March 2026, even if some central banks’ “selling” causes gold prices in the short term to experience “ups and downs,” the upward trend may not be reversed.

Fourth, “non-core” central banks’ short-term “tactical” selling of gold does not affect the long-term upward trend of gold. Taking the weakening U.S. dollar credit phases from 2016 to 2026 as an example, global central bank gold reserves saw a cumulative net increase of 3,517 tons. While non-core central banks such as Turkey and five Central Asian countries and the Philippines sold gold in the short term—causing some pullback in gold prices in the short run (refer to Figure 11)—they did not reverse the big-picture trend of gold prices rising from 2016 to 2026.

In summary, we believe that the gold selling by a small number of “non-core” central banks such as Turkey and Russia this time is based on “tactical” de-risking chosen during moments when they are “following the trend” and “temporarily easing a fiscal crisis,” and it does not affect the long-term logic of “weakening U.S. dollar credit → increasing central bank gold purchases → the consolidation of the gold upward trend.”

Risk disclosure:

The Federal Reserve in 2026 may begin pricing rate hikes instead of cutting rates based on expectations;** With the Strait of Hormuz closing in the long term, oil prices may continue rising or remain volatile at high levels, potentially impacting the global economy;** Wash is expected to take office as the chairman of the Federal Reserve, and the Federal Reserve may have the possibility of pushing forward “quantitative tightening” in advance.

（Source: Guolian Minsheng）