Central banks selling gold: temporary trend or lasting shift?

After many years of sustained net purchases of gold, some central banks have shifted to selling gold in recent times as the US–Iran conflict has led to a high demand for liquidity. Is this a long-term change in central banks' gold reserve strategy, or just a temporary trend? In 2025, net central bank purchases were a key driver behind gold's 65% gain for the year. Earlier this year, gold continued its strong uptrend, approaching the near 5,600 USD/oz level. When the US–Iran conflict erupted, investors expected gold prices to soon break above 6,000 USD/oz. Yet reality turned out to be the opposite. Gold has fallen about 10% from before the conflict. 'Some central banks have sold gold significantly,' said Nicky Shiels, Chief Global Strategist for Precious Metals at MKS Pamp, in an interview with CNBC. The reasons behind central banks' gold sales are closely tied to the challenges the Gulf War poses to economies. Higher oil prices put pressure on energy-importing economies, causing exchange rate volatility and prompting central banks to intervene more in currency markets to defend their currencies. Additionally, higher energy import costs lead to a greater demand for foreign currency. 'Many central banks bought gold early and have made substantial profits when gold reached around 5,000 USD/oz,' Ms. Shiels emphasized, adding that some central banks view that as an opportunity to sell and cash in 'to pay for rising energy and defense expenditures, or to protect the exchange rate.' Emerging market central banks have been at the forefront of selling activity recently. 'The currencies of these economies have weakened, forcing central banks to sell gold to stabilize the exchange rate,' said Steve Brice, Head of Investments at Standard Chartered. Data on gold-selling activity this year remains incomplete, but the data available thus far reflects this trend clearly. Notably, the Turkish central bank posted a net sale and swap totaling 131 tonnes in March, part of an effort to stabilize the lira exchange rate. The Russian central bank has also sold gold in recent months, possibly to cover government budget deficits. Ghana has sold gold to raise foreign exchange liquidity, and the Polish central bank has at times contemplated selling gold to boost defense spending. The selling of gold by these central banks has worried gold market investors, as this group has been a major pillar of the gold market in recent years. The persistent net purchases of gold by central banks have helped offset Western investors selling at various times, lifting gold to record levels. Now, gold selling by some central banks occurs alongside Western investors exiting gold ETFs. According to data from the World Gold Council (WGC), central banks bought net more than 1,000 tonnes of gold in each year from 2022 to 2024. In 2025, this group bought a net 863 tonnes. Adrian Ash, Director of Research at BullionVault, said the logic of central banks' net gold selling in recent times is easy to understand: gold has been bought as a form of crisis hedge, and when crisis hits, gold plays its role as a reserve asset. 'You buy gold to hedge against crises, and now crises have arrived. Oil prices are rising, the USD is strengthening, interest rates are rising... which means central banks need more foreign-exchange liquidity,' Mr. Ash said. Some long-time market observers contend that central banks' gold selling is only a tactical, temporary move rather than a long-run structural change. First, this selling underscores gold's role as a crisis reserve asset — as Shaokai Fan of the World Gold Council notes, 'this really underscores why central banks hold gold... Gold is a highly liquid asset even in times of volatility, so it can be sold when needed,' Fan told CNBC. Second, large gold-consuming countries such as China often step in to bottom-fish when gold prices dip. Natixis analyst Bernard Dahdah said that buying activity would rise when gold prices fall, helping to mitigate deeper declines.