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

In the near term, international gold prices are consolidating at high levels. As geopolitical tensions in the Middle East heat up, the U.S. Dollar Index strengthens on a periodic basis, and short-term selling by some central banks adds disruption, gold prices are under pressure and pull back.

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

Institutional analysts believe the selling by a small number of central banks is more of a tactical operation and does not change the main tone of global central banks buying gold. Under the long-term trend of weakening U.S. dollar credit, the allocation logic for gold—both as a tool for diversifying reserves and as a credit-hedging asset—remains solid. Short-term pullbacks do not change the long-term upward trend; after being oversold, gold has medium-term allocation value.

Gold prices face pressure in the short run

Since March, the intraday swings in international gold prices have noticeably widened, and divergences between long and short sides have intensified. According to Wind data, COMEX gold futures prices fell cumulatively by more than 10% during March. On April 1, the contract closed at $4,784.60 per ounce. On April 2, COMEX gold futures briefly dipped to $4,580.4 per ounce during the session; the high reached $4,825.90 per ounce, and then prices remained range-bound.

As of 3:35 p.m. on April 7, COMEX gold futures prices were down slightly by 0.13%, at $4,677.9 per ounce.

Liu Shiyao, an analyst at Zijin Tianfeng Futures, said that in the short term, gold prices are being held down by the suppression caused by the Middle East conflict driving oil prices to surge and supporting the U.S. dollar, resulting in a clearly pressured posture. 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 Federal Reserve rate cuts, which drives U.S. Treasury yields higher and, in turn, supports the U.S. Dollar Index; second, from the perspective of the petrodollar system, rising oil prices increase global demand for dollars.

“While the conflict between the U.S. and Iran has not yet shown a clear trajectory, the market may be going through an irrational decline,” Liu Shiyao said.

Meanwhile, short-term selling by some central banks has also disrupted market sentiment.

According to the World Gold Council’s latest released report, the Russia central bank and the Turkey central bank were the two main sellers of gold in February. In that month, the Russia central bank sold 6 tons of gold, and it has been in a clearly net selling range since the beginning of the year, becoming one of the main official net sellers of gold.

The World Gold Council’s calculations show that Turkey’s gold reserves fell 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, Turkey’s central bank appeared highly active, and it is estimated that it used about 50 tons of gold reserves to enhance liquidity and carry out intervention operations in the foreign exchange market.

Fatih Karahan, Governor of the Turkey Central Bank, said: “A large portion of these transactions is similar to gold-currency swap futures. In other words, the related gold will return to our reserves upon maturity.”

With regard to the recent gold-selling behavior by some central banks, the macro team at Guolian Minsheng Securities believes this is more tactical than strategic. There are three core reasons: first, “trend-following” institutional behavior—central banks also play the role of institutional investors in the gold market, often selling during periods of consolidation and buying more during accelerated price increases; second, fiscal deficits rise quickly in the short term, leading central banks to passively sell gold to meet liquidity spending, which applies to both Turkey and the Russia central bank; third, the give-and-take between central banks’ gold reserves and foreign exchange reserves—after geopolitical conflicts push up oil prices and increase currency depreciation pressure in some countries, central banks have no choice but to sell gold to add to foreign reserves.

Most central banks are still increasing holdings

Although countries have slowed their pace of gold purchases amid high gold prices, overall, in February most global central banks were still increasing their gold reserves.

World Gold Council data shows that in February, global central banks combined net bought 19 tons of gold, which rebounded somewhat from January’s low point, but it still remained below the 26 tons level of the 2025 monthly average. In the first two months of 2026, global central banks cumulatively bought 25 tons of gold, about half of the amount purchased in the same period last year.

Looking in detail, the National Bank of Poland was the main force behind gold purchases in February. The bank increased its holdings by 20 tons in that month—both the largest monthly purchase by any central bank and its biggest 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 gold’s share of total official reserves increased to 31%, bringing it further close to its previously announced long-term target of 700 tons.

The momentum for gold buying in Asia is also steady. The Uzbekistan central bank has increased its gold holdings for the fifth consecutive month; in February it again bought 8 tons. Its gold reserves now stand at 407 tons, with gold accounting for 88% of its official reserves. Since the beginning of the year, it has cumulatively increased holdings by 16 tons. The People’s Bank of China has increased its gold holdings for the 16th consecutive month, and its latest reserve size rose to 2,308 tons, accounting for 10% of total official reserves. The Czech National Bank has continued its 36-month consecutive record of increasing holdings, and its gold reserves are currently 75 tons. The Malaysia central bank entered the market for the second consecutive month; in February it increased holdings by 2 tons, bringing cumulative purchases since the beginning of the year to 5 tons.

Worth noting is that more and more African central banks are starting to treat gold as a strategic hedging tool. In March 2026, the Uganda central bank will officially launch a domestic gold purchasing program, planning to procure at least 100 kilograms of gold from domestic artisanal, mid-sized, and large producers between March and June, aiming to strengthen reserves and address risks arising from volatility in international financial markets.

The long- to medium-term upward logic has not changed

In the face of a pullback in gold prices, most institutions believe that gold’s long- to medium-term upward logic has not been substantively shaken. Short-term fluctuations are more likely to be phased disruptions rather than a trend reversal.

Guolian Minsheng Securities said that the main trend of gold’s long-term rise has not changed. On the one hand, in March, the global central banks as a whole remain in a net-buying position, with gold purchases of 14.7 tons. Within that, the euro area increased holdings by 43.1 tons, far exceeding the selling reductions by the Turkey central bank and the Russia 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 above 110% in 2025, the trend of weakening U.S. dollar credit is expected to continue. Historical experience shows that during the periods of weakening U.S. dollar credit in 1977–1979 and 1999–2008, even if major economies sold large amounts of gold, gold prices still showed an upward trend. Tactical selling by a small number of “non-core” central banks does not affect the long-term logic of “weakening U.S. dollar credit → central banks increase gold purchases → gold’s upward trend becomes consolidated.”

Liu Shiyao believes that from a long-term perspective, the U.S. fiscal situation continues to deteriorate, and coupled with geopolitical games weakening global trust in the safety of U.S. dollar reserve assets, gold as an asset for hedging and as part of a credit-risk alternative currency system has a long-term allocation logic that is actually further strengthened. After being oversold, it has medium-term allocation value.

Cao Xiaojun, an analyst at Hua’an Futures, also said that over the long to medium term, factors such as the global central banks’ gold purchasing trend and shocks to currency credit arising 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 may 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, thereby exerting a phase-specific downward pressure on gold prices. Still, the long-term upward trend has not changed.