Data from the People's Bank of China reveals that as of the end of March 2026, official gold reserves stood at 74.38 million ounces, an increase of 160,000 ounces from the previous month. This marks the first time since March 2025 that monthly additions have surpassed 100,000 ounces. The central bank has now increased its gold holdings for 17 consecutive months. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, suggested that the significant decline in international gold prices during March, which saw a double-digit drop, was likely a direct catalyst for the accelerated purchases. This price movement was influenced by rising international oil prices due to Middle East tensions and a cooling of global monetary easing expectations, including potential Federal Reserve rate cuts. Furthermore, the eruption of geopolitical risks in the Middle East itself is a factor prompting increased gold holdings. Wang Qing indicated that the fundamental reason for the sustained accumulation is the new global political and economic dynamics emerging under the current US administration. This suggests that, despite gold prices being at historically high levels, the necessity to optimize the structure of international reserves has increased the appeal of holding more gold.
Since the deterioration of the situation involving Iran, gold has experienced substantial volatility. Influenced by multiple factors, gold prices have been turbulent in 2026. After two consecutive months of gains, both London spot gold and COMEX gold ended March lower, falling by 11.54% and 11.07%, respectively. Amid concerns that Middle East conflicts may persist, there is market apprehension that central banks might be forced to sell gold reserves to combat soaring inflation, slowing economic growth, and currency depreciation. This worry is considered a primary reason for the 16% drop in gold prices during March. Recently, the central banks of Turkey, Russia, and Poland have indicated they have sold or plan to sell part of their gold reserves. Notably, the Turkish central bank reduced its holdings by nearly 120 tonnes over the past two weeks. Analysis suggests that since the outbreak of conflict in the Middle East, global energy prices have surged significantly. With Turkey heavily reliant on energy imports, pressure on foreign exchange payments has intensified. Concurrently, rising risk aversion has put downward pressure on the Turkish Lira, compelling the central bank to intensify intervention efforts to support the currency and enhance market liquidity.
UBS recently stated in a research report that the structural trend of official sector gold buying remains unchanged, with central banks expected to continue as net purchasers. UBS anticipates that central bank buying will only gradually slow, projecting purchases of 800 to 850 tonnes for the year, slightly below the approximately 860 tonnes bought in 2025. Some analysts even suggest the recent price decline has created a "golden opportunity" for accumulation, presenting a favorable buying moment. Goldman Sachs remarked that the sell-off was "clearly an overreaction," with the market overestimating inflation and underestimating growth deceleration. As prices stabilize, the bank expects central bank purchasing to re-accelerate, averaging around 60 tonnes per month. Coupled with expectations for two more interest rate cuts this year, Goldman Sachs maintains its year-end 2026 gold price target of $5,400 per ounce.
Looking ahead to the second quarter, Nanhua Futures indicated that the evolution of the Middle East situation, Federal Reserve policy, and supply-demand fundamentals will collectively dictate the rhythm of the precious metals market. However, the marginal driving impact of geopolitical events is expected to gradually weaken, allowing gold prices to revert to a pricing model dominated by monetary policy adjustments and fundamental supply-demand dynamics. Precious metal prices are forecast to consolidate, gradually recovering from previous losses and trending higher after a period of volatility, with short-term adjustments not altering the medium to long-term upward trajectory. Huatai Securities believes that liquidity-driven selling has temporarily detached gold from its traditional role as an inflation hedge, thereby putting downward pressure on its price. From a medium to long-term perspective, global "de-dollarization" trends and concerns over US fiscal sustainability will continue to underpin gold's value as a strategic asset. The primary pricing logic for gold is expected to shift towards hedging credit risks and facilitating asset reallocation.
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