Why Are Central Banks Around the World Selling Off Gold in Droves?
Global gold prices have lost their shine in recent weeks. Gold prices fell more than 20% from their peak at the end of January 2026, when they reached around US$5,596 per troy ounce. Now, prices are hovering in the US$4,400 range.
According to Refinitiv, gold prices closed at US$4,492.48 per troy ounce on Friday’s trading (27/3/2026), up 2.6%. However, gold prices have collapsed 15% since the war broke out on 28 February 2026.
This correction is occurring amid conditions that would normally support gold, namely geopolitical conflict and global uncertainty.
The factor that has changed is actually the market participants, particularly central banks.
Over the past three years, central banks have been the world’s largest gold buyers, absorbing nearly 1,000 tonnes per year since 2022. This flow created a strong foundation for the upward gold trend. But since the beginning of 2026, the direction has reversed. The market is now facing supply from institutions that were previously the main supporters.
According to Bullion Vault, the mechanism began with a surge in energy prices. Disruptions in oil trade routes pushed oil prices above US$100 per barrel. Energy-importing countries need more dollars to pay for these imports.
This pressure led to the weakening of domestic currencies, particularly in developing countries. In such situations, central banks face a quick choice: allow the currency to weaken or use reserves to hold it back.
Gold becomes the most liquid instrument after the US dollar. When exchange rate pressures increase, gold is sold or used as collateral to obtain liquidity. This is what drives additional supply to the gold market in a short time, without considering prices.
Turkey is the most striking example. According to Bloomberg, the country’s central bank has released around 60 tonnes of gold since the Iran conflict heated up, valued at about US$8 billion. This step was taken to stem the continued weakening of the lira, which has hit record lows against the dollar. Some transactions were conducted through swap schemes using gold reserves stored at the Bank of England.
Russia is acting with a different motive. Its central bank has begun selling gold since 2025 to finance war needs. The latest data shows Russia’s gold reserves at their lowest level in four years, with sales value reaching around US$2.4 billion in early 2026. This adds consistent supply-side pressure.
Poland has not yet made direct sales, but policy signals are already moving the market. According to statements from central bank officials, Poland is considering monetising gold reserves to fund defence spending, with potential funds of around US$13 billion. The market is responding to this policy direction as potential additional supply, given that Poland was previously one of the largest gold buyers in recent years.
Central bank demand for gold is indeed starting to weaken. Its share fell below 25% of total global demand in 2025, from an average of around 33% in the previous three years. Although still historically high, this directional change is enough to shift market balance.
Selling pressure from central banks is price-insensitive. Sales are made for liquidity and stability needs, not to seek the best timing. In such conditions, the market struggles to absorb additional supply, especially when other investors are also liquidating, including from gold ETFs which recorded the largest outflows in more than two years.
Looking ahead, the direction of gold prices will be heavily determined by the same factors: currency pressures and energy prices.