For "reverse hedging," some central banks have started selling gold, but no large-scale selling signals have appeared yet.

Ask AI · Is the central bank selling gold a short-term liquidity need or a shift in risk aversion strategy?

China Securities Journal, April 7 — (Zhang Zhihan) on the 7th, spot gold continued to fluctuate, with prices dropping then rising again. The previous day, spot gold experienced a sharp decline and rapid rebound throughout the day. Overall, after experiencing intense volatility, international gold has significantly retreated from its previous highs. Is it now trying to find a bottom?

According to information from the UK on the 6th, an insider said that the US and Iran have received a proposal for a ceasefire agreement, which could take effect on the 6th. Local time April 6, U.S. President Trump stated that the conflict with Iran is about to escalate or come to an end, depending on Iran’s response to his set “deadline(Eastern Time 7th 8:00 PM).”

Compared to frequent changes in news, liquidity seems to be a more critical factor influencing current gold prices. Xu Wenyu, Director of Macro Strategy Research at Huatai Futures Research Institute, said that since the US-Iran geopolitical conflict, gold price volatility has increased, showing a “non-safe-haven” characteristic, driven by the pressure from rapidly rising energy prices and the US dollar.

It can be seen that international oil prices have continued to rise recently. Looking back over the past week, Brent crude futures and WTI crude futures both showed significant increases. Inflation pressures have intensified, raising the risk of liquidity tightening.

Although the US dollar index fell below 100 on the 6th, it still fluctuates around a relatively high level. The pursuit of the dollar may trigger global liquidity withdrawal.

At this time, changes in international central banks’ gold holdings more clearly reflect shifts in liquidity demand. Recently, central banks worldwide have been major buyers of gold. Data from the World Gold Council shows that from 2022 to 2024, global central banks bought over 1,000 tons of gold annually for three consecutive years. In 2025, when gold prices surged, central banks’ gold purchases still reached 863 tons.

However, recently, some central banks have started selling gold. The World Gold Council reports that the Russian central bank sold a total of 15 tons of gold in the first two months of this year. Data released by the Turkish central bank on April 2 shows that to cope with energy shortages caused by Middle East conflicts and the pressure of currency depreciation, it sold nearly 120 tons of gold in the two weeks ending March 28.

Does this indicate a shift in the gold market trend? Wan Zhe, a professor at Beijing Normal University, said that some of the recent gold sales by international central banks are mainly to utilize gold reserves to manage liquidity, not strategic bearishness.

For example, Turkey’s lira has depreciated sharply, and the Turkish central bank’s use of gold reserves is a response to liquidity needs. Poland’s central bank’s “tactical adjustments” to gold are mainly to raise funds to meet fiscal and other demands.

Lian Ping, Chief Industry Researcher at Guangkai, analyzed that the demand for import-export and capital flow expenditures has become prominent amid rapid international liquidity contraction. After some countries’ economies are impacted, their demand for various foreign assets requires international liquidity support, and selling gold is one of the most effective and convenient ways to supplement international liquidity.

Beyond liquidity factors, Lian Ping also pointed out that the previous rapid rise in gold prices has accumulated a large amount of profit-taking. To avoid potential large-scale corrections, some institutional investors have closed positions to lock in profits, which has triggered market sell-offs, including some central banks. This behavior is essentially “counter-hedging.”

Does the selling pressure from international central banks push gold prices toward a sustained decline?

Wan Zhe believes that the pressure from some central banks selling gold is short-term. In the long run, the overall trend remains that central banks are net buyers of gold, possibly slowing down large-scale accumulation, but there are no signs of massive sell-offs.

Lian Ping also stated that the basic logic for gold’s long- and medium-term upward trend has not changed. Global oil prices still have considerable upside potential, which will boost global inflation. Sticky inflation combined with rising oil prices will continue to enhance gold’s role as an inflation hedge.

Xu Wenyu reminded that short-term liquidity factors and medium- to long-term debt factors are two key concerns for gold. In the medium term, if liquidity constraints lead to global debt risks and debt deleveraging, gold adjustments may not have ended yet. (China Securities Journal APP)

All rights reserved by China Securities Journal. Unauthorized reproduction or use in other forms is prohibited.

Editor: Yuan Yuan, Jia Yifu