UBS: Concerns about central bank gold selling are exaggerated; the official sector may still be a net buyer of gold

Overview

This report focuses on the market concern of whether central banks have started selling gold. UBS believes the recent reports that the Turkish central bank sold about 50 tons of gold should be interpreted with caution, because Turkey uses gold as a policy tool through a special mechanism, part of the gold holdings in some reports represent commercial bank positions, and some transactions may be swaps rather than outright sales. The report maintains the view that the official sector will remain a net buyer of gold, and that medium- to long-term upside risk in gold remains.

Core views

The key views are: first, occasional monthly gold selling by central banks is not uncommon and may come from tactical profit-taking, rebalancing, or transfers after domestic supply absorption in gold-producing countries, and does not necessarily imply a trend reversal. Second, official-sector purchases are expected to slow but not reverse; UBS expects this year's purchases to be about 800-850 tons. Third, the gold bull market is not driven solely by central bank buying; more importantly, the investor base is broadening and strategic allocations are increasing. Fourth, in the short term, gold may continue to fluctuate under the influence of geopolitical headlines, U.S. real interest rates, the dollar, and inflation expectations, but in the medium to long term it remains supported by portfolio diversification and demand for inflation and geopolitical risk hedging.

Analysis framework

The report combines cross-analysis of changes in official central-bank gold reserves, IMF/WGC data, the World Bank's 2025 reserve management survey, gold ETF flows, implied gold volatility, U.S. real interest rates, dollar trends, China's onshore gold demand, and geopolitical events. In the Turkey case, the report emphasizes waiting for more granular data that can break down the changes in CBRT's total gold holdings, rather than equating a headline directly with strategic central-bank selling.

Methodology notes

• Reserve management surveyWorld Bank 5th Biennial Reserve Management Survey Report 2025

  Central bank gold reserve management behavior

  The survey covers 136 institutions and includes a dedicated gold chapter for the first time. The report uses it to analyze how central banks decide on gold holdings, their management styles, and the motives for increasing allocations.

• Flow and positioning analysisOfficial-sector gold purchase monitoring

  Judging the net-buying trend in central banks

  Monthly official-sector gold purchases, major buyer composition, and known central-bank transaction data are used to determine whether the pace of buying is merely slowing or whether a structural reversal has occurred.

• Macro correlation analysisCorrelation of gold with U.S. real interest rates, the dollar, oil prices and equities

  Sources of short-term price pressure

  The report argues that when strategic buyers are temporarily on the sidelines, gold's short-term sensitivity to U.S. real interest rates and the dollar increases, putting pressure on prices.

• Market structure analysisETF flow and China onshore demand observation

  Downside support and investor participation

  Outflows from global gold ETFs are partly offset by continued inflows in China and healthy physical demand, while the rebound in onshore Chinese premiums and trading volume shows demand remains supported.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold

  Core research asset

  Strengths

  Supported by net central-bank buying, strategic investor allocation, and hedging demand against inflation and geopolitical risk.

  Weaknesses

  Short-term pressure from rising U.S. real interest rates, a stronger dollar, and high volatility.

  Comparison

  Compared with risk assets, gold has defensive and diversification value in an environment of a deteriorating growth-inflation mix and geopolitical conflict.

  Risks

  If geopolitical risks ease, real rates continue to rise, or the dollar keeps strengthening, gold may remain under near-term pressure.

• Central bank gold reserves

  An important source of demand support for gold

  Strengths

  Central-bank allocations are usually long-term, with a high buy-and-hold share and accumulation driven mainly by diversification and geopolitical risk.

  Weaknesses

  This year's pace of buying has been slower than expected, and monthly selling by individual central banks can spark market concern.

  Comparison

  Official-sector buying is similar to physical buyers and tends to support pullbacks or stable markets rather than chase rallies.

  Risks

  If more central banks sell due to liquidity, currency pressure, or rebalancing, market sentiment could worsen.

• China gold demand

  A downside support factor

  Strengths

  Onshore prices still carry a premium, physical and futures trading volumes have recovered, and ETF inflows partly offset global outflows.

  Weaknesses

  If volatility continues to rise or domestic demand weakens, the level of support may decline.

  Comparison

  Compared with outflows from some global ETFs, China demand looks healthier.

  Risks

  Slowing demand or narrowing premiums could weaken the floor under gold prices.

• The dollar and U.S. real interest rates

  Negative short-term drivers for gold

  Strengths

  If the market reprices rate cuts or real rates fall back, gold would benefit.

  Weaknesses

  A stronger dollar and rising real rates suppress gold, a non-yielding asset.

  Comparison

  When strategic buyers are on the sidelines, gold's macro correlation with the dollar and real rates becomes stronger.

  Risks

  If inflation concerns push the Fed to sound more hawkish, gold may continue to face pressure.

Key data

• Turkey central bank-related reportsAbout 50 tons of gold reported sold over several weeksUBS cautions against reading the headline directly; some of this may be swaps or commercial bank-related positions.
• UBS expectation for official-sector gold purchases this yearAbout 800-850 tonsBelow roughly 860 tons in 2025, but still represents net buying.
• Gold full-year average price expectation$5,000/ozLowered slightly from the prior $5,200/oz due to mark-to-market adjustments in the first quarter.
• Gold year-end target$5,600/ozThe year-end target set at the end of January is maintained.
• World Bank survey sample136 institutionsCentral bank participation was the highest since the survey began.
• Share of central banks using short-term tactical adjustmentsAbout 4.5%This shows that most central-bank gold reserve management is long-term rather than short-term trading.
• Share managing gold as buy-and-holdAbout 62%This supports the long-term nature of central-bank gold allocations.
• Main drivers of gold accumulation in 2024Diversification over 50%, local gold purchase programs about 35%, geopolitical risk about 32%Liquidity needs were only about 6%, indicating forced sales for liquidity are not the main driver.

Impact & implications

For investors, headlines about central bank gold selling may amplify short-term volatility, but they are not enough to prove that the official-sector buying logic has ended. If geopolitical tensions and growth-inflation pressures persist, gold can still serve as a portfolio hedge and diversification asset. UBS believes pullbacks can be used to build strategic gold positions, but in the coming weeks investors should still guard against headline-driven consolidation and sharp swings.

Risks

• More granular Turkish gold reserve data could confirm a larger direct sale, undermining the central-bank buying narrative.
• Middle East conflicts, disruptions in the Strait of Hormuz, and related headlines may continue to amplify short-term gold volatility.
• Rising U.S. real interest rates and a stronger dollar could weigh on gold performance.
• High volatility may keep central banks and long-term strategic buyers on the sidelines, weakening dip-buying support.
• If global gold ETF outflows continue and China demand cannot offset them, downside support for gold prices may weaken.

What to watch

• More granular CBRT gold reserve data and whether it can break out commercial bank positions, swaps, and direct holdings.
• Whether monthly official-sector net gold buying continues to slow and whether multiple countries turn into net sellers at the same time.
• Movements in 1-month gold implied volatility and the VIX to gauge whether long-term buyers may re-enter.
• U.S. real interest rates, the dollar index, and market repricing of the Fed's policy path.
• China onshore gold premiums, physical and futures turnover, and Chinese gold ETF flows.
• Whether global gold ETF flows stabilize or turn from outflows to inflows.