Despite a sharp drop in gold prices this week, central banks globally added a net 244 tonnes of the metal in the first quarter – more than a year earlier.
Spot gold broke below $4,540 an ounce during European trading on Wednesday, hitting its lowest level in four weeks. The decline extends this week’s loss to 3.6%. Brent crude futures surged above $115 per barrel, hitting a four-year high after the US and Iran both blockaded the Strait of Hormuz, with prices now nearly 60% above the eve of the US-Israeli strikes on Iran.
In the early hours of Wednesday, President Donald Trump posted an AI-generated image on Twitter showing himself holding an assault rifle against a war-ravaged desert backdrop, with the caption: “No more Mr. Nice Guy!” In a separate tweet, he wrote, “Iran can’t get their act together. They better get smart soon!”
Yet even as geopolitical tensions escalate, central banks have not pulled back from gold. The World Gold Council’s latest quarterly demand trends report shows that central banks and other institutions bought a net 243.7 tonnes in January-March, up 3% from a year earlier. That marks the seventh-heaviest quarter of net purchases on record and stands 7.8% above the five-year quarterly average.
The figure is notably higher than earlier official data for March suggested, which pointed to heavy net selling as the Middle East war erupted. The WGC said the Iran-US-Israel conflict “added to an already fraught geoeconomic environment, driving greater volatility across markets including gold.” It added that continued central bank buying “underscores the broadly strategic nature of their purchases and continued confidence in gold’s role as a store of value during periods of uncertainty.”
Not every central bank is following the same path. Analysis from BullionVault of available official data shows that eight central banks together bought 63 tonnes of gold in the first quarter. But Turkey’s central bank sold and borrowed against a total of 118 tonnes, pulling its total gold holdings – including commercial bank bullion held as required reserves – below 700 tonnes for the first time since the third quarter of 2023.
In a note to Bloomberg News, derivatives exchange CME offered an explanation for Turkey’s move: “Nothing changed regarding the long-term thesis. What changed is that the crisis they were preparing for actually arrived. Gold is the most liquid non-Dollar asset they have. So, they’re selling it, not because they’re wrong about gold, but because it’s working exactly as it’s designed.”
The World Bank also weighed in, noting in its latest commodities outlook that precious metal returns often rise with geopolitical stress. “But blistering rallies in early 2026 have subsided as the conflict escalated,” it said. “This atypical pattern likely reflects a partial reversal of the speculative fervor that gripped precious metals markets in recent months, extending a spell of extraordinary volatility.”
On the investment side, the WGC reported that global bar and coin demand jumped 42% year-on-year to 474 tonnes in the first quarter – the second-highest quarterly figure on record. Asian investors led the charge. Meanwhile, gold-backed ETFs posted a second straight quarter of net inflows, but the pace slowed drastically to 62 tonnes, far below the 230 tonnes seen in the same period of 2025, driven by significant outflows from US funds in March.
Looking ahead, the World Gold Council said geopolitics will remain a central variable for gold demand in 2026. Investment and central bank buying are expected to be supported by ongoing geopolitical risks, with elevated inflation and persistently high gold prices possibly adding further impetus. Jewellery consumption will remain under pressure, though jewellery spending is expected to hold up.
