Iran War Spurs Record Central Bank Gold Selling

Turkey's huge gold sales and swaps swamp China's buying...

GOLD SELLING by national central banks as a group set a monthly record by value in March as the US-Israeli war against Iran sent energy prices soaring.

With global gold prices making the steepest drop since June 2013 last month, official data reported so far show huge gold sales and swaps by Turkey offsetting other central banks' purchases more than 4 times over.

That puts the sector's net gold outflows in March at a 21st century record by weight of 102 tonnes, worth an all-time record near $16 billion based on last month's average gold price.

"Central banks' sales are the dominant driver of the $1,000 price fall over the past few weeks," the Financial Times quotes Nicky Shiels, precious metals strategist at Swiss refining and finance group MKS Pamp.

Gold ETF trust funds also saw heavy investor selling in March, with net liquidation worldwide totalling more than 84 tonnes on data compiled by the mining industry's World Gold Council.

The heaviest 1-month outflow since September 2022 by weight, those gold ETF outflows were worth a record $12 billion.

"The recent increase in central bank gold sales is likely to prove temporary," say specialist analysts Metals Focus.

"Indeed, even accounting for these sales, provisional data suggest that the official sector has remained a net bullion buyer this year-to-date."

The world's 10th largest national gold holder when the Iran War broke out at the end of February, the Central Bank of the Republic of Turkey sold and borrowed against some 15% of its total bullion reserves amid the ensuring oil-price shock and rebound in the US Dollar's exchange rate.

While the CBRT has yet to comment in public, its official data releases show that it sold 52 tonnes of gold in the 4 weeks ending 27 March while also lending out a further 79 tonnes via gold swaps, almost certainly using the cash raised to try defending the Lira on the forex market.

The Lira still fell to new all-time Dollar lows, however, before stabilizing so far in April.

Separate data from the People's Bank of China show the world's 2nd largest economy moving into 5th position among national central bank gold holders, overtaking Russia with a 5-tonne increase, the heaviest monthly purchase by weight in more than a year.

The past 3 years' heaviest gold buyer Poland also used March's price drop to acquire more bullion, buying 11 tonnes and overtaking Turkey's directly-owned central bank holdings as the 11th largest in the world. 

"Elevated geopolitical risks should, if anything, reinforce the case for central banks to hold gold," says Metals Focus, "as a means of diversifying away from dollar-denominated assets."