FXTRADING Financial Focus (Asia-Pacific 04/30)Central banks accelerate gold purchases

In the first quarter, global central banks clearly stepped up their activity in gold, moving at a more aggressive pace than at any point over the past year. According to estimates from the World Gold Council, official sector net purchases totaled 244 tonnes over the three months, exceeding the 208 tonnes recorded in the previous quarter. The scale alone indicates that demand did not retreat in response to price volatility; instead, it was reactivated during the correction.

Gold prices surged at the start of the year, reaching near record highs by late January, with market sentiment briefly overheating. By March, as tensions in the Middle East escalated—particularly with a sudden deterioration in U.S.-Iran relations—oil prices rose sharply, prompting markets to reprice inflation paths and interest rate expectations. Gold, however, came under pressure, with the monthly decline at one point reaching levels rarely seen in over a decade.

It was precisely during this pullback phase that central bank buying began to concentrate. The decline from elevated levels provided long-term investors with a more comfortable entry point. Some central banks that had previously remained on the sidelines were effectively waiting for such a correction window; once volatility increased, it became easier for them to step in. In other words, this round of buying was not driven by an ongoing upward trend, but rather triggered by the price correction itself.

That said, the market was not unanimously bullish on gold at the time. Even as central banks as a whole were increasing their holdings, some institutions were reducing exposure. Türkiye, Russia, Azerbaijan, and several smaller official entities collectively sold around 115 tonnes. These moves briefly raised concerns in the market about whether the sustained central bank buying narrative might be weakening.

A closer look suggests that these sales were largely driven by country-specific constraints rather than a rejection of gold allocation logic. Türkiye was primarily aiming to stabilize its currency and cope with external shocks; Russia needed to release liquidity under fiscal pressure; Azerbaijans adjustments were more technical, intended to keep holdings within regulatory limits. The motivations were quite specific and did not reflect a unified directional shift.

On the price side, gold approached around $5,600 per ounce at the beginning of the year before falling sharply in March, declining by roughly 12%. Even so, at the time the relevant reports were released, spot gold was still holding near $4,600. Such a pullback is relatively extreme by historical standards, yet it has not altered the medium- to long-term price anchor. Instead, it has reinforced golds allocation value amid volatility.

Data from the International Monetary Fund only covers partially disclosed official figures, while the World Gold Council‘s estimates also incorporate trade flows and survey results, suggesting that actual purchases may be even higher. This helps explain why price performance does not always move in sync with publicly available data, as undisclosed demand may exist beneath the surface. From the FXTRADING perspective, this round of central bank activity carries two extended implications. First, gold’s role in asset allocation is being redefined—not merely as a hedging tool, but increasingly as a component of long-term reserves. Second, price volatility itself is amplifying the pace of buying. In the future, any similar rapid correction is likely to attract official sector inflows again, a mechanism that could further solidify the downside support in the gold market.