The volatile downward trend of gold prices since the outbreak of the US Israel Iraq War has left Wall Street multi strategy hedge fund manager Zhang Gang, who has many years of experience in gold investment, quite confused.

Throughout March, COMEX gold futures prices on the New York Mercantile Exchange fell by over 13%, marking the worst monthly performance since October 2008.

Many Wall Street fund managers are puzzled: why has gold suddenly lost its safe haven and anti inflation properties in the face of escalating conflicts in the Middle East and rising crude oil prices? "Said Zhang Gang.

In late March, he found the answer.

The weekly data released by the Bank of T?rkiye shows that since the week of March 13, the Bank of T?rkiye has reduced its holdings of gold reserves for three consecutive weeks, reducing a total of 126.4 tons of gold, the largest reduction since 2018. More than half of them were completed through "gold to foreign exchange" swap transactions.

This reminded Zhang Gang of a previous news - on March 4th, Adam Graminski, the Governor of the Polish Central Bank, proposed to raise about 13 billion US dollars to support national defense construction by selling some of his gold reserves.

As a precious metal futures trading broker on Wall Street, Pan Feng witnessed firsthand the market impact brought about by some central banks selling their gold reserves. After the Central Bank of T?rkiye released the information of selling gold, COMEX gold futures market suffered a continuous selling tide in late March, making the main contract of COMEX gold futures once fell to 4128.9/ounce.

According to data released by the US Commodity Futures Trading Commission (CFTC), as of the week ending March 24th, asset management institutions led by Wall Street hedge funds reduced their net long positions in 1314400 ounces of gold futures options, marking the largest reduction since March.

The logic behind this is that Wall Street hedge funds believe that gold prices are facing a dual pressure: on the one hand, the cooling expectations of the Federal Reserve's interest rate cuts and the rise of the US dollar index are putting pressure on gold prices; On the other hand, many central banks have sold off their gold reserves, causing them to lose key buyer support.

As of 10:00 on April 3rd, the main COMEX gold futures contract price hovered around $4689.8 per ounce, rebounding from the lowest point of $4128.9 per ounce in late March. However, there are still differences on Wall Street regarding whether the gold price can quickly recover from its losses in March.

At present, Wall Street investment institutions are beginning to pay attention to a potential risk: if the conflict in the Middle East continues to trigger high oil prices, more central banks may have to sell their gold reserves to raise funds to cope with the pressure of currency depreciation and purchase high priced energy.

Suddenly transformed into a 'big seller'

Over the past four years, global central banks have been key buyers in the gold market, accounting for approximately 20% of the annual global gold demand.

According to data from the World Gold Council, from 2022 to 2024, the average annual gold purchases by global central banks exceeded 1000 tons for three consecutive years. Even in 2025, when gold prices hit new highs, the global central bank's gold purchases still reached 863 tons, accounting for approximately 17.3% of global gold demand that year.

Among them, the central bank of Poland and the central bank of T?rkiye are particularly strong in purchasing gold.

The World Gold Council stated in its "Global Gold Demand Trends 2025 Q4 and Year Report" that the Polish central bank has become the world's largest official gold buyer for the second consecutive year, increasing its gold reserves to 550 tons by adding 102 tons of gold in 2025.

T?rkiye's central bank is also "unwilling to lag behind". From 2022 to 2025, the Central Bank of T?rkiye accumulatively increased its holdings of 325 tons of gold, making its gold reserves reach 603 tons by the end of 2025, with an estimated value of about 135 billion dollars.

Wang Lixin, CEO of the China region of the World Gold Council, told Economic Observer reporters that in recent years, the main reason why global central banks have actively increased their holdings of gold reserves is to cope with the continuous escalation of international geopolitical risks through diversified asset allocation, and to use the safe haven nature of gold to achieve the preservation and appreciation of reserve assets.

However, after the outbreak of the US Israel Iraq War at the end of February, these two central banks, which were most enthusiastic about increasing their gold holdings, suddenly became "big sellers".

T?rkiye's central bank sold 126.4 tons of gold reserves in just three weeks in March, which was actually a helpless move. Since the outbreak of the US Israel Iraq war, the US dollar index has soared. The exchange rate of T?rkiye's lira against the US dollar has hit a record low for 11 consecutive times, once falling to 44.35:1, leading to the withdrawal of more than US $6 billion of overseas capital from T?rkiye's stock and bond markets. In order to stabilize the domestic currency exchange rate and curb capital outflows, T?rkiye's central bank spent about $25 billion of foreign exchange reserves in March to intervene in the foreign exchange market.

This led to T?rkiye's foreign exchange reserves falling to the US $43 billion warning line. In order to replenish the liquidity of foreign exchange reserves, T?rkiye's central bank has to continue to sell gold reserves.

Zhang Gang said: "The market expects T?rkiye's central bank will continue to sell its gold reserves." He analyzed that, because T?rkiye's crude oil, natural gas and other energy sources mainly rely on imports, T?rkiye needs to spend more than $20 billion annually to purchase crude oil in the face of crude oil prices exceeding $100/barrel, and T?rkiye's central bank needs to further reduce its gold holdings to obtain more US dollars.

The Polish central bank's shift was also sudden.

In January, the Polish central bank also announced that it would increase its holdings of 150 tons of gold, bringing its gold reserves to 700 tons. But on the fifth day after the outbreak of the US Israel Iran War, the Governor of the Polish Central Bank suddenly changed his mind: 'We will reduce some of our gold reserves for national defense construction.'. On the day when the Polish central bank released a signal to sell its gold reserves, the price of the COMEX gold futures main contract plummeted from $5400/ounce to around $5100/ounce, significantly cooling down the buying sentiment of gold in the financial market. ?Zhang Gang said.

At the same time, the floating profits from the increase in gold holdings by global central banks are also considerable, making gold reserves a priority for reduction.

Pan Feng stated that selling gold reserves is the "tip of the iceberg" for global central banks to fully increase their cash reserves under the dual impact of high oil prices and domestic currency depreciation.

According to the data released by the Federal Reserve, as of the end of March, the amount of US treasury bond bonds deposited by foreign official institutions in the New York Federal Reserve has dropped by 82 billion dollars since February 25 to 2.7 trillion dollars, the lowest level since 2012.

Wall Street financial institutions have concluded that as long as conflicts in the Middle East continue to cause oil prices to rise and non US dollar currencies to depreciate, central banks around the world will continue to increase their efforts to sell gold and US Treasury assets.

Bottom fishing and floating losses

The shift of the two central banks has disrupted Wall Street investment institutions' bottom fishing plans for gold.

After the main COMEX gold futures contract fell below the $5000/ounce mark on March 16th, Wall Street sparked a wave of gold bottom buying.

According to CFTC data, as of the week ending March 17th, asset management institutions led by Wall Street hedge funds increased their net long positions in 368200 ounces of gold futures and options.

Zhang Gang also participated in the bottom fishing of gold.

During the period of March 16-19, he used approximately $5 million to buy a net long position in COMEX gold futures. At that time, most Wall Street asset management institutions believed that gold had been mistakenly damaged, "Zhang Gang said. Despite the sharp rise in oil prices cooling down expectations of Fed interest rate cuts and the rise of the US dollar (which is not conducive to the rise of gold prices), Wall Street asset management institutions believe that financial markets will soon pay attention to the high inflation expectations brought by high oil prices, as well as the global economic damage caused by the ongoing US Israel Iran war, which will make gold's safe haven and anti inflation properties shine again.

In this wave of gold bargain hunting, Wall Street multi strategy funds and subjective investment funds have become the main force. They used 2-3 times the leverage of their funds and adopted a "buy as you fall" strategy for COMEX gold futures. Because they also found that after the outbreak of the US Israel Iraq War, the Fear Index (VIX) continued to hover above 25, indicating that market panic sentiment remained near historical highs, which helped gold quickly recover lost ground.

Pan Feng believes that in the past, this investment logic had a high chance of winning, but this time they miscalculated. The reason is precisely that they did not expect that compared with Poland's central bank, T?rkiye's central bank "said ahead of time" in selling gold reserves, Turkey's central bank was "doing first and then saying".

"T?rkiye's central bank sold 126.4 tons of gold reserves in three weeks, quickly breaking the gold pricing system of global financial institutions," Pan Feng said. In view of the massive increase in gold reserves held by the global central bank in the past few years, many global investment institutions have regarded the global central bank as a key gold buyer and gold price supporter in the gold investment model. However, after T?rkiye sold its gold reserves, they included the global central bank into the "new uncertainty factors that caused the fall of gold prices", and they reduced their gold positions one after another before the central bank sold its gold reserves.

During this period, commodity futures investment funds and quantitative funds became key forces in selling gold. Several commodity futures investment funds only reduced their gold holdings from 20% to 10-12% in the week of March 27th, leading to another tragedy of "buying more and killing more" in the COMEX gold futures market in late March.

The reporter learned during the interview that the average cost of COMEX gold futures holdings by many Wall Street investment institutions is between $4300 and $4800 per ounce. After the futures price fell below $4500 per ounce, they had to sell their gold positions to stop losses and leave.

Zhang Gang said that in mid March, he bought COMEX gold futures at a low price of about $4800-5000 per ounce. During the period when the price fell to $4128.9 per ounce in late March, he suffered a floating loss of over $800000, forcing him to quickly take risk remedial measures by adding short contracts for gold futures. Even worse, some Wall Street investment funds have used 4-5 times leverage to buy COMEX gold futures, with losses exceeding 17%. ?Zhang Gang said.

A new round of game

On April 1st, Zhang Gang attended a Wall Street fund investment salon.

During this period, he noticed that more and more Wall Street investment institutions were beginning to worry that multiple central banks would sell gold, which would put new downward pressure on gold.

A precious metals analyst from a Wall Street investment bank told Zhang Gang that the investment research report he wrote in mid March is still supporting the recovery of gold prices, as the rise in oil prices and the ongoing US Israel Iran war will quickly restore gold's anti inflation and safe haven properties.

After the central bank of T?rkiye sold its gold reserves, the analyst's latest investment research report completely overturned the previous optimistic forecast of gold prices. Because he found that if more central banks follow the practice of T?rkiye's central bank and sell the gold reserves with considerable profits to purchase high priced crude oil and stabilize the exchange rate of their own currency, it is difficult for the gold price to reach a new high in the short term, or even encounter a new round of decline.

Bloomberg think tank market analyst Mike McGlone stated in his April metal market outlook report that gold's historic high of $5626.8 per ounce in January may be a "once-in-a-generation" historical high.

Zhang Gang said that at this fund manager salon, fund managers who hold a pessimistic attitude towards gold prices have a slight advantage. They generally believe that when global central banks are no longer big buyers in the gold market, it will be difficult for the future gold price center to continue the upward trend before the outbreak of the US Israel Iran war.

However, there are also large Wall Street investment banks fiercely refuting this "negative" viewpoint.

On March 30th, Lina Thomas and Daan Struyven, analysts from Goldman Sachs' commodity research team, released a report stating that after the sharp drop in gold prices in March, it is expected that global central banks' gold purchasing behavior will accelerate, with an average monthly increase in gold holdings of about 60 tons. In addition, the Federal Reserve is still expected to cut interest rates twice this year, and they expect the gold target price to remain at $5400 per ounce by the end of 2026. If international geopolitical risks continue to escalate and the private sector accelerates the pace of asset diversification, gold prices are expected to rise to $6100 per ounce.

Faced with the "support" from Goldman Sachs and the "pessimistic sentiment" of many fund managers, Zhang Gang admitted that he believes more in data - in addition to the monthly global central bank gold increase (decrease) data released by the World Gold Council, he also spends money to purchase dynamic data from third-party research institutions to understand the latest trends in global central bank gold buying and selling.

Before these data come out, the bullets will fly for a while longer, "Zhang Gang said. In order to prevent investment risks caused by significant fluctuations in gold prices, at the end of March, he hedged all long positions in gold by buying equal amounts of COMEX gold futures short contracts, leaving no risk exposure.

Pan Feng said that investment institutions are waiting for a clear signal - if data shows that global central banks are also buying bottom and increasing their holdings of gold, they will quickly close short positions in arbitrage positions, betting that gold prices will quickly recover lost ground and reach new highs; On the contrary, they will close out the long positions in their arbitrage positions and bet heavily on the continued decline of gold prices.

But Pan Feng found that most investment institutions are "praying" for global central banks to increase their holdings of gold, driving a rapid rebound in gold prices. Because their gold holdings account for over 10%, they are most afraid of an unexpected pullback in gold prices, which could drag down the net value of the entire investment portfolio and trigger new pressures for fund redemption and investor accountability.

On April 2nd, UBS released a report stating that in the face of the sharp fluctuations in gold prices in March and the escalation of international geopolitical risks, the structural trend of global central banks increasing their gold reserves has not changed. It is expected that the global central bank's gold purchases this year will be between 800-850 tons, slightly lower than the 863 tons in 2025.

UBS also pointed out that some gold reserves of T?rkiye's central bank were sold through swaps instead of direct selling, which does not exclude that T?rkiye's central bank will "redeem" this part of gold reserves in the future.

Regarding this, Zhang Gang admitted that it is still unknown whether Wall Street investment institutions will accept this viewpoint. Since April, Wall Street fund managers have developed a simple and practical investment formula - as long as oil prices continue to rise, global central banks will have to sell more gold reserves (to purchase high priced energy), increasing the pressure for a pullback in gold prices.