The feared wave of official sector selling never materialised. What matters now is what happens when China's buyers return from holiday
The gold market spent much of the first quarter braced for bad news on central bank selling. It didn't come. According to the World Gold Council's Gold Demand Trends report for Q1 2026, central banks bought 244 tonnes on a net basis, a 3% increase on the same period a year earlier. Even UBS precious metals strategist Joni Teves, who expected the multi-year buying trend to continue, was surprised by the size of the number.
That matters for sentiment more than it does for price. And understanding that distinction is key to reading where gold goes from here.
Central banks stabilise gold; they don't drive it
The role official sector buying plays in the gold market is widely misunderstood. Central banks are not the marginal price-setters.
They operate on long time horizons, they are largely insensitive to near-term opportunity cost, and they tend to accumulate steadily rather than trade tactically. What they do is absorb supply, reduce available liquidity, and provide a floor during periods when macro headwinds would otherwise trigger sharper drawdowns.
That structural support is what made the prospect of broad-based central bank selling so alarming earlier this year. When headlines suggested Turkey's central bank had sold around 50 tonnes, some investors read it as a potential regime shift.
UBS is sceptical of that interpretation. Turkey has used gold as a policy tool in domestic liquidity management before, and reported declines in official holdings can reflect swap activity rather than outright liquidation.
Turkey's gold imports from Switzerland, a key refining hub, remained relatively steady through the period, which sits awkwardly with a forced-seller narrative.
The real price drivers are reasserting themselves
What is actually moving gold right now is the classic macro toolkit: US real rates, the dollar, and increasingly, energy prices. Gold's negative relationship with real rates and the dollar has strengthened in recent months.
At the same time, gold has been tracking equities more closely and moving in the opposite direction to oil, a combination that reflects how financial markets are currently pricing the impact of higher energy costs on inflation and, by extension, on Federal Reserve policy.
Speculative positioning is relatively muted, and there is little sign of appetite to rebuild exposure at current levels, even with prices near $4,500. Physical markets are also seasonally quieter at this time of year. UBS sees support around the $4,500 level and treats any near-term weakness as a gradual accumulation opportunity rather than a structural problem.
China factor
The near-term variable worth watching is China. Buyers there are returning from holidays this week and will be confronted with prices close to $4,500. How they respond will say something useful about physical demand appetite at these levels, and could provide the short-term catalyst that macro positioning alone has not.
Over the medium to longer term, UBS sees the balance of risks as tilted upward. The likely compression of real rates ahead, combined with continuing geopolitical uncertainty and a broadening base of official sector buyers beyond the most active central banks, supports a higher gold price than current baseline forecasts imply.