Gold holds firm as central banks buy more; China, Poland drive demand

Gold prices: Central bank demand continues to provide a strong foundation for gold prices, helping the metal hold critical long-term support levels even amid recent volatility. China remains a key driver in this trend, reinforcing its position as one of the most consistent buyers in the global gold market.

According to data cited by The Kobeissi Letter, global central banks purchased 19 tonnes of gold in February, marking the 23rd consecutive month of net buying. This follows an addition of 6 tonnes in January, taking total purchases so far this year to 25 tonnes — highlighting sustained institutional demand despite fluctuating prices.

Among individual buyers, the National Bank of Poland led with a significant addition of 20 tonnes, taking its total gold reserves to 570 tonnes. This now accounts for roughly 31% of its total foreign exchange holdings, reflecting a strategic shift toward gold as a reserve asset. Uzbekistan also remained active, adding 8 tonnes and raising its gold reserves to 407 tonnes—an unusually high 88% of its total FX reserves.

China’s strategic accumulation

China, while reporting a smaller addition of 1 tonne in February, continues to play a dominant role. Updated data from the People’s Bank of China shows that it added 5 tonnes more recently—its largest monthly purchase since February 2025. This extends China’s buying streak to 17 consecutive months, taking its total gold holdings to 2,313 tonnes, or about 10% of its foreign exchange reserves.

Analysts believe China’s continued accumulation is part of a broader strategy to diversify away from the US dollar and strengthen the yuan’s position as a potential global reserve currency. Notably, this buying has continued even as gold prices fell 11.5% last month, suggesting central banks tend to buy opportunistically during price corrections rather than react to short-term volatility.

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Global gold reserves

While accumulation remains strong in some regions, the broader sovereign trend is becoming more mixed. Turkey, in particular, has emerged as a notable seller. Its central bank reported a decline of more than 118 tonnes in recent months, including a sharp 69.1-tonne drop last month—the largest drawdown since 2013.

Officials indicated that while some gold was sold outright, a large portion was monetised through swap arrangements to raise liquidity. These funds were then used to stabilise the domestic currency and manage economic pressures, reflecting the growing need for flexibility in reserve management.

Geopolitical pressures and market impact

This divergence highlights the increasing impact of global uncertainty. The ongoing Middle East conflict continues to disrupt supply chains—especially in energy markets—pushing inflation risks higher and forcing central banks to take more active positions in managing reserves.

Higher oil prices, currency volatility, and tightening liquidity conditions are pushing some economies to rely on gold not just as a store of value, but also as a financial buffer during stress periods.

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Outlook for now

Despite intermittent selling, sustained buying by major economies such as China and Poland continues to act as a structural support for gold prices. This consistent demand is helping cushion downside risks even during sharp corrections.

Going forward, analysts expect central bank demand to remain a key pillar for gold, particularly as geopolitical tensions, currency realignments, and inflation concerns persist. In this environment, gold’s role as both a reserve asset and a hedge against uncertainty is likely to stay firmly intact.

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