China's central bank persisted in adding to its gold stockpile in March, marking the 17th month in a row of net purchases. The People’s Bank of China reported an increase of 160,000 fine troy ounces during the month, taking the nation's official holdings to 74.38 million fine troy ounces.
Measured in dollars, the value of those holdings declined to $342.76 billion in March, down from $387.59 billion in the prior month, according to the central bank's data. The drop in dollar value coincided with a marked pullback in global prices, as gold tumbled 16% in March.
The price decline has prompted investor concern that central bank selling contributed to the weakness. Market participants have also voiced a broader worry tied to a potential prolonged Middle East conflict - namely that central banks could confront a mix of sharply rising inflation, slowing growth and weakening currencies. In such a scenario, those combined pressures could compel some officials to liquidate gold reserves to relieve the strain on their balance sheets.
While there has been some official-sector selling reported, UBS strategist Joni Teves views the episode as unlikely to represent a long-term reversal. He says "it is very unlikely that there is a structural shift in the official sector trend." In his assessment, the global official sector remains on track to be a net buyer of gold this year.
"Over the past 15 years of the official sector building gold reserves, it is not unusual for some central banks to occasionally show selling during any one month and there are several reasons for this," Teves said. He added that central banks generally prefer to accumulate in periods of stability and often buy into price dips rather than chase a falling market.
Teves expects the global official sector to acquire between 800 and 850 tonnes of gold in the current year - a modest reduction from roughly 860 tonnes projected for 2025 - and he does not anticipate a structural reversal in official buying patterns.
The continuity of China's purchases stands out in that context. Domestic, onshore gold prices in China have persistently traded at a premium to international benchmarks throughout the 17-month buying run, indicating resilient local demand even as global sentiment swung sharply during March.
Looking ahead, Teves cautioned that gold may undergo further consolidation and choppy trading in the near term as markets continue to reprice geopolitical risks. Nonetheless, he views such pullbacks as opportunities for buyers. His pricing assumptions include an average of $5,000 for gold this year and a year-end target of $5,600, a view he links to the idea that long-term investors remain underallocated to the metal while concerns about the growth-inflation mix encourage diversification into gold.
Implications for markets: Continued official buying supports the narrative of central banks as structural participants in gold markets, while short-term price dynamics remain sensitive to geopolitical developments and investor positioning. Sectors most directly affected include bullion markets, banking and reserve management, and broader financial markets where portfolio diversification and currency dynamics are considerations.