Gold’s Fractured Foundation: Turkish Sales and Fed Caution Eclipse Safe-Haven Demand

Gold edges to $4,710 but faces headwinds from Turkey’s 127-tonne dump, Fed rate hold, and Western ETF outflows, while Asian central banks buy.

The gold market is navigating a rare paradox. Spot bullion edged up to roughly $4,710 an ounce on Monday, yet the modest gain belies a deepening schism between traditional buyers and sellers. While geopolitical tensions in the Middle East would normally ignite a rally, a confluence of central bank divestment and Federal Reserve restraint is muting the metal’s safe-haven appeal.

Ankara’s Unprecedented Dump

The most striking development comes from Turkey. The country’s central bank has offloaded or lent out approximately 127 tonnes of gold in recent weeks, a massive liquidation that has slashed the value of its national reserves by nearly a quarter to $101.5 billion month-on-month. The bulk of these sales are being used as collateral for currency swaps, as Ankara scrambles to secure dollar liquidity amid a collapsing lira, battered by surging energy costs tied to the Iran conflict.

Russia is also tapping its gold hoard, though for different reasons. Moscow is capitalizing on elevated prices to fund the state budget, adding further supply to a market already absorbing Turkey’s disposals.

The Fed Factor and Dollar Strength

Against this backdrop, the Federal Reserve’s policy meeting on Wednesday looms as the week’s defining event. Markets assign a 99.5% probability that the central bank will hold rates steady at 3.50% to 3.75%. With the U.S. dollar index climbing to 99.3, gold’s upward momentum faces a stiff headwind.

The geopolitical catalyst that would typically lift bullion — Iran’s three-phase diplomatic proposal to Washington — has instead complicated the picture. Tehran’s plan, delivered via Pakistani intermediaries, calls for a full ceasefire and security guarantees in phase one, regulation of the Strait of Hormuz in phase two, and nuclear talks only in phase three. The proposal breaks with Western negotiation norms, but its impact on gold is indirect. Brent crude has surged past $106 a barrel on Hormuz disruption fears, pushing U.S. inflation to 3.3% in March. That leaves the Fed unable to cut rates — a scenario that has weighed on gold, which has fallen roughly 10% since the conflict erupted.

Western ETF Exodus Meets Eastern Buying

Western investors are voting with their feet. North American gold ETFs saw outflows exceeding $12.7 billion in March, the largest monthly exodus in at least five years, according to State Street’s April monitor. The selling reflects a broader rotation out of non-yielding assets as real rates remain elevated.

Yet the story is different in Asia. The People’s Bank of China has extended its buying streak to 17 consecutive months, pushing reserves above 2,300 tonnes. Malaysia and South Korea have also re-entered the market. This bifurcation is keeping prices from a full-blown collapse. JPMorgan projects central bank purchases of roughly 800 tonnes in 2026, in line with 2025 levels, and estimates that every 100 tonnes of committed buying adds about 1.7% to the gold price.

Analyst Divergence and the Path Ahead

The shifting supply-demand dynamics have prompted a split among Wall Street strategists. Morgan Stanley has slashed its second-half target to $5,200 an ounce, while Goldman Sachs maintains a year-end forecast of $5,400. The divergence underscores uncertainty over whether central bank selling is a temporary liquidity measure or a structural shift.

The immediate catalyst for gold, however, remains monetary policy. This could be Fed Chair Jerome Powell’s final meeting before Kevin Warsh is expected to take over in May. First-quarter U.S. GDP data, also due this week, will be closely watched. A sharper-than-expected slowdown would increase pressure on the Fed to reconsider its rate path — a development that would provide the real spark for gold. Tehran’s diplomacy may set the direction, but the Fed’s communication on Wednesday will define the range.