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After a turbulent first quarter, gold and silver remain volatile under the influence of strong macroeconomic forces. The combination of rising interest rates, a stronger dollar and geopolitical tensions is putting pressure on the markets. At the same time, the underlying fundamentals for precious metals remain intact.
The first quarter of 2026 is now behind us and proved to be highly turbulent. In January, gold and silver recorded a parabolic price increase of 30% and 70% respectively. This came on top of the strong returns of 2025 (66% and 170% respectively). This was followed by a short but intense sell-off, after which gold managed to recover most of its losses in February. This was not the case for silver.
Then, the outbreak of war in the Middle East triggered a shock in the energy markets. This upended the prevailing macroeconomic narrative and corresponding forecasts. Higher energy prices and their indirect effects fueled inflation expectations.
Where markets had previously expected lower interest rates, this was suddenly no longer the case. Bond markets reacted with higher long-term yields, accompanied by a stronger dollar. This is, especially in the short term, a negative factor for gold, but at the same time it ensures that the price decline in the eurozone is less pronounced.
Chart: gold price since 01/01/26, in EUR per troy ounce (Source: HollandGold)
Due to this changed macroeconomic environment, funds are seeking cash to rebalance their positions. In doing so, positions with substantial gains are the first to be sold, such as gold and silver. The selling pressure is further amplified by algorithms that automatically sell gold when interest rates and the dollar rise, supplemented by momentum traders jumping on the bandwagon.
Although higher energy prices will only gradually feed through into inflation data, rate cuts by the Federal Reserve now appear to be off the table. The CME FedWatch Tool shows that no rate cuts are currently priced in for 2026. Some market observers even anticipate a rate hike, but that scenario remains unlikely. The Treasury (Department of Finance) has increasingly financed itself in recent years with short-term debt. Further increasing the interest burden on a national debt now exceeding $39 trillion would therefore be unwise.
This does not change the fact that the upward price momentum in gold and silver seen in January (and partly in February) has now faded. On March 23, gold briefly fell back to its 200-day moving average, which is around $4,100. For silver, that level, at $58, has not yet been reached. As long as there is a weekly close above these support levels, there is technically little cause for concern and the upward trend remains intact. It is also worth noting that the gold price also dropped sharply during previous market shocks in 2008 and 2020, before recovering relatively quickly.
Chart: silver price since 01/01/26, in EUR per kilogram (Source: HollandGold)
President Trump, who during his election in 2024 vowed not to start new wars, continues to send mixed signals day after day about the course of the war with Iran on his Truth Social platform. As a result, gold and silver move in line with the ebb and flow of market sentiment, causing significant volatility. Following an earlier promise of a quick end to the war, he suddenly stated that he would bomb Iran back to the Stone Age. This temporarily halted the recovery that had pushed the gold price back to $4,800.
Nevertheless, despite all the volatility, gold is still trading 9% higher in dollars and 10% higher in euros since the start of 2026. Apart from the changed macro narrative, nothing has fundamentally changed in the drivers that have fueled the rise in gold prices over the past two years. Global debt accumulation, with chronic budget deficits and rising interest costs, continues unabated. This erodes the purchasing power of all currencies relative to a real asset such as gold.
Some media outlets have suggested that gold sales by central banks played a major role in the recent price decline. Gold transactions by central banks are highly opaque, as they are not always disclosed publicly. They are usually reported to the World Gold Council (WGC), which publishes periodic updates, but there is no formal obligation to do so. As a result, it is not always clear, especially for non-Western central banks, how much gold they actually hold.
The most recent figures provided by the WGC are those for February. These showed that total net gold purchases by all central banks amounted to 19 tonnes. Poland purchased 20 tonnes of gold, while Uzbekistan (8 tonnes), the Czech Republic, Malaysia, China and Cambodia were also among the buyers. Sellers were Turkey and Russia, with 8 and 6 tonnes respectively.
Among others, Reuters and Bloomberg reported, based on data from Turkish economists, that the gold reserves of the Turkish central bank fell by more than 50 tonnes in the last week of March, marking the largest weekly decline since August 2018.
The Turkish central bank declined to comment, but according to the aforementioned media, 22.2 tonnes of gold were sold and an additional 34.4 tonnes were used in swap transactions. In the latter case, this does not constitute a sale, but the gold serves as collateral for liquidity in dollars (or euros). In addition, since the start of the conflict with Iran, $26 billion in foreign currency has also been sold. Turkey therefore drew not only on its gold reserves but also on its foreign exchange reserves.
The Turkish central bank has been one of the most active gold buyers in recent years. The recent transactions do not necessarily indicate a structural shift, as the sales and swaps are intended to support the domestic currency. This is a legitimate objective and does not signal a loss of confidence by the central bank in gold.
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