July 20, 2026
Since the spring of 2026, something unusual has been unfolding in the gold market. Countries that had been among the world's largest buyers of gold for years have suddenly begun selling their reserves. These sales are taking place quietly. They are not announced publicly, and the transactions only appear in central bank data weeks or even months later.
Those who look closely quickly realize that these are not routine portfolio adjustments. Instead, something far more significant is happening right before our eyes, largely unnoticed. What we are witnessing is a silent emergency response to an economic shock that is placing enormous strain on the global financial system: the closure of the Strait of Hormuz as a consequence of the Iran war.
The logic becomes clear once the underlying mechanism is understood. Roughly 20% of the world's oil passes through the Strait of Hormuz. If that route is blocked, oil prices rise sharply, forcing oil-importing countries to obtain additional U.S. dollars to pay their energy bills.
For a central bank, the fastest way to raise those dollars is by selling its most liquid dollar-denominated assets—typically U.S. Treasury securities. However, once those holdings have been largely exhausted and additional dollars are still required, gold often becomes the only remaining dollar-convertible reserve asset.
Turkey Illustrates the Entire Drama
No country demonstrates this process more clearly than Turkey.
In March 2026, following the U.S. and Israeli military strikes against Iran that began in late February, the Turkish central bank reduced its holdings of U.S. Treasuries from US$15.7 billion to US$1.8 billion—a reduction of nearly 90% in just one month.
Once that buffer had been depleted, the central bank turned to its gold reserves. During the first two weeks of the Iran war alone, it sold or pledged approximately 58 tonnes of gold, worth around US$8 billion, from reserves totaling roughly US$130 billion.
This was not a strategic shift away from gold. Rather, it was a sign of financial distress. After all, no country willingly sells its gold simply to pay for gasoline and diesel as long as better alternatives remain available.
Turkey is not an isolated case. It is merely the most visible example of a broader group of countries that Jay Martin, publisher of the commodity newsletter Capital 10X, describes as "oil-importing emerging markets." This group includes India, Indonesia, Thailand, the Philippines, Egypt, Pakistan, Vietnam, and South Africa.
They all share two characteristics: they depend heavily on imported oil, and they hold a significant portion of their national savings in U.S. Treasury securities. When oil prices surge, these countries are among the first to come under financial pressure.
The Sri Lanka Pattern: When Running Out of Money Leads to Empty Shelves
Sri Lanka's experience in 2022 demonstrates what happens once a country has exhausted its reserves.
The country imports nearly everything required to keep its economy functioning—fuel, medicine, and food—and pays for those imports in U.S. dollars. When tourism collapsed during the COVID-19 pandemic, Sri Lanka's foreign exchange reserves fell from US$7.6 billion at the end of 2019 to just US$50 million by the spring of 2022.
The consequences were as predictable as they were dramatic. Fuel first became scarce and eventually disappeared altogether. Medicines could no longer be purchased abroad. Food prices skyrocketed, while nationwide power outages lasted for hours at a time.
Public anger escalated rapidly. In July 2022, hundreds of thousands of protesters stormed the presidential residence, forcing the country's president to flee.
The difference between then and now is crucial. Sri Lanka's crisis resulted from the collapse of tourism and affected only one country. A global energy shock, by contrast, affects many countries simultaneously.
The chain reaction, however, is identical. Every country that sells U.S. Treasuries puts downward pressure on bond prices, making other countries nervous and encouraging them to sell as well. Each sale increases the likelihood of the next.
What Washington Is Really Doing—And What It Reveals
Two quiet actions by the U.S. government demonstrate how seriously Washington views the situation.
First, the United States is drawing down its Strategic Petroleum Reserve at a record pace. Anyone who believes this is primarily intended to help American motorists ahead of the congressional elections in November is not entirely wrong—but that explanation does not tell the whole story. The U.S. is also shipping part of those reserves overseas, an unusual move given that the Strategic Petroleum Reserve is intended for domestic emergencies.
Second, in an effort to reduce mounting pressure on the U.S. Treasury market, the U.S. Treasury Department has quietly eased sanctions on Russian oil twice. This is occurring in the middle of a war in which Russia is on the opposing side. That step is equally extraordinary and suggests that the United States itself is under considerable pressure.
The motivation behind both measures is the same. Washington wants to prevent vulnerable emerging-market economies from collapsing and triggering a wave of Treasury selling that could destabilize the U.S. bond market.
Falling prices for U.S. government bonds mean weaker investor demand and higher borrowing costs for issuers. Neither outcome is desirable for U.S. President Donald Trump, who has repeatedly expressed his preference for lower interest rates.
If the system were truly stable, none of these extraordinary measures would be necessary. Their implementation suggests that the pressure is not confined to individual emerging markets. The United States itself now finds it necessary to intervene in order to stabilize global financial markets.
Source：https://goldinvest.de/en/why-countries-are-selling-their-gold-and-what-s-really-behind-it
