Central banks pivot as regional conflicts reshape gold reserves

The State Oil Fund of Azerbaijan (SOFAZ) halted gold sales in the second quarter of 2026, even as the metal’s performance dragged on their overall investment portfolio. By the end of June, the fund held 178.1 tons of gold, accounting for 31.4% of its total assets. Management cited the broader U.S.-Iran conflict as the primary catalyst for the market instability that forced this defensive stance, noting that rising real interest rates eroded the gains gold had realized earlier in the year.

Meanwhile, Pakistan’s gold reserves saw an 11.4% decline between May and June, dropping to $8.39 billion. While these holdings remain significantly higher than levels recorded in June 2025, the monthly contraction reflects a broader trend among emerging market economies. These nations are increasingly liquidating bullion or utilizing swap agreements to secure the capital necessary to fund energy imports and stabilize domestic currencies.

This trend extends to larger players currently navigating fiscal strain. Russia’s Central Bank reported a decline of 43.5 tonnes of gold since the start of the year, marking six consecutive months of divestment. With sovereign reserves now standing at 2,282 tonnes, the country continues to draw down its holdings to address budget deficits exacerbated by the war in Ukraine and international sanctions. Turkey has similarly monetized its gold reserves through swap agreements to support the lira, underscoring a global environment where gold is increasingly viewed as a vital liquidity lever rather than a long-term store of value.