Geopolitical Tensions Drive Shifts in Global Sovereign Gold Reserves

Impact of Regional Conflict on Sovereign Gold Reserves

The escalating conflict between the US and Iran is significantly influencing central bank and sovereign wealth fund activities, altering one of the primary catalysts for long-term gold price appreciation. The heightened volatility across financial and energy markets has prompted several nations to rebalance their portfolios to mitigate risks.

Azerbaijan and Pakistan Adjust Gold Holdings

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The State Oil Fund of the Republic of Azerbaijan (SOFAZ) announced a suspension of gold sales in Q2 2026. As of the end of June, the fund held 178.1 tonnes of gold, representing 31.4% of its investment portfolio, after noting that gold made a negative contribution to its performance during the second quarter.

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Meanwhile, data from the State Bank of Pakistan (SBP) indicates an 11.4% decline in gold reserves from May to June. Total reserves dropped to $8.39 billion in June from $9.47 billion in May, although this figure remains 22.6% higher on a year-over-year basis.

Market Drivers and Liquidity Needs

The geopolitical instability has forced several emerging economies to adjust their gold positions to finance energy imports or defend their respective currencies. Higher oil prices and rising real interest rates have collectively shifted the dynamics, prompting state entities to either reduce gold acquisitions or monetize holdings.

Case Studies: Turkey and Russia

Turkey’s Central Bank reported a significant reduction of 118 tonnes of gold in March, marking its largest decline since 2013, as it sought to stabilize the lira through gold monetization and swap agreements. Simultaneously, Russia continues to reduce its gold holdings to address budgetary pressures stemming from military expenditures and ongoing international sanctions.

The Central Bank of Russia (CBR) recorded a decline of 1.4 million ounces (43.5 tonnes) since the beginning of 2026, marking six consecutive months of reduction. As of July 1, Russia’s sovereign gold reserves stood at 73.4 million troy ounces, valued at approximately $299 billion.

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