Official Demand Risks Rise
He adds that rising energy prices may extend this risk to other energy-importing countries. He says that if official sector support weakens, participation via institutional channels becomes more vulnerable. He notes that reduced official demand removes a potential support for institutional positioning in a crowded trade, and that retail participation has contributed to extreme prices in recent months. He also states that the bull-market trendline is about $1000/oz below current prices, implying room for further declines without breaking the long-term trend. The article says it was produced with the help of an AI tool and reviewed by an editor. We see that systematic funds like CTAs are positioned to continue selling gold, even if the daily amounts are modest. Looking back at the situation in 2025, we identified the growing risk that Middle Eastern central banks would stop buying gold due to the economic strain of regional conflict. This vulnerability is now a reality.Market Fragility Without Central Banks
The problem is expanding as high energy prices, with WTI crude holding over $95 a barrel, pressure the finances of energy-importing countries globally. Data from late 2025 already showed a nearly 40% slowdown in the pace of central bank gold buying compared to the year prior. Without this official sector support, the gold market is more fragile. This creates a precarious situation for institutional investors who participated in what became a very crowded trade. The unprecedented retail buying we saw push prices to extremes in 2025 now lacks the backstop of official demand. This leaves fewer large buyers to absorb any significant selling. While gold’s long-term uptrend is technically intact, its main support trendline is nearly $1000 lower than current prices. This indicates there is considerable room for a deeper price correction in the weeks ahead without breaking the overall bull market structure. Therefore, traders should consider positioning for further weakness, perhaps through buying puts or initiating bear put spreads. Create your live VT Markets account and start trading now.
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