Central Banks Increase Gold Reserves as Geopolitical Risks Reshape Investment Strategies

Growing geopolitical uncertainty and concerns about overreliance on the US dollar are prompting central banks around the world to strengthen their gold holdings, according to analysts and new survey data from the World Gold Council (WGC).

The latest WGC survey found that a record 45 percent of reserve managers expect their institutions to increase gold reserves over the next 12 months. The findings highlight gold’s expanding role in reserve management as central banks seek protection against geopolitical shocks, financial market volatility and concentration risks.

The survey, conducted between February and May, gathered responses from 74 central banks. Most participants completed the survey after the outbreak of conflict in the Middle East, making the results particularly relevant at a time of heightened regional tensions and uncertainty in global energy markets.

Analysts say the trend is not new but reflects a deeper shift that has been underway since 2022. Ahmed Azzam, head of market research at Equiti Group, said central banks have increasingly viewed gold as a strategic asset rather than a temporary safe haven during crises.

According to the survey, 93 percent of respondents now hold gold in their reserves, compared with 81 percent a year earlier. Among the main reasons cited for holding gold were its performance during periods of crisis, its ability to preserve value over the long term and its role as a hedge against inflation. Many reserve managers also highlighted gold’s usefulness in protecting against geopolitical risks.

The findings are particularly significant for Gulf countries, where currencies remain closely tied to the US dollar and energy exports continue to play a central role in economic policy. Analysts stressed that growing gold purchases should not be interpreted as a move away from the dollar.

Instead, central banks are seeking to diversify risks while maintaining the dollar’s dominant role in the global financial system. Gold is increasingly viewed as a complementary asset that can reduce vulnerability to sanctions, currency concentration and geopolitical disruptions.

The survey also revealed changes in how central banks manage their gold holdings. Nine percent reported increasing domestic storage of gold during the past year, while 10 percent said they had diversified overseas storage locations. Analysts view these moves as evidence that central banks are paying greater attention to direct control and accessibility of their reserve assets.

The trend could have wider implications for the Gulf region. The United Arab Emirates has become an important hub for gold trading and refining, while Saudi Arabia is investing heavily in mining and mineral development as part of its economic diversification plans.

Despite strong demand from central banks, consumer demand for gold jewellery across the Middle East has weakened due to high prices. However, analysts say continued official-sector purchases are providing long-term support for the market.

While central bank demand may help underpin gold prices, experts caution that the market remains vulnerable to swings driven by investor sentiment, interest rates and broader economic conditions. Still, many believe central banks will remain steady buyers as they focus on strengthening reserves against an increasingly uncertain global backdrop.