Why Central Banks Are Shifting Reserve Balances to Gold

For the third consecutive year, central banks globally have been net purchasers of gold at volumes not seen since the end of the Bretton Woods system. The trend is accelerating — and African central banks are among the most active buyers.

**The context**

Gold’s role in central bank reserves declined sharply after 1971, when the US severed the dollar’s link to gold. For decades, central banks held mostly US Treasuries, euros, and other fiat instruments. That consensus is fraying.

**Why now?**

Three forces are converging:

1. **Dollar weaponisation**: The freezing of Russia’s dollar reserves in 2022 sent a clear signal to sovereigns holding large USD positions — geopolitical risk is now a real variable in reserve management.

2. **Interest rate uncertainty**: Gold pays no yield, which made it unattractive in a low-rate world. As rate cycles become less predictable, gold’s non-correlated nature becomes a feature, not a bug.

3. **Inflation hedging**: Persistent above-target inflation in major economies has revived gold’s traditional role as a store of value over long time horizons.

**African central banks**

The Central Bank of Nigeria, the South African Reserve Bank, and the Bank of Ghana have all increased gold allocations in recent years. Nigeria, notably, holds gold mined domestically — creating an unusual alignment between reserve management and local industrial policy.

**What to watch**

Gold prices remain elevated. If central bank buying continues at current pace, analysts at several major investment banks project gold could test $3,000 per troy ounce before end-2026.