17/06/2026 04:13 AST
Gold is becoming an increasingly deliberate component of central bank reserve strategies as geopolitical tensions, concerns over the concentration of assets in the US dollar, and questions surrounding the resilience of traditional holdings reshape official-sector thinking, analysts told Arab News.
Their comments came after a World Gold Council survey revealed a record appetite among reserve managers to increase bullion holdings, underscoring gold's growing role as a strategic asset in an evolving global economic landscape.
For the Gulf, the findings land at a sensitive moment. The region remains anchored to the dollar through currency pegs and energy trade, but policymakers are also navigating oil-price swings, tighter global liquidity and heightened geopolitical risk.
Ahmed Azzam, head of market research at Equiti Group, told Arab News that the WGC's 2026 survey should not be read as evidence that central banks have only recently discovered gold's strategic importance.
"The World Gold Council's 2026 survey does not tell us that gold has suddenly become a strategic asset for central banks. That shift has already been visible for several years, especially since the sharp acceleration in official-sector buying after 2022," he said.
"The real message from this survey is different: the role of gold inside reserve management is becoming more institutional, more deliberate and less dependent on one single crisis narrative."
The council said a record 45 percent of reserve managers surveyed expect to increase their own institutions' gold holdings over the next 12 months, up 2 percentage points from a year earlier.
The majority, 54 percent of the 74 central banks that answered the question, said their holdings would remain unchanged, while 1 percent anticipated a decline.
The annual survey was conducted between Feb. 5 and May 19.
According to the WGC, most responses were received after the start of the Middle East conflict in late February, giving the findings additional relevance for a region where geopolitical risk, energy markets and reserve management are closely linked.
The report said Middle East institutions accounted for 3 percent of survey respondents, unchanged from 2025.
The broader survey findings also speak to concerns that are prominent across the Gulf.
The report said geopolitical instability moved ahead of inflation troubles as a reserve-management issue, likely because of the war in Iran.
Overall, 88 percent of respondents cited geopolitical instability as relevant to reserve management decisions, including 95 percent of emerging market and developing economy respondents and 67 percent of advanced-economy respondents.
Azzam said that for the Middle East, the rise of gold should not be framed as a simple move away from the dollar.
"The region remains deeply tied to the dollar through currency pegs, energy trade, sovereign wealth portfolios and financial-market structure. So any discussion about gold should not be framed as a move away from the dollar. That would be too simplistic," he said, adding: "The more realistic interpretation is that gold gives central banks and sovereign institutions a way to diversify risk while keeping the dollar at the center of the system."
The Equiti Group official stressed that gold is not being used to "replace" the dollar, adding: "It is being used to reduce the vulnerability that comes with relying too heavily on one reserve framework."
Azzam said central banks are confirming that the reasons for holding gold have changed in weight and urgency.
"Gold was always a reserve asset, but today it is being used to answer a wider set of questions around currency concentration, geopolitical risk, access to liquidity, sanctions exposure and the long-term credibility of traditional reserve structures," he said.
The WGC survey showed that 93 percent of respondents reported already holding gold, up from 81 percent a year earlier.
Among the drivers for gold ownership, a record 90 percent cited its performance during times of crisis. Other top reasons included gold's role as a long-term store of value and inflation hedge, and its function as an effective portfolio diversifier. Among emerging market and developing economy respondents, 85 percent said gold's role as a geopolitical risk hedge was relevant.
Shaokai Fan, head of central banks at the WGC, said central banks remain keen on gold and that the recent decline in prices has not altered their thinking.
Gold demand from central banks is expected to slow by 15 percent year on year in tonnage terms in 2026, according to consultancy Metals Focus, but remain above pre-2022 levels, continuing to provide support for the market.
Fahad Badar of Mercer's global multi-asset team told Arab News that the survey confirms central banks intend to keep adding gold and trimming dollar exposure in the coming years, but he said the official-sector trend is not the only force driving the market.
"The survey confirms what we already knew, central banks intend to keep adding gold and trimming dollar exposure over the coming years," Badar said. "But for an asset allocator that's the slow-moving part of the story: it's a structural floor, not the swing factor, and after several years of buying well above the historical pace it may be largely in the price."
He said the sharp rise in gold prices in recent years was driven by more than central bank buying.
"What produced the melt-up in 2024 and 2025 was private and institutional investment flows layered on top of that central bank bid. Whether those investors stay engaged is the open question," Badar said.
He added that the outlook remains "genuinely two-sided," with higher real yields and the dollar doing some of the safe-haven work that gold performed a year earlier.
"This year's volatility, when some reserve managers actually drew on their gold during this time, is a reminder that even the official bid isn't unconditional," Badar said.
The share of respondents increasing domestic gold storage rose to 9 percent over the past 12 months, up from 5 percent a year earlier. Meanwhile, 10 percent said they had diversified their overseas storage locations, compared with just 2 percent in the previous survey.
Looking ahead, 7 percent said they planned to increase domestic storage over the next 12 months, while 9 percent planned to diversify overseas locations.
Azzam said these operational details may be among the most important parts of the survey.
"Funding new purchases through domestic programs, holding more gold locally, and diversifying vaulting locations all point to a more practical and operational view of gold. This is not just about price exposure. It is about control over the asset," he said.
Azzam said that has implications for the Gulf, where the UAE is already an important regional hub for bullion trade and refining, while Saudi Arabia is expanding mining and mineral development as part of its economic diversification strategy.
"Over time, gold can become more than a line item in reserves. It can link reserve management with domestic market development, commodity infrastructure and financial-sector depth," Azzam said.
The official-sector appetite contrasts with weaker regional consumer demand caused by record prices. Earlier WGC data showed gold markets across the Gulf and wider Middle East diverged in the first quarter of 2026, with jewelry demand falling 23 percent year on year to 34.5 tonnes as higher prices and weaker purchasing power weighed on buyers.
Saudi Arabia was relatively more resilient, with jewelry demand falling 13 percent to 12.7 tonnes from 14.6 tonnes a year earlier, a smaller drop than the regional average.
For investors, analysts said the key message is that central-bank demand can support the medium-term structure of the gold market, but it does not remove volatility.
"The gold market is not only being driven by Federal Reserve expectations, inflation data or safe-haven flows," Azzam said. "A structural buyer remains active, and that buyer is thinking in years rather than weeks."
Arab News
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