Four Factors Fueling African Countries’ Strengthening of Gold Reserves

African countries are increasingly turning to the use of gold as an alternative reserve, leaving one to wonder what is fueling the rush to amass gold. Gold’s status as a safe-haven resource has made it increasingly enticing for African countries burdened by concerns over currency volatility, geopolitical risks, and a desire for greater monetary independence.

What is Driving the Affinity For Gold?

Ability to withstand inflationary pressures

Gold’s ability to hedge against inflation has made it a viable alternative for African central banks in a bid to safeguard the economy. Unlike fiat currencies, Gold is not highly susceptible to devaluation, which makes gold a great resource to have in the case of economic shocks.

For instance, countries like Ghana and Uganda have been purchasing gold from artisanal miners to bolster their foreign currency reserves. In 2022, Zimbabwe introduced a gold-backed currency, the Zimbabwe Gold (ZiG), to combat inflation and stabilize its exchange rates, after the zimbabwe dollar became greatly devalued.

Nigeria has proposed increasing its gold reserves to 30% of its total reserves, up from just 4%, as a strategy to combat inflation and strengthen its economic position. Similarly, nations like Mozambique are boosting gold holdings to reduce reliance on foreign aid and attract investment.

The widely accepted US dollar currency has lost 10-11% of its value against major world currencies in 2025 while Gold is up approximately 26%–28% in 2025, crossing $3,300/ounce by July, and reaching $3,342.74. Gold therefore offers a way to diversify reserves, reducing exposure to currency fluctuations and external economic policies.

Risk of Sanctions

Geopolitical tensions and the risk of financial sanctions especially in form of US tariffs have also spurred African nations to diversify their reserves. The threat of Donald Trump’s US tariffs looming large has forced markets in Africa, to shift away from holding foreign currencies, which can be frozen or restricted, toward gold, which can be stored domestically and is immune to such risks.

There is also the fear of what an alliance with the BRICS summit would attract in the form of sanctions for African countries. As a result, countries like Algeria, which leads Africa with 174 metric tons of gold reserves, and Libya, with 146.65 tons, view gold as a strategic asset to navigate political and economic instability.

Surge in Africa’s Domestic Gold Production

Africa currently accounts for approximately 10.8% of global gold production, with countries like Ghana, South Africa, Mali, Burkina Faso, and Sudan among the top producers. Ghana, Africa’s largest gold producer, contributes 7% of global output, while Mali and Burkina Faso have seen significant growth in their mining sectors.

This abundant domestic supply allows African nations to acquire gold directly from local sources, including artisanal and small-scale mining (ASGM), which produces about 20% of the continent’s gold. By purchasing gold from local miners, countries like Ghana not only bolster their reserves but also support local economies and reduce the outflow of untaxed gold through smuggling, a significant issue across the continent.

Currency Stabilization

Gold reserves also play a critical role in stabilizing national currencies and facilitating international trade. By holding substantial gold reserves, countries can back their currencies leading to greater investor confidence. Ghana, for instance, has explored using gold to pay for oil imports, easing pressure on its local currency and reducing fuel price volatility while the proposed African Continental Free Trade Area’s Pan-African Payment and Settlement System also encourages trade in local currencies, with gold reserves providing a stable foundation for such transactions.

Persisting Challenges Despite Opportunities

Smuggling remains a significant issue for African countries, with billions of dollars’ worth of gold leaving Africa untaxed each year, often through hubs like the United Arab Emirates. Countries like Burkina Faso estimate that only a fraction of their artisanal gold production is declared, undermining efforts to build reserves, this has informed Burkina Faso’s drive to nationalize all its Gold mines.

Perennial issues like corruption, Environmental concerns, such as mercury use and deforestation in artisanal mining still persist underscoring the need for firm regulation and aligning with global best practices.

Subscribe to Notifications