Gold re-emerges as core reserve asset: Strategic implications for the Global South and Africa’s gold-producing economies

For the first time in modern history, gold has grown in importance as an alternative reserve asset alongside US Treasury bonds, reflecting structural shifts in the global international monetary landscape rather than short-lived market fluctuation.

 Over four consecutive years, central banks worldwide have ramped up gold acquisitions to an annual average of 1 100 tonnes, marking the fastest buying pace since the collapse of the gold standard in 1971.

Amid rising US sovereign debt and evolving global economic and geopolitical landscapes, sovereign nations are diversifying reserve allocation to enhance asset resilience, driving structural adjustments to the post-Bretton Woods reserve framework built around US dollar assets.

Nevertheless, a key structural reality remains: boosting gold holdings cannot entirely decouple economies from the existing global dollar-based financial system. Recent research indicates that even after cutting US Treasury holdings and increasing gold reserves, central banks’ gold assets still maintain close ties with the US financial market via seven core channels, including US-dollar denominated global gold pricing, Comex-based price benchmarking, partial overseas gold depository arrangements, yield correlation between gold and US government bonds, and stablecoin products backed by US treasuries. Shifting asset mix between US bonds and gold only optimizes portfolio structure instead of delivering full de-dollarization.

For the Global South, notably major gold producers across South Africa, Zimbabwe, Ghana, Uganda, Mali, Burkina Faso and Tanzania, the ongoing global monetary restructuring brings unprecedented development opportunities. As vital global gold suppliers, African countries can break away from outdated colonial-era pricing and trading frameworks and participate in building a more diversified global monetary architecture with targeted industrial strategies.

1. Core drivers behind central banks’ rising gold allocation

 The post-1971 fiat dollar system was underpinned by three foundational factors: US treasuries as mainstream low-risk reserve assets, the Federal Reserve’s liquidity adjustment function, and the US dollar’s neutral positioning in global cross-border settlement. These foundations are undergoing gradual structural changes:

First, US national debt has climbed to US$40 trillion with a debt-to-GDP ratio above 120%, pushing central banks worldwide to diversify reserve holdings amid long-term fiscal pressure.

Second, evolving global geopolitical and economic conditions have prompted many countries to pursue diversified reserve layouts to mitigate single-currency concentration risks.

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Third, regular cross-border regulatory restrictions on certain trade and financing activities accelerate the global trend of multi-currency settlement development.

Statistics back this trend: annual central bank gold purchases averaged merely 150 tonnes from 2010 to 2019 before jumping above 1 100 tonnes after 2022. China’s official gold reserves exceed 2 200 tonnes alongside gradual reduction in US Treasury holdings; Russia’s official gold stock tops 2 300 with substantially scaled-back US bond exposure.

Turkey, India, Poland, Qatar, Kazakhstan and Egypt have kept steady gold procurement, while GCC members including Saudi Arabia and the UAE also expand gold reserves while optimizing US debt allocation.

1. Key paradox: Gold accumulation does not equal full separation from dollar finance

 Seven interlinkages keep global gold markets closely connected with the US financial system:

1. Benchmark influence: The US holds 8 133 tonnes of gold (23% of global above-ground stock), enabling indirect impacts on international gold pricing;
2. Price setting: 74% of global exchange-traded gold trades take place on Comex with USD pricing;
3. Transaction denomination: Roughly 90% of global gold deals are settled in US dollars;
4. Overseas custody: 6 331 tonnes of gold from 36 global central banks are deposited at the New York Federal Reserve;
5. Institutional path dependency: Long-term trade contracts and existing financial infrastructure are built around the US dollar with high switching costs;
6. Yield linkage: Gold price trends correlate with US Treasury yield fluctuations;
7. Stablecoin spillover: Over US$ 190 billion worth of stablecoins are collateralised with US government bonds, sustaining continuous demand for dollar assets.

Complete independent gold trading, custody and settlement systems denominated in diversified currencies are required to fully bypass these binding links.

 Even so, gold boasts unique diversification merits unavailable with sovereign bonds: no counterparty default risk linked to government credit, physical gold stored domestically avoids cross-border regulatory uncertainties, stable long-term purchasing power, and supports autonomous cross-border financial arrangements for central banks.

1. Toward a multi-currency global system instead of classical gold standard

 Countries across the Global South do not aim to restore the historical gold standard; their core demand lies in advancing diversified cross-border settlement to promote a multipolar international monetary order. Key development directions include bilateral currency swap-based trade payment, exploration of commodity-linked accounting units among Brics members, and blockchain-enabled settlement alternatives complementing existing mainstream payment systems. Gold will not replace everyday fiat money but will develop into a core reserve asset for inter-central-bank final settlement.

1. Six-pillar development strategy for African gold producers

 Africa supplies 20%–25% of global annual gold output: Ghana ~130 tonnes (No.1 in Africa), South Africa ~110 tonnes, Burkina Faso ~60 tonnes, Mali ~55 tonnes, Sudan ~45 tonnes, Zimbabwe ~35 tonnes; Uganda’s output ranges 5–10 tonnes on a rising track, with Tanzania, Guinea, Côte d’Ivoire, DRC and Niger also substantial producers.

For decades, most African raw doré gold is exported overseas for refining and pricing, resulting in massive value leakage. Six practical development proposals:

1. Build domestic gold refining capacity: South Africa’s Rand Refinery and Ghana’s Royal Gold Refinery have set precedents. Zimbabwe, Mali can construct medium-scale refineries with annual capacity of 50–100 tonnes and obtain LBMA certification; refined certified bullions enjoy obvious market premium against unprocessed doré.
2. Establish a Pan-African Gold Exchange: Initiated under AfCFTA and Afreximbank with hubs in Accra, Johannesburg, Cairo and Kigali; adopt dual quotation of local basket currencies plus US dollars; impose strict physical delivery or high margin rules to curb excessive speculative paper trading.
3. Localise national gold reserve accumulation: Mandate central banks to purchase 20%–30% of domestic mined gold via local currency; use gold as credible collateral for domestic currency issuance and lend reserve gold to local industrial and jewellery sectors for steady yields.
4. Diversify gold trade settlement: Carry out barter trade of gold for equipment, infrastructure goods with China, Russia, India and Türkiye; develop gold-backed digital regional currencies; enable multi-currency pricing including CNY, RUB, INR and ZAR on African exchanges.
5. Develop continental cross-border gold custody network: Build high-standard secured vaults in west, east, southern and north Africa under AU and Afreximbank; sign mutual gold storage pacts among African nations; deploy alliance blockchain to track gold ownership and cut redundant physical transportation.
6. Rationalise risk control for paper gold exposure: African miners can moderately shift hedging from overseas futures to domestic exchange physical forward contracts; promote reasonable global position supervision on excessive speculative trading; launch 1:1 physical-backed African gold ETFs to enrich domestic investment options.

1. Targeted roadmap for representative African nations

- South Africa: Expand Rand Refinery’s regional service capacity, launch rand-based gold derivatives, advance multilateral gold reserve coordination within BRICS framework;

- Zimbabwe: Improve gold backing ratio for local currency, standardise artisanal gold acquisition to curb cross-border smuggling;

- Ghana: Complete LBMA accreditation for domestic refinery and raise central bank gold reserve to 50 tonnes within three years;

- Uganda: Cooperate with Chinese and Indian investors to build small refineries and develop east African regional gold storage hub;

- Francophone West African states: Jointly build shared refinery in Abidjan or Dakar to end long-term gold export to Europe.

1. Responses to common doubts
2. “Gold is an outdated asset”: The proposal never advocates full gold standard; gold is positioned only as supplementary inter-central-bank settlement reserve alongside existing fiat currencies.
3. High storage cost: Domestic vault investment counts as risk prevention expenditure against potential overseas asset risks with measurable long-term economic returns.
4. US market intervention risks: Radical restriction on dollar-based gold trading would severely damage US dollar credit; countries can diversify trading via Shanghai Gold Exchange, Moscow Exchange and Dubai markets to spread risks.

The global monetary system is gradually evolving toward diversified reserve composition instead of abrupt collapse of the US-dominated framework. Central banks worldwide keep expanding gold allocation as a prudent portfolio choice. As a major global gold-producing continent, Africa faces rare historic chances to upgrade its whole gold industrial chain.

By implementing the six-pillar roadmap and deepening multilateral cooperation under AU, AfCFTA, Brics and bilateral partnerships with China, Russia and India, African nations can evolve from raw gold suppliers to key participants in global gold pricing and build a regional monetary foundation backed by tangible gold resources.

 *Saxon Zvina is  principal consultant at Skyworld Consultancy Services and fellow of Belt and Road Initiative Think Tank

Email: [email protected] | X: @saxonzvina

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