DUBAI: Gold is having a moment, again. Because when the world gets messy, investors reach for the metal that never flinches.  

The Central Bank of the UAE increased its gold reserves by nearly 26 percent in the first five months of 2025, bringing total holdings to $7.9 billion, as global economic uncertainty and geopolitical tensions continue to drive demand for safe-haven assets. 

According to data released by the central bank in its May 2025 bulletin, gold reserves rose from $6.255 billion at the end of 2024, making it one of the most significant increases in recent years.  

The move aligns with a global trend of increased gold accumulation by central banks amid rising inflation, currency volatility, and geopolitical risks. 

The UAE’s reserves growth comes alongside a surge in international gold prices, which have increased approximately 33 percent year-to-date, reaching a record high of more than $3,500 per ounce.  

In Dubai, the price of 22-karat gold rose by 15.25 UAE dirhams per gram last week — up from 376 dirhams to 391.25 dirhams, a 4.06 percent increase that brings it close to the 400 dirhams per gram threshold. 

“This fits the global pattern we’ve seen over recent years, with gold used as a hedge against the dollar, interest rates, and geopolitical risks,” Noureldeen Al-Hammoury, chief market strategist at Squared Financial, told Arab News.  

Al-Hammoury said that the UAE’s gold strategy appears to be a broader attempt to diversify its reserves and hedge against global financial instability:  

“It signals diversification away from pure FX reserves and readiness for tail-risk liquidity needs — a classic insurance strategy amid uncertain cycles.” 

Why gold now? Global reserve trends offer clues 

According to the World Gold Council, central banks have been net buyers of gold for more than a decade, with annual net purchases averaging about 1,000 tonnes in the past three years, roughly double the average seen during the previous decade.  

The WGC’s latest survey shows that 95 percent of central bank reserve managers expect global gold holdings to rise further over the next 12 months, while 43 percent plan to increase their own allocations. 

“Central banks will still be one of the biggest drivers of gold’s performance, around 20 percent of annual demand,” Andrew Naylor, head of Middle East and Public Policy at the World Gold Council, told Arab News.  

While official sector demand continues to rise, consumer demand in the UAE has shown mixed trends.  

WGC data for the first half of 2025 indicates a 16 percent year-on-year decline in demand for gold jewelry, while demand for gold bars and coins surged by 25 percent, pointing to increased investment activity.  

UAE’s evolving role in global gold markets 

Although the UAE has historically not been among the world’s top official sector buyers, it has positioned itself as a major gold trading hub, surpassing the UK to become the second largest globally. In 2023, the UAE handled more than $129 billion in gold trade.  

The UAE’s growing reserves could influence broader institutional behavior in the region, said Prashant Tandon, CEO of investment firm Lighthouse Canton.  

“We may see more capital flow into gold-linked instruments, not in isolation, but as part of a broader trend toward alternative assets that provide resilience against systemic shock.” 

Implications for monetary policy and strategy 

Analysts say the accumulation of gold by the UAE Central Bank reflects a long-term strategy aimed at increasing financial resilience.  

“Investment demand is driving gold’s increase. It’s primarily an investment story,” said Naylor, noting the central bank purchases serve not only as financial hedges but as confidence signals during periods of economic instability. 

The shift also coincides with growing interest in de-dollarization, as emerging economies look to reduce their dependence on the US dollar.  

Conflicts in the Middle East, the ongoing war in Ukraine, and trade tensions with the US have further motivated sovereign wealth funds to diversify into gold and alternative assets.  

“The US’s increasingly assertive use of the dollar as a policy and negotiating tool has accelerated this trend, encouraging sovereigns to seek greater autonomy,” Tandon said. 

Will the UAE continue buying? 

It is not clear whether the UAE will continue expanding its gold reserves at this pace.

In 2021, central banks added 463 tonnes of gold globally, marking a return to net purchases following the uncertainty of the COVID-19 pandemic.  

However, the scale of future buying is expected to be moderate.  

“We probably won’t see the record buying that we’ve seen in recent years,” Naylor explained, but said gold remains a core component of central bank reserves due to its performance during times of uncertainty. 

Still, analysts say a shifting macroeconomic environment could influence future reserve strategies. 

As gold prices continue to climb, investors are digging in, but regular consumers are still on the fence.

“As long as real yields stay contained and geopolitics remain uncertain, dips in gold prices should find support,” said Al-Hammoury at Squared Financial.