LONDON: Gold has a history as a hedge against inflation, or more precisely, inflationary expectations, but what is not often considered is its role in a deflationary environment.
Since the United States Treasury closed the gold window in August 1971, the world's major economies have been almost continuously in an inflationary environment.
The year-on-year change in the consumer price index (CPI) in the US has been negative in just eight months since August 1971 and all eight of these were in one consecutive period from March to October 2009. In Germany, just 12 months fit the criterion, of which eleven were in 1986-1987.
Now, however, recent figures from the US and China, plus persistent problems in Europe and commercial banks' reluctance to lend, have rekindled fears of an imminent period of deflation.
There has been little hard evidence of gathering deflationary forces. However, the stresses in the banking sector and gold's historical performance during deflationary phases add weight to the argument that any deflationary fears should underpin gold prices.
Although it may seem counter-intuitive, gold can be as effective a hedge against deflation as against inflation; in fact gold's purchasing power is more likely to increase in deflationary periods than during inflationary eras.
Historical precedents suggest that gold's worth is powerful during deflationary periods.
The most recent deflationary period in the US was 1929-1933 as the depression took hold.
In 1931, Britain came off the gold bullion standard and effectively devalued sterling; then, perhaps somewhat reluctantly, in 1933 the US left the gold standard when President Roosevelt severed the dollar:gold link and banned domestic gold hoarding and gold exports.
Later that year, Roosevelt tried to nudge the gold price higher in the hope that rising gold would dispel depressionary forces. An increase in the dollar price of gold was, in an era when the gold standard had been prevalent, a de facto devaluation of the dollar.
Gold historian and analyst Timothy Green notes in his book "The World of Gold" that the "precise each day was less important than the encouragement of a general upward trend," but also that the move was too gradual and failed to lift the US economy out of depression.
Roosevelt then fixed the dollar-gold price at $35 in 1934 (an effective dollar devaluation of 40 percent) under the newly implemented Gold Reserve Act and the new gold exchange standard was established in the US, lasting until 1968 when a two-tier market was implemented, prior to the final severance of the dollar:gold link in 1971.
While gold's role as a medium of exchange may have proved disappointing to Roosevelt in terms of its impact on depressionary forces, gold's purchasing power increased substantially during this period of deflation, as it had in previous deflationary eras.
"The Golden Constant", written by Roy Jastram over 30 years ago and recently re-released including fresh material by economist Jill Leyland, studies gold over a series of inflationary and deflationary periods, going as far back to the 17th century in England and the 19th century in America.
In England, over the past four centuries, gold lost its purchasing power in every period of inflation; by anything from 21 percent (in both 1675-1695 and 1752-1776) to 67 percent (1897-1920).
The story is similar for four periods out of five in the US, from 6 percent (1861-1864) to 70 percent (1897-1920).
The outlier here is the period of 1951-1976 when gold's purchasing power did increase in the US, by 80 percent as the price corrected after its sustained period pegged to $35/ounce.
In each of the four deflationary periods since the 17th century in England, gold has increased its purchasing power, by between 42 percent (1658-1669) and 251 percent (1920-1933).
In the US there have been three recorded deflationary periods — and gold increased its purchasing power in each of them — by between 44 percent (1929-1933) and 100 percent (1814-1830).
It could understandably be argued that these results stem from periods when the gold price was fixed, but Leyland notes that while a fixed price could help in the short term, there is a mass of economic experience showing that a price cannot remain fixed in the face of overwhelming fundamental forces.
Roosevelt having to free gold in 1933 (if only temporarily), and the subsequent changes in 1968 and 1971, are cases in point.
More recently, and in a different sphere, one can point also to the failure of the International Tin Council, in the mid-1980s, to sustain the efforts to maintain tin within a price bands an exercise that ultimately caused ructions in the London Metal Exchange and elsewhere.
In the short term, participants are concerned that any or all of the US, Europe or China could be sailing into deflationary headwinds.
History suggests that to sell gold ahead of such a development would be counter to the likely price outlook, as well raising investment risk profile rather than reducing it, especially as a deflationary environment would be likely to undermine equities, while keeping bond yields low.
Continued flattening in the yield curve suggests that the market is still looking for QE3. Such a development could help to dispel deflationary fears, but in mid-2012 they are still hovering in the background.
Finally, the fact that gold is under consideration at the Basel Committee for Bank Supervision for elevation to Tier 1 Asset status for commercial banks is informative enough in its own right, since it flags the continued stresses in the financial system.
Although the opportunity cost of holding gold would remain positive in a deflationary environment, the reduction of risk would be likely to outweigh this final consideration.
— Rhona O'Connell is a Reuters GFMS market analyst.
The views expressed are her own.
Gold as a hedge against deflation
Gold as a hedge against deflation
Airports in GCC are turning stopovers into tourism growth
- Governments and airport operators are turning aviation as a central pillar of tourism and economic strategy
CAIRO: Once defined by fleeting layovers and duty-free corridors, airports across the Gulf Cooperation Council are increasingly gateways to short-stay tourism, driving non-oil growth, hospitality revenues and job creation.
Across the region, governments, airlines and airport operators are treating aviation not merely as a transport sector but as a central pillar of tourism and economic strategy. Through streamlined visa regimes, airline-led stopover programs and sustained investment in airport infrastructure and technology, GCC countries are turning transit passengers into visitors.
“Across the GCC, destinations have shifted from functioning primarily as global transit hubs to positioning themselves as places travelers actively choose to visit, even for short stays during onward journeys,” Nicholas Nahas, partner at Arthur D. Little, told Arab News.
Airports in the Middle East are investing heavily in biometric processing systems, e-gates and digital border controls designed to shorten waiting times and improve passenger flow. These upgrades, backed by coordinated public-private initiatives, are narrowing the gap between arrival and exploration, making short stays viable even for passengers transiting for less than 48 hours.
Unified GCC visa
Two years after its initial proposal, the long-discussed unified GCC tourist visa is moving through final coordination stages, a development expected to further accelerate tourism spending linked to stopovers.
Looking ahead, the visa could allow the region to function as a single tourism corridor. Robert Coulson, executive adviser for real estate at Accenture, said the next phase is about regional continuity. “The next leap for the GCC is making the region feel like one seamless journey while differentiating each stop with a distinct identity,” he told Arab News.
First proposed in 2023 and approved in principle in 2024, the visa is designed to allow travel across Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE under a single permit. Analysts say Saudi Arabia is positioned to be among the biggest beneficiaries, given its scale, expanding destination portfolio and growing aviation capacity.
The unified visa is expected to complement existing stopover initiatives by allowing travelers to combine short visits to Saudi Arabia with trips to Dubai or Doha, effectively turning the Gulf into a single multi-country itinerary rather than a series of isolated transit points.
Saudi aviation surge
Saudi Arabia’s aviation-driven tourism growth has accelerated rapidly. The Kingdom welcomed an estimated 122 million visitors in 2025, moving closer to its Vision 2030 target of attracting 150 million tourists annually.
“GCC travel hubs have stopped selling connections and started selling experiences,” Coulson said. “They’ve cracked the stopover-to-stayover model, turning a layover into a mini-holiday rather than dead time.”
In January, Abdulaziz Al-Duailej, president of the General Authority of Civil Aviation, said international destinations served from Saudi Arabia increased to 176 in 2025, while the Kingdom remained home to some of the world’s busiest air routes.
He credited this performance to the “unlimited support” of the Kingdom’s leadership, identifying aviation as a key enabler of Vision 2030 and broader economic diversification.
Saudi Arabia’s newest airline, Riyadh Air, is expected to contribute more than $20 billion to non-oil gross domestic product and create over 200,000 direct and indirect jobs, underscoring aviation’s expanding economic footprint.
A key pillar of Saudi Arabia’s strategy has been the introduction of a digital stopover visa in 2023, allowing transit passengers to enter the Kingdom for up to 96 hours. The initiative enables short visits for Umrah, trips to Madinah or exploration of the country’s cultural and historical sites. The policy reflects a broader regional effort to turn time spent between flights into economic activity beyond the airport terminal, particularly in hospitality, transport and cultural tourism.
Short-stay shift
This evolution has been driven by global connectivity, simplified visa access and the ability to deliver high-quality experiences within a 24-to-72-hour window. The UAE, particularly Dubai, was the earliest and most established example of this transition, converting a growing share of its transit traffic into visitors through airline-led stopover packages, flexible visa categories and dense, short-stay-friendly attractions.
Dubai International Airport handles more than 85 million passengers annually. Curated stopover products combining hotel stays with cultural and entertainment experiences have helped transform transit traffic into leisure demand. Direct metro access and streamlined entry processes have further reduced friction. As a result, Dubai welcomed around 19 million international overnight visitors in 2025.
Other GCC destinations have since adopted similar models. Abu Dhabi expanded stopover offerings through its national carrier, promoting entertainment and cultural districts as compelling short-stay experiences. Qatar embedded stopover tourism into its national tourism strategy, converting transfer traffic at Hamad International Airport into city stays. Saudi Arabia expanded its tourism offering through its 96-hour digital visa linked to onward flights.
A smooth transit experience is often the deciding factor in whether passengers remain airside or choose to explore. Fast entry processes, intuitive airport design and reliable airport-to-city connectivity can turn even a six- to eight-hour layover into usable time rather than idle waiting.
Under Vision 2030, Saudi Arabia has invested heavily in airport expansion, digital border processes and urban mobility projects designed to shorten the distance between arrival and experience. Airline stopover platforms, transport apps and airport-based destination messaging increasingly reduce uncertainty and enable spontaneous exploration.
Beyond transit traffic, Nahas said tourism growth across the GCC has been driven by integrated destination ecosystems. Successful destinations are designed end-to-end — from trip planning and arrival through accommodation, mobility, experiences and departure — requiring coordination across tourism authorities, airlines, airports, transport providers and experience operators.
Designing destinations
For developers shaping the region’s next phase of tourism growth, the focus has shifted toward creating destinations that capture travelers from the moment they arrive.
Sultan Moraished, group head of technology and corporate excellence at Red Sea Global, said next-generation destinations are being designed to resonate with global travelers beyond a flight connection.
“As we design and build next-generation destinations, our focus is always on creating experiences that resonate with global travelers from the moment they arrive to when they choose to explore beyond a flight connection,” he told Arab News.
Moraished said offering experiences travelers cannot find elsewhere, from cultural immersion to nature-based activities, creates compelling reasons to extend visits beyond simple transit. He added that collaboration across aviation, hospitality and destination authorities ensures that every part of the journey is aligned with a shared vision for tourism growth.
Looking ahead, Moraished said the intersection of innovation and hospitality will continue to open new pathways, from smart digital experiences to regenerative tourism practices that appeal to increasingly conscious travelers and encourage repeat visitation.
Experience economy
Airports have shifted from being standalone infrastructure assets to functioning as world-class distribution engines for cities and destinations. Investments in gateway airports have made them part of the destination brand promise.
Tourism operates as a continuous conversion funnel, Coulson said. Every step removed between the flight gate and the city increases the likelihood that travelers will leave the terminal and spend money locally. Fast connections, predictable baggage handling and clear wayfinding reduce perceived risk, while simplified transit visas make spontaneity possible.
A unified GCC tourist visa could unlock longer stays and multi-country itineraries, supported by investment in walkable districts, waterfronts and climate-smart design.
Taken together, the transformation of transit hubs into tourism powerhouses reflects a broader shift in how the Gulf approaches aviation-led growth. Airports are no longer just points of passage but economic gateways where short stopovers translate into tourism spending, jobs and long-term diversification.
