Why Central Banks Keep Loading Up on Gold: The Pakistan Connection

Gold prices climbed higher in Saudi Arabia on December 15, with spot rates reaching SAR 521.91 per gram—a solid uptick from the SAR 518.67 level recorded five days prior. On a tola basis, the precious metal moved to SAR 6,087.57, reflecting broader strength in global gold markets.

The Price Breakdown Across Different Units

Data sourced through FXStreet’s conversion of international USD-denominated gold prices into local Saudi Arabian currency and measurement standards. Daily updates reflect real-time market conditions at publication time.

Central Banks’ Strategic Gold Accumulation

The recent upward momentum in gold prices reflects a deeper trend: institutional demand from central banks continues to accelerate. In 2022 alone, central banks worldwide added 1,136 tonnes of gold worth approximately $70 billion to their reserves—the strongest annual purchase rate on record.

This buying spree isn’t random. Emerging market central banks, particularly from China, India, and Turkey, have dramatically ramped up acquisitions. These institutions view gold as a critical tool for currency stabilization and economic credibility. Countries with substantial gold reserves signal solvency and financial strength to global markets, particularly during periods of economic turbulence.

Gold’s Role as an Economic Safeguard

Beyond its monetary policy applications, gold functions as a multi-purpose portfolio hedge. Its inverse relationship with the US Dollar means that when the greenback weakens, gold typically strengthens—offering investors and policymakers a natural diversification mechanism during market volatility.

The precious metal also moves opposite to equity markets. Stock market rallies often suppress gold demand, while selloffs in riskier assets trigger safe-haven flows into gold. Additionally, gold maintains a well-documented negative correlation with inflation and currency depreciation, making it invaluable for long-term wealth preservation.

What Moves Gold Prices?

Interest rate policy stands as a primary driver. As a non-yielding asset, gold becomes more attractive when borrowing costs fall, but loses appeal when central banks maintain restrictive monetary stances. Geopolitical tensions and recession fears accelerate gold accumulation by institutional investors seeking stability.

The USD factor cannot be overlooked—since gold trades in dollars globally, currency strength directly impacts purchasing power across different regions. A depreciating dollar environment typically supports higher gold prices, while dollar strength can create headwinds for the metal.

Emerging Markets and Gold Reserves

The strategic importance of gold reserves extends beyond advanced economies. Countries like Pakistan, alongside China and India, recognize gold as a cornerstone of foreign exchange management and financial independence. As emerging markets increase their reserve diversification away from dollar-denominated assets, gold accumulation represents both a defensive strategy and a statement of economic self-determination.

This structural shift in global reserve management suggests that gold’s role as a store of value—a function it has served for millennia—remains as relevant today as ever.