Egypt’s foreign exchange reserves have undergone a significant shift over the past year, with gold’s share rising to unprecedented levels. Gold accounted for 40.8 per cent of total reserves in February this year, up from 24 per cent in January last year.
According to Central Bank of Egypt (CBE) data, the overall reserves currently stand at $52.7 billion.
The surge does not only reflect an accounting change in asset allocation but also signals a strategic change in reserve management in response to profound shifts in the global economic and political landscape, said Walid Gaballah, a member of the Egyptian Society for Political Economy, Statistics, and Legislation.
Speaking to Al-Ahram Weekly, Gaballah said that the CBE “along with other central banks around the world began increasing the pace of gold purchases during the Covid-19 pandemic, when the United States moved to inject exceptional stimulus into its domestic economy by making more dollars available.”
“It was expected that this would trigger an inflationary wave, and this pushed global central banks, including Egypt’s, towards gold.”
He explained that during the pandemic the United States had adopted unprecedented expansionary policies, including printing massive amounts of dollars and distributing direct financial support to households to avoid a deep recession.
While these measures helped shield the US economy in the short term, they contributed to the highest inflationary wave in decades. The surge in prices weakened the purchasing power of the dollar, not only domestically but globally, prompting investors and central banks to boost their gold holdings as a hedge against currency depreciation.
A significant portion of the increase in Egypt’s gold reserves is attributable to the sharp rise in global gold prices, with the precious metal climbing by around 67 per cent over the past 12 months.
This surge boosted the dollar value of the CBE’s existing holdings.
However, the price effect is not the sole driver of the higher ratio. During the same period, Egypt increased its actual gold reserves by approximately 65,291 ounces, equivalent to more than two tons of gold, reflecting a deliberate decision to expand physical holdings of the yellow metal rather than merely benefiting from price appreciation.
Gaballah noted that since the outbreak of the war in Ukraine and the imposition of sweeping financial sanctions by the United States and its allies on Russia, including the freezing of its foreign assets, many countries have reassessed their level of dependence on the dollar and the Western financial system.
China, for example, has intensified its gold purchases in recent years and relatively reduced its exposure to US debt instruments in an effort to mitigate the risks associated with holding dollar-denominated assets.
The US’ use of its currency as a way of putting pressure on other countries or even economically punishing them has brought the issue of the risks associated with dollar-denominated reserves back to the forefront.
When the world’s leading reserve currency becomes an instrument in geopolitical conflicts, countries tend to seek assets that are not subject to direct political control, with gold at the top of the list.
It is a tangible asset, not tied to another party’s liabilities, and it cannot be frozen by an external political decision if stored within national borders, according to Gaballah.
Mounting US debt adds another layer of concern. With US debt surpassing historic levels and approaching $39 trillion, questions are growing about the long-term sustainability of US public finances.
Although the dollar remains the world’s primary reserve currency, increasing talk of “de-dollarisation” and the desire of major powers such as China and Russia to reduce US currency dominance reflect a gradual transformation of the structure of the international financial system.
In this context, gold is reclaiming its traditional role as a safe haven. As conflicts intensify across various regions from Eastern Europe to the Middle East, and tensions among the major powers persist, the appeal of the yellow metal as a hedge against risks has strengthened.
But this should be within limits, according to Alia Al‑Mahdi, professor of economics and former dean of the Faculty of Economics and Political Science at Cairo University. Al-Mahdi believes that the CBE should maintain the current share of gold in its reserves without increases aimed at hedging against the current geopolitical risks.
Speaking to Al-Ahram Weekly, Al-Mahdi warned that increasing the share of gold could expose the reserves to fluctuations in gold prices, particularly as the metal is likely to decline in value once current geopolitical tensions ease.
She added that the ongoing tensions do not necessarily mean further increases in gold purchases.
Al-Mahdi noted that the CBE could diversify its reserve portfolio into other relatively stable currencies, including the Japanese yen and the Swiss franc, stressing that excessive exposure to any single component could subject the reserves to price volatility, especially given the CBE’s need for liquidity to meet various requirements.
Gold’s importance is also rising amid uncertainty surrounding US policies, particularly with the renewed rhetoric of trade protectionism and tariffs. Volatile policies, whether in trade or even in relations with European allies, raise concerns about the future of the global economic order established after World War II.
As the world moves closer to a multipolar system, with competing economic and political blocs led by the United States and the West on one side and China and Russia on the other, reserve management is becoming as much a matter of national security as of finance.
“For Egypt, increasing the share of gold in the reserves does not mean abandoning the dollar or other assets, but rather reflects a move towards more balanced diversification,” Gaballah said.
“Foreign reserves primarily aim to support local currency stability, meet external obligations, and enhance investor confidence. A higher proportion of gold provides an additional layer of security, especially during periods of exchange rate volatility or financial market turbulence.”
In sum, the rise in gold’s share of Egypt’s foreign reserves reflects a combination of factors includes soaring global prices, increased physical acquisitions, deep geopolitical shifts, concerns over inflation and US debt, and a global desire to hedge against the volatility of a rapidly changing financial system.
While the dollar remains a central player in the global economy, gold appears to be gradually reclaiming its status as a cornerstone in reserve-management strategies in Egypt and beyond.
* A version of this article appears in print in the 12 March, 2026 edition of Al-Ahram Weekly
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