Gold prices have surged to historic highs in 2025, surpassing $3,500 per ounce, a milestone that defies conventional market trends.
Traditionally, gold performs inversely to interest rates, rising when rates fall, but the precious metal continues to rally even as major central banks, particularly the U.S. Federal Reserve, have yet to implement rate cuts this year.
According to financial experts speaking at the Comercio Partners H2 Economic Outlook Forum in Lagos, the ongoing gold rally stems from geopolitical tension, robust central bank purchases, and inflationary concerns, underscoring gold’s enduring appeal as a safe-haven asset.
“Buying more gold is always good. It remains one of the safest and most reliable stores of value,” said Professor Joseph Nnanna, Chief Economist at the Development Bank of Nigeria.
Gold’s Role in Economic Growth and Industrialisation
Professor Nnanna highlighted gold’s broader value beyond investment returns, emphasizing its potential to drive industrial growth in emerging economies.
“When central banks source gold domestically, it stimulates the entire mining value chain, from raw extraction to refining and jewellery manufacturing. That catalyzes industrialisation,” he explained.
He added that central banks are increasingly seeking diversification across varied asset classes, including cryptocurrencies and stablecoins, to hedge against currency volatility and future shocks.
Currency Diversification and Risk Mitigation
Referencing the Central Bank of Nigeria’s asset profile, Prof. Nnanna noted the presence of reserve currencies like the Chinese renminbi and the U.S. dollar, alongside gold holdings.
However, he cautioned against overreliance on fiat currencies.
“The dollar has depreciated in recent months, while gold continues to appreciate. Diversifying reserve assets is not just prudent, it’s imperative.”
He explained that economic shocks, whether internal or external, affect multiple sectors, and maintaining a balanced asset portfolio is vital for long-term stability.
Geopolitical Tensions Push Central Banks Toward Gold
Zeal Akaraiwe, CEO of Graeme Blaque Advisory, echoed this sentiment, attributing the recent acceleration in gold buying to geopolitical risks, particularly those stemming from U.S. policy actions.
“Our ability to settle international transactions is increasingly influenced by political decisions made in America. This vulnerability is pushing countries to seek alternatives with gold being a leading option,” Akaraiwe remarked.
He emphasized that gold’s rise reflects a strategic shift away from dollar dominance, with central banks globally choosing to de-dollarise their reserves amidst global uncertainty.
What You Should Know
- Both experts agreed that diversification is now a core pillar of central bank strategy rather than a theoretical concept.
- They urged the Central Bank of Nigeria (CBN) to expand its reserve management strategy to incorporate modern assets and prepare for emerging digital and decentralized financial systems.
