UAE Gold Reserves Surge As Global Uncertainty Fuels Bullish Outlook

The Central Bank of the UAE (CBUAE) has significantly expanded its gold holdings, underscoring the precious metal's growing strategic importance in the nation's financial reserves at a time of global economic uncertainty.

According to the regulator's latest statistical bulletin, the UAE's gold reserves rose 25.9 per cent in the first five months of 2025 to Dh28.93 billion ($7.9 billion). On a monthly basis, the central bank reported a modest 0.49 per cent increase in May, with holdings climbing to Dh28.79 billion compared to Dh28.65 billion at the end of April. The consistent accumulation highlights the regulator's strategy of diversifying assets away from traditional reserve holdings such as the US dollar.

Economists are of the view that the central bank's stronger gold holdings offer both financial stability and strategic security for the second-largest Arab economy. Gold's status as a hedge against inflation and currency volatility makes it a vital component of reserves in an era where monetary policy paths remain uncertain and geopolitical frictions persist.

As the global economy faces shifting currents - from slowing growth in advanced markets to intensifying debates over fiscal sustainability - the UAE's decision to steadily build its gold stockpile strengthens its resilience, they said.“Combined with the broader momentum of its banking sector, the country is positioning itself to navigate global turbulence while reinforcing investor confidence in its financial system.”

The CBUAE's increase in gold reserves has taken place against a backdrop of robust growth across the UAE banking sector. Demand deposits surged past Dh1.16 trillion by the end of May, up from Dh1.10 trillion in December 2024. Of this, Dh892.57 billion was denominated in local currency, while Dh274.33 billion was in foreign currencies.

Savings deposits also recorded sharp growth, climbing to Dh359.57 billion from Dh317.48 billion over the same period. Time deposits crossed the Dh1 trillion milestone for the first time, with Dh614.85 billion in local currency and Dh398.35 billion in foreign currencies.

This expansion helped propel total banking sector assets, including bankers' acceptances, to Dh4.75 trillion in April, a 0.6 per cent increase. The rise was largely driven by resilient credit demand and an inflow of non-resident deposits, further strengthening the UAE's position as a regional banking hub.

Across the Gulf, banking performance has been mixed. Kuwait recorded a 6.7 per cent year-on-year rise in total assets to 93.5 billion dinars ($303 billion) in March, while Saudi Arabia's assets jumped 7.4 per cent to SR5.3 trillion ($1.41 trillion) in April. Qatar, however, registered a marginal monthly decline of 0.1 per cent in total assets to 2.07 trillion riyals ($559 billion), reflecting weaker domestic demand.

The UAE's steady growth trajectory, coupled with its strengthening gold reserves, reinforces the country's reputation as one of the most resilient financial centres in the region.

Globally, gold remains firmly in the spotlight as investors seek shelter from volatile economic conditions. Spot gold ended the week at $3,371.23 per ounce, up 1 per cent, after Federal Reserve Chair Jerome Powell signalled the possibility of rate cuts next month. Powell noted that while inflation remains a concern, weakening economic activity and rising unemployment could warrant monetary easing.“...With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said during the Fed's annual central bank symposium.

Analysts believe his comments open the door to easing in September, though not necessarily to a sustained series of rate cuts. The CME FedWatch Tool indicates markets are pricing in the possibility of two cuts before year-end.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, said Powell's tone suggested the Fed recognises interest rates may currently be“a little too high,” even as risks of inflation linger. Others, like Jeffrey Roach, chief economist at LPL Financial, argue that beyond September, structural uncertainties could limit further cuts.

While gold's near-term support has strengthened, the market remains range-bound. Philip Streible, Chief Market Strategist at Blue Line Futures, expects recalibration following Powell's remarks but cautions against an imminent breakout. FxPro's chief analyst Alex Kuptsikevich added that the precious metal is still trading in a consolidation phase, warning that both downside and upside risks remain large.

Capitalight Research's Chantelle Schieven noted that while gold remains well supported, its upside could be limited as markets have already priced in September's rate cut. Commerzbank analysts echoed this view, highlighting that higher prices tend to soften retail demand.

Adding momentum to the bullish narrative, UBS has raised its gold price forecast by $100 to $3,600 per ounce for March 2026 and by $200 to $3,700 per ounce for June 2026. The bank also set a September 2026 target at $3,700, citing fiscal sustainability concerns in the US, questions about Federal Reserve independence, and broader geopolitical risks that are eroding the dollar's dominance.

UBS expects exchange-traded fund inflows to reach around 600 tonnes in 2025, up sharply from its previous forecast of 450 tonnes, marking the strongest demand since 2010. The bank also projects global gold demand to rise 3 per cent to 4,760 tonnes in 2025, the highest since 2011, while central bank purchases are expected to remain elevated, albeit slightly below last year's record levels.

MENAFN24082025000049011007ID1109968673