African nations are rushing to build their gold reserves to hedge against geopolitical tensions that have battered their currencies and fanned inflation. Nations from South Sudan, Zimbabwe and Nigeria have either taken steps to shore up their holdings or are considering doing so. The move follows that of central banks in places such as China and India that have accumulated gold to diversify reserves and reduce dependency on the US dollar. About 20 central banks are expected to stock up in the coming year, according to a World Gold Council survey.

“As a diversification strategy, that makes some sense,” said Charlie Robertson, head of macro strategy at FIM Partners. “While gold does not pay interest, unlike reserves held in US treasuries, this hasn’t mattered because the gold price has risen so much. It’s been a profitable trade.” The price of bullion has rallied 16% this year to $2,396.59 an ounce on Monday.

African nations were among the worst affected by the supply-chain disruptions caused by the coronavirus pandemic and the war in Ukraine and a steep increase in global interest rates that led to a selloff in their currencies and stoked inflation. Geopolitical tensions are again simmering with the conflict in Gaza, trade wars and concerns over what a second term for Donald Trump as US president might bring.

South Sudan’s central bank Governor James Alic Garang reiterated over the weekend that the nation plans to expand its reserve base by adding other resources such as gold. “We are in the stage of preparing policy documents and studying examples of other countries and lessons drawn,” he said.

The Bank of Uganda plans direct bullion purchases from artisanal miners to mitigate “the declining foreign-currency reserves and address the associated risks in the international financial markets.” Its foreign-exchange reserves have been hit by capital flight following anti-LGBTQ legislation that prompted the World Bank in August to halt new financing to the East African nation.

Nigerian lawmakers are also proposing that the central bank use gold to support and stabilize the naira and moderate inflation risks. The currency in Africa’s most populous nation is the worst performing against the dollar globally this year after the Lebanese pound, partly due to devaluations aimed at creating a free-floating naira.

Last year, the Central Bank of Madagascar made a move toward domestic gold purchases as income from vanilla exports declined. In June, Tanzania said it will spend $400 million on six tons of the metal.

Zimbabwe — which first flirted with gold coins in 2022 — launched a bullion-backed currency in early April to help curb an inflation spiral and exchange-rate volatility.

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Zimbabwe Gold, or ZiG, is backed by 2.5 tons of gold. It is the nation’s sixth attempt at having a functioning local currency in 15 years, replacing the Zimbabwean dollar that lost 80% of its value against the greenback in 2024.

Governor John Mushayavanhu plans to ramp up reserves to over three tons this year and has stopped issuing gold coins, instead redirecting the bullion to the nation’s vaults.

Over the past two years, the World Gold Council has collaborated with central banks to structure domestic purchase programs from small-scale miners, Shaokai Fan, global head of central banks at the industry group, said in an emailed response to questions.

“Central banks can add gold to their official reserves using their local currency, allowing them to grow reserve assets without having to sacrifice other hard-currency reserves,” he said.

Still, the gold rush doesn’t signal expectations that bullion will become a “liquid substitute” for dollars, said Hasnain Malik, emerging market equity strategist at Tellimer in Dubai. “However, for countries taking a view that either the price of gold is going to go up, the price of the US dollar is going to go down, or their access to US dollars may be compromised by sanctions then increasing the allocation of gold in their reserves might make sense.”