The Central Bank of Kenya (CBK) is joining other central banks across the world in the scramble for gold to diversify away from the dollar.
This marks a new reserve strategy for the regulator that has generally been conservative when it comes to accumulating the precious metal in the age of currency volatility and geopolitical uncertainty.
Gold is now up more than 50 percent this year, to a record $4,300 (Sh555,400) a troy ounce, marking the best year since 1979, partly as investors worried about inflation and soaring debt levels pile into the precious metal.
What is the current status of CBK’s gold holdings?
CBK data shows the value of gold holdings surged by 40.8 percent to Sh238 million in the financial year ended June 2025 from Sh169 million the previous year, marking one of the largest percentage increases in recent years.
Between June 2024 and June 2025, the price of gold jumped from about $1,950 (about Sh251,900) a troy ounce to $3,700 (about Sh478,000), meaning that part of the rise in CBK holdings was due to the appreciation in price.
Currently, the share of gold in Kenya’s $12.07 billion (Sh1.559 trillion) reserves is way under one percent, leaving most of the holdings in traditional assets such as the US dollar.
Why is CBK suddenly talking about gold?
The CBK’s interest in gold stems from the need to diversify its reserves. For decades, the CBK— like most African central banks—has held the bulk of its reserves in foreign currencies, especially the US dollar.
However, the persistent global dollar strength, easing interest rates, and the rising global uncertainty have made CBK start thinking about assets that can better preserve value during turbulence.
CBK Governor Kamau Thugge recently said the CBK is “actively considering” adding gold to its reserves as part of a long-term risk management strategy.
The move would make Kenya part of a global club of central banks seeking to reduce their dependence on the dollar. The move also reflects lessons from recent volatility in Kenya’s foreign exchange market. For instance, the shilling shed about a quarter of its value against the dollar in 2023, leaving the country with little flexibility due to the heavy reliance on US dollar reserves.
Gold, which historically performs well during periods of inflation and currency weakness, offers a hedge which CBK wants to ride on.
How might Kenya’s gold strategy compare with other African countries?
Several African central banks have already made similar moves. Ghana, for example, launched a domestic “Gold for Oil” programme in 2022, using locally mined gold to pay for fuel imports.
However, the Bank of Ghana terminated the Gold for Oil programme in March 2025, citing severe financial losses in the programme.
The Bank of Tanzania has also been gradually building its gold reserves, citing diversification and inflation-hedging benefits.
Therefore, Kenya’s move to acquire gold would mark a symbolic entry into the club of African economies redefining their reserve strategies.
What is driving the global gold buying binge among central banks?
Kenya’s interest comes amid a global resurgence in official gold purchases. Across the world, central banks have been on their biggest gold-buying spree in over half a century.
The World Gold Council reported that in 2023 and 2024, central banks collectively added more than 1,000 tonnes of gold each year to their reserves—the highest levels since records began. Countries such as China, India, Turkey, Poland and Singapore have been buying, driven by a shared desire to diversify away from the dollar-dominated financial system.
Geopolitical events have laid a solid foundation for gold to become prominent in the reserve portfolios of central banks, and as a way to settle payments for some countries, according to the Official Monetary and Financial Institutions Forum— an independent think tank for central banking, economic policy and public investment.
For emerging economies, gold provides protection against inflation and exchange-rate volatility.
The Central Bank of Kenya’s move, therefore, aligns it with peers who see gold as an insurance policy in uncertain times.
What does it mean for Kenya’s economy and its monetary policy?
Adding gold to its reserves would strengthen the CBK’s balance sheet by providing a more diversified asset base. In times of dollar scarcity or exchange-rate pressure, gold could serve as a store of value, supporting Kenya’s external position.
A diversified reserve portfolio could also improve Kenya’s market confidence and attract more stable foreign capital. This is because gold reserves can act as a psychological anchor for markets, especially when currency weakness or debt-servicing pressures rise.
Gold is seen as neutral reserve asset since it carries no counterparty risk. It is not subject to sanctions, unlike dollar- or euro-denominated assets. In a fractured world economy, where sanctions and trade restrictions are reshaping global finance, gold has become a symbol of autonomy.
What are the risks of Kenya joining gold-buying trend?
CBK has to be cautious not to accumulate too much and take a hit should there be a big tumble in the price of the precious metal. If CBK buys during a price peak and the market corrects, the value of its reserves could fall.
Also, storing and insuring gold, domestically or abroad, presents new expenses. Kenya has limited domestic gold storage capacity and will have to engage the likes of the Bank of England about potentially storing future gold holdings overseas.
This introduces storage costs which must be balanced against the gains of holding this precious metal.
Finally, CBK’s core mandate is to maintain price and financial stability. Therefore, overemphasis on gold at the expense of foreign currency reserves could limit CBK’s flexibility in defending the shilling or paying for critical imports.
