Uganda’s largest export, gold, has this year hit an all-time high, peaking at US$4,379 an ounce in October 2025.
This worldwide gold rush is attributed to an increase in central banks’ purchases of the metal. According to the World Gold Council, gold purchases have gone up by over 104 per cent in the last three years.
The surge in the price of the precious metal took off when President Trump slapped a 100 per cent tariff on China, starting a trade war. In retaliation, China, well aware that the US dollar is indirectly pegged to gold at $35 an ounce, embarked on a campaign to drive up the price of the metal.
One way to collapse the greenback is by driving the price of gold up. Gold and the US dollar have an inverse relationship; when one goes up, the other drops. To Uganda, the yellow metal brought in its highest revenue ever, in the financial year 2024/25, raking in $4.2 billion, as attested by the Bank of Uganda [BoU].
What should be celebrated as a blessing for the local economy is turning into a curse because Uganda doesn’t have the necessary structures to stockpile gold. In the central bank’s annual report released in October 2025, the document reads: “In the coming year, the Bank plans to start gold purchases to diversify reserves.”
This same position was taken by BoU in 2024 when it revived its gold purchase program. The central bank hasn’t stored up any gold yet, pushing the initiative to the coming year.
Nonetheless, Uganda has exported 160,617 kilograms of gold in the last five years, as recorded by the central bank. Traditionally, gold is a major component of a country’s foreign exchange reserves, because it helps stabilise currencies.
It also reduces overdependence on the US dollar, which is losing its global trade appeal. Gold boosts investor confidence in the economy because it is a legitimate backup in times of uncertainty, seeing as it’s easily converted into cash.
Without a gold reserve, Uganda is exposed to enormous risk whose shock value would have devastating effects on the whole economy. Predominantly, Uganda’s international reserves are made up of the US dollar collected from remittances, coffee receipts and offshore investments.
According to BoU, Uganda’s reserves rose from $3.2 billion — 3.1 months of import cover, to $4.2 billion — 3.9 months of import cover in the previous year. Although the reserve’s expansion is commendable, its being dominated by the US dollar is risky.
This year alone, the US Federal Reserve has moved from the dollar to gold as its top reserve asset. Gold was the US top reserve asset in the 1940s. Even the world’s largest economy’s confidence in their own currency is waning.
In the past year alone, the US dollar has dropped in value against the Uganda shilling by 3.4 per cent. In theory, this scenario is meant to favour Uganda by reason of goods from the US becoming slightly cheaper.
However, Uganda’s imports from the US in the last decade total up to $ 1.2 billion, making the gains negligible. Instead, the economy is exposed to inflation because of the reduced purchasing power of the reserves and overall economic instability.
When accompanied by an increase in money supply from the ongoing highly monetized election, tight monetary policy control measures are bound to be activated. This leads to increased local borrowing rates, a slower economy, and a large public debt: it is more costly for the government to borrow domestically than it is to get a foreign loan.
So long as the country earns less from its exports than it spends on imports, a trade deficit is created. This distorts the real state of the economy. A robust gold reserve not only boosts the economy, but offers investors an interest-free option to invest in.
Additionally, the absence of a gold reserve strips the country of a fund that would cover budget deficits in case of economic hardships because gold is very liquid.
In an attempt to enhance their reserves, African countries — South Africa, Egypt, Morocco and Ghana have restocked their foreign reserves with gold to stabilise their currencies and avert inflation.
When contacted to comment on the unusually large portion of the US dollar in the country’s international reserves; and the absence of a gold reserve, BoU’s governor, Micheal Atingi Ego had this to say: “Thank you for recognizing the Central Bank’s efforts in building foreign exchange reserves, which indeed remain largely in the United States Dollar, reflecting both the currency profile of Uganda’s external obligations and the dominant role of the U.S. Dollar in global trade and settlement.
“This notwithstanding, we are mindful of the concentration risk associated with holding predominantly hard currency reserves, particularly in the US Dollar”. “Since January 2024, we have been working closely with the Ministry of Energy and Mineral Development on piloting a Domestic Gold Purchase Program to support diversification and further strengthen the reserve position.
“Cabinet recently approved this initiative, and we are now in the advanced preparatory stages before commencing purchases. The program will be anchored on a clear operational framework and a gold traceability mechanism aligned with standards from the International Conference on the Great Lakes Region (ICGLR).”
“Regarding inflation risks during the election period, our recent Monetary Policy Statement acknowledged various pressures and therefore maintained the Central Bank Rate at 9.75 per cent. The Bank of Uganda will continue to prioritize price stability and deploy the appropriate monetary policy tools to ensure inflation remains within target”.
As global confidence in paper money goes down because of its increased supply, uncertainty and bad government policies, the value of precious metals — like Gold will continue to rise.
For that reason, countries the world over have embarked on a gold piling exercise. In spite of the dollar rising in value in recent weeks against the shilling, [owing to gold overtaking the US treasuries as the central bank’s top reserve asset], this gain will not last long.
Mainly because of the uncertainty surrounding President Trump’s trade policies and threat to sack Jerome Powell, the Fed chairman. This unpredictability makes the dollar less attractive to foreign investors, and prospective trade partners.
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