Central Banks Turn to Local Mines for Gold as Prices Surge

Global — As gold prices surge past $3,300 an ounce, central banks around the world are increasingly sourcing gold directly from domestic mines to build up their reserves. The move is aimed at cutting costs, supporting local industries, and reducing reliance on U.S. dollars during volatile times.

According to the World Gold Council (WGC), nearly 53% of central banks with access to local gold production now buy directly from artisanal and small-scale miners (ASGM) using local currency, a sharp rise from 25% last year.

“You’re able to grow your reserves using local currency and therefore not sacrifice another reserve asset,” said Shaokai Fan, WGC’s Global Head of Central Banks.

Countries Leading the Trend

Among the most active participants are Colombia, Tanzania, Ghana, Zambia, Mongolia, and the Philippines. In Ghana, authorities now require miners to sell 20% of their gold output to the state. Tanzania has implemented similar mandates since late 2024.

These purchases often come at a discount to international prices, and help avoid shipping, banking, and intermediary fees tied to traditional markets like London, where gold is traded in high-purity LGD bars.

“It’s cheaper and supports domestic employment while strengthening monetary buffers,” said Adrian Ash of BullionVault.

The Economic and Strategic Case

• Gold Prices: Up 27% year-to-date, currently at $3,328.3/oz

• Savings: Reduced costs for storage, shipping, and forex exchange

• Flexibility: Avoids draining USD reserves

• Support: Boosts formalization of small-scale mining

However, countries without LGD-certified refining capabilities still need to export gold for processing, which can reduce net savings. The Philippines and Kazakhstan have in-country LGD refiners, but others like Ghana depend on external refiners.

Risks and Reputational Concerns

Experts warn that sourcing from artisanal mines poses challenges, including environmental impact, poor labor conditions, and risk of illegal mining. Yet, by becoming institutional buyers, central banks can improve traceability and help legitimize the sector.

“Having a credible buyer like the central bank provides miners a legal, fair outlet to sell gold,” Fan added.

With geopolitical tensions, global debt levels, and currency volatility rising, gold remains a favored reserve asset. Nearly 95% of central banks surveyed by WGC expect peers to continue increasing gold reserves over the next year, and local sourcing may become a dominant strategy moving forward.