The State Bank of Pakistan (SBP) needs to urgently reassess its foreign reserves strategy by increasing gold holdings as global geopolitical tensions are casting doubt over the long-term stability of the US dollar.
A Dubai-based commodities broker told ProPakistani that SBP should prepare a contingency plan in case a prolonged war in the Gulf region weakens confidence in the dollar-dominated global financial system.
SBP could strengthen Pakistan’s financial security by gradually converting a portion of its dollar reserves into gold before the US economy starts crashing, he said.
Under the SBP Act, 1956, Section 17 authorizes SBP to buy and sell gold coins, gold bullion, and silver bullion, either personally or as a government agent. While gold purchases are fully legal, SBP maintains larger dollar reserves for the International Monetary Fund’s (IMF) liquidity requirements, as gold-heavy reserves reduce short-term usability.
So yes, the bank can increase gold holdings without violating IMF rules or any law.
As of February 2026, SBP holds slightly over $10.3 billion worth of gold reserves. Since the start of fiscal year 2025-26, the central bank has increased its gold holdings by nearly $3.5 billion. In total, Pakistan possesses 64.76 tons of gold, equivalent to approximately 2.082 million ounces or 5.552 million tolas.
The broker explained that central banks worldwide have significantly accelerated gold purchases in recent years. Global central bank buying has exceeded 1,000 tons annually for three consecutive years.
The expert noted that escalating tensions between the United States and Iran have triggered heavy fiscal spending by Washington on military deployments across the Middle East. He warned that Trump’s excessive wartime spending and monetary expansion could place long-term pressure on the US dollar, “or simply kill it”.
Meanwhile, US forces have increased troop deployments and logistical movements through bases located in Saudi Arabia, Bahrain and Jordan. A defense analyst claimed that any prolonged escalation in the Gulf could disrupt global trade routes, energy markets, and financial stability.
Military observers on X mostly say Iran’s forces have spent decades preparing defensive strategies across mountainous terrain and strategic waterways, including the Strait of Hormuz.
Its difficult terrain and asymmetric warfare risks could complicate any potential ground operation by the US military.
Therefore, countries exposed to global energy and currency shocks may increasingly turn toward gold as a hedge against economic instability. Some X posters believe Pakistan could consider gradually diversifying 80 percent of its foreign reserves into gold to reduce dependence on the dollar.
However, it cannot be ignored that reserve management decisions involve complex monetary considerations, including liquidity needs, trade settlements, and international financial obligations. SBP may therefore have strategic reasons for maintaining its current reserve composition in US Dollars.
Whether Pakistan accelerates gold accumulation remains uncertain, but rising geopolitical tensions are already pushing global reserve strategies towards pro-gold decisions for most economies.
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