In Ethiopia today, gold tells a story that no statistic alone could capture. It is at once a measure of wealth, a hedge against uncertainty, and a mirror reflecting the economy’s most pressing vulnerabilities. Over the past two years, the domestic price of gold has surged more than fourfold in birr terms, far outpacing the rise of property, foreign currency, or other traditional stores of value. What might appear as a commodity boom is, in fact, a window into the structural pressures shaping the country’s financial and macroeconomic landscape.
Globally, gold has reached record highs in 2025, trading above USD 4,000 per troy ounce (roughly 19,800 birr per gram) by October, with forecasts pointing toward USD 5,000. Investor demand has been fueled by geopolitical tensions, persistent inflationary pressures, and concerns over asset bubbles in emerging technologies. Expectations of U.S. Federal Reserve interest rate adjustments, combined with broader concerns about currency stability, have further reinforced gold’s role as a safe-haven asset. Central banks and exchange-traded funds (ETFs) have played a pivotal role in this trend, making gold one of the year’s most resilient assets.
In Ethiopia, these global dynamics intersect with domestic factors to produce extraordinary local outcomes. The National Bank of Ethiopia (NBE) sets official gold purchase rates to support exports, strengthen foreign reserves, and reduce smuggling.
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As of late November 2025, 24-karat gold traded around 28,000 birr per gram at jewelry shops—more than four times higher than at the start of 2024. The rapid depreciation of the birr, now roughly 150 per USD, and ongoing inflationary pressures further magnify the cost for domestic consumers. Urban retail premiums push prices even higher, reflecting supply-chain costs, taxes, and persistent cultural demand for gold in investment and ceremonial contexts.
Economic theory provides insight into these trends. Gold functions simultaneously as a commodity and a monetary asset. When confidence in the domestic currency wanes, households and investors turn to gold to preserve wealth—a phenomenon consistent with classical liquidity-preference theory. From a Minskyan perspective, this behavior illustrates systemic financial fragility: currency depreciation and inflation create self-reinforcing cycles of asset hoarding, which can exacerbate instability in domestic markets.
Ethiopia’s gold sector also illustrates the “paradox of abundance.” Despite record production, which has elevated gold above coffee as the country’s leading foreign-exchange earner, local prices remain high. Smuggling and regional conflicts in gold-rich areas constrain formal supply, while NBE policies that incentivize legal sales can inadvertently increase retail prices. Gold thus becomes both an engine of macroeconomic resilience and a potential barrier to broad-based economic inclusion.
The broader economic implications are significant. Heavy reliance on gold as a store of wealth can divert investment from productive sectors, concentrate wealth, and weaken financial intermediation if households increasingly favor physical gold over deposits in formal institutions. While export revenues strengthen reserves, they cannot fully counterbalance pressures from currency depreciation, inflation, and informal markets.
Ethiopia’s experience underscores the double-edged nature of gold in emerging economies. It provides a critical hedge against uncertainty, strengthens reserves, and supports fiscal stability. Yet it also highlights vulnerabilities in financial infrastructure and the potential social costs of high asset prices. Policymakers face the challenge of maximizing the benefits of gold while mitigating the risks it poses to equitable growth and financial inclusion.
The high value of gold in Ethiopia reflects more than market dynamics; it is a mirror of structural pressures, currency volatility, and the need for robust macroeconomic management. For emerging-market economies, gold is both a safeguard and a signal—a barometer of confidence, resilience, and the structural health of the economy.
Samson Berhane is an economics graduate with expertise in business and economic reporting and communications. He can be reached at [email protected]. The views expressed in this article are his own and do not represent the opinions of the institutions he is affiliated with nor that of the magazine.
