Although the inverse relationship between currencies and gold prices has been seen to be changing in recent years, gold and silver are still considered among the most important investment instruments in the face of global economic uncertainties.
Precious metals continue to be investors' choice as a hedging asset when inflationary pressures and currency instability are increasing.
According to the Chairman of the Shariah Advisory Council of the Securities Commission of Malaysia, Prof Datuk Dr Aznan Hasan, gold ownership plays an important role in stabilizing financial positions, especially when currencies experience depreciation due to inflation. He explained that the value of currencies usually declines when inflation increases, but gold tends to maintain or increase its value during such periods.
The relationship between gold and currencies is also seen to be still relevant when the price of gold usually increases when currencies weaken. However, he reminded that investors cannot assume that the relationship is absolute because gold movements are still influenced by global demand factors, market sentiment and current economic trends.
At the same time, gold has not yet been categorised as a High Quality Liquid Asset (HQLA) instrument under the Basel standards, thus limiting its use in aspects of financial institutions' liquidity control such as Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
Despite this, demand for gold from global central banks has continued to show a significant increase over the past few years.
Bank Muamalat Malaysia Bhd Chief Economist, Dr Mohd Afzanizam Abdul Rashid said gold purchases by global central banks continued to grow even though the global financial system was no longer fully dependent on gold.
As of February 2026, global central banks were reported to have purchased 31 tonnes of gold, while the People's Bank of China continued to purchase gold for the 16th consecutive month, bringing the country's gold reserves to 2,308 tonnes.
He said global geopolitical changes and efforts to reduce dependence on the US dollar were seen as among the main factors increasing interest in gold as a strategic reserve asset.
An increasingly multipolar world is expected to change the landscape of the global financial system, including the use of currencies and supporting assets in international trade.
In addition, the development of financial technologies such as blockchain and stablecoins has also opened up new potential for the integration of gold into modern payment systems. Precious metals such as gold, silver, platinum and palladium are seen as having the potential to become part of the digital financial ecosystem in the future.
In the domestic context, the development of the Ar-Rahnu industry has also supported demand for gold, especially among micro, small and medium enterprises (MSMEs) that need access to working capital financing.
This situation indirectly increases the need for the development of the gold mining, processing and downstream industries to ensure that the supply of the precious metal remains sufficient in the local market.
