A lesson in the hidden costs of resource nationalism.
For a small-scale gold miner in Uganda, the question of where to sell has just been answered for him. Gold has surpassed coffee as Uganda’s largest export, and as of last month, the country’s central bank is positioning itself as the dominant legal buyer for nearly all of it.
Late in April, the Bank of Uganda launched a three-year gold-buying program that registers it as a gold dealer purchasing directly from licensed Ugandan miners through contracts with two refiners. Settlement happens in Uganda shillings at international gold prices, with a target of 7 to 10 metric tons per year and an initial 100-kilogram purchase worth roughly $160 million. A separate Ministry of Energy notice, issued in December 2025, banned all unlicensed gold trading inside Uganda. Licensed private exporters technically remain in the market, but in practice the central bank’s procurement pipeline now sits at the front of the queue.
Uganda’s stated goals are familiar: build foreign reserves, diversify away from fiat currency, develop domestic refining capacity, formalize artisanal mining, and reduce illicit trade. But concentrating so much purchasing power in a single state buyer carries costs that work against every one of those goals. The program is more likely to expand smuggling, alienate foreign investment, distort price signals across the global gold market, and transfer value from Ugandan producers to the Ugandan state.
The program fits a wider pattern. The Bank of Tanzania ordered miners and dealers in October 2024 to sell 20% of output to government at market prices in exchange for lower royalty rates. Ghana went further with the Gold Board Act, 2025, making GoldBod the only legal buyer and exporter of small-scale gold from May 2025 and adding 39.4 metric tons to formal export channels in nine months.
The pattern extends beyond Africa. The People’s Bank of China has bought gold for thirteen straight months and is reducing its US Treasury holdings in parallel. The Bank of Russia restarted domestic gold buying in March 2022 after Western jurisdictions froze its dollar reserves. The motivation in each case is straightforward. The $300 billion freeze of Bank of Russia reserves demonstrated how quickly sovereign assets denominated in dollars or euros can be cut off, and physical gold offers a way out of that exposure. Sustained official buying has been a contributing factor in the recent run-up in gold prices.
Uganda’s approach goes a step beyond passive accumulation. The Bank of Uganda has positioned itself as the dominant buyer for new production, while the December 2025 rule narrows the pool of allowed sellers further. The right to sell freely shifts from miners and refiners to the central bank, with predictable consequences.
The first external effect is more smuggling, not less. Small-scale miners produce roughly 90% of Uganda’s domestic gold. A government buyer paying in shillings cannot match the prices on offer in informal cross-border markets. SwissAid estimates that 321 to 474 metric tons of African artisanal gold leaves the continent undeclared each year, and Ugandan officials estimate 2 trillion (UGX) in smuggling losses for 2024 alone. Most of the displaced supply will move toward Kenya, Rwanda, Burundi, the DRC, and South Sudan before making its way to the UAE for processing.
The second effect is sanctions evasion. Gold held by a state is easier to trade outside the dollar system than gold held by private firms. The UAE imported 66 metric tons of Russian gold in 2024, and Dubai is a key conduit for illicit flows from Sudan and the Democratic Republic of Congo. The US Treasury’s January 2025 sanctions on the Sudanese Rapid Support Forces gold network show how undeclared African gold already settles trade outside the dollar, and enforcement options for gold are far weaker than the tools available within the fiat currency system.
The third effect is pressure on global price discovery. The world’s headline gold prices come from London (LBMA) and New York (COMEX), where most trading happens through paper futures contracts, derivative claims on gold rather than the metal itself. A relatively small physical inventory underpins a much larger volume of these paper claims. As earlier analysis of Western bullion markets has shown, that imbalance produces strain when too many holders demand actual delivery. In December 2024, the gap between New York and London gold prices reached about $60 per ounce, and Bank of England wait times to retrieve physical gold extended to four weeks in January 2025. State buying programs that pull physical gold off the world market at the source make this strain worse.
The program’s design also imposes costs on Ugandans that do not appear in the official rationale.
The first is settlement in shillings. The Bank of Uganda will pay miners in shillings at international gold prices, but the shilling has steadily depreciated against the dollar and faces ongoing inflation pressure. A miner who delivers a hard, internationally-traded asset and receives soft local currency accepts an implicit discount that does not appear in the stated price. The longer the holding period before that miner converts shillings into dollars or imported goods, the larger the discount becomes.
The second is the benchmark itself. Uganda has tied purchase pricing to international gold benchmarks like the Bloomberg Composite Gold Index, which derives from the same paper-driven London and New York markets described above. By contrast, Asian venues like the Shanghai Gold Exchange settle a much larger share of trades in physical metal, and physical gold often commands a premium there. Tying purchase prices to the paper benchmark means Ugandan miners receive Western spot prices for a physical product that could fetch more elsewhere. The premium that physical sellers could otherwise capture in Asian markets accrues to the central bank instead.
The third is the Cantillon effect, the principle that whoever receives newly created money first benefits before that money’s purchasing power erodes for everyone else. New shillings created to fund the central bank’s gold purchases reach licensed dealers and refiners first. Those entities can spend at current prices, before any monetary expansion propagates through the broader economy. Smaller miners and ordinary Ugandans face the resulting price pressure later, without ever having received the upstream payment. The licensing structure concentrates value among connected intermediaries rather than distributing it across the broader sector.
The Ugandan program will fall short of its stated goals. It will not solve smuggling, it will not formalize artisanal mining, and it will not stabilize the shilling. What it will do is redistribute value from miners and refiners to the central bank, compound the existing distortion of global gold price discovery, and create another channel for trade settlement outside the dollar.
This is the recurring pattern of resource nationalism. A government identifies a strategic resource, names a public-interest goal, and inserts itself between producers and the world market. The producers, the refiners, and the broader population pay the costs. The state captures the gains. Uganda’s gold program is the latest case, not the last.
