Lebanon missed its golden moment, worth $11 billion

Source: Nida Al Watan

Since global gold prices began to rise, calls in Lebanon have increased to make use of the Banque du Liban’s gold reserves and benefit from the surge that pushed prices to historic record levels, giving Lebanon a massive wealth estimated at around $50.8 billion at the beginning of this year, when the price of an ounce of gold reached $5,500. As gold reserves are assets that should be invested like any other type of asset, the state did not respond to proposals to exploit this wealth and generate profits, despite the country and the banking sector being in urgent need of foreign liquidity to address the repercussions of the financial crisis that has remained unresolved since 2019.

A sharp reversal in prices

What was expected happened, and global gold prices declined again by a record rate of 19 percent compared to late January levels, and by 11 percent within one week—the largest weekly loss since 1983. The price of an ounce of gold fell to $4,300 on Tuesday, and Lebanon lost $11 billion within just two months, with the value of its gold wealth dropping to around $39.8 billion (gold reserves amount to 9.25 million ounces).

Is this decline temporary, or is it a corrective trend in global gold prices?

There are multiple reasons behind the decline in global gold prices, most notably inflationary pressures resulting from the war. While geopolitical risks usually increase demand for safe-haven assets, particularly gold, the war has raised concerns about energy supply disruptions, pushing oil prices higher and increasing inflationary pressures. This has also led to a stronger dollar index and higher real yields, both of which are negative factors for gold. The strength of the US dollar has also pushed investors away from investing in the yellow metal, despite positive long-term expectations for gold prices.

The decline in global gold prices usually occurs due to a combination of interconnected economic and financial factors, not just one single cause. Recently, these reasons included the rise of the US dollar, which makes gold more expensive for investors in other countries and reduces demand, leading to lower prices. Expectations of higher interest rates also push gold down, as gold reserves do not generate returns or interest, prompting investors to favor banks or bonds instead. Profit-taking after a strong rise in gold prices leads to market correction, as investors sell to realize gains, and large-scale selling drives prices down. Rising inflation driven by energy costs and wars has also played a role, as higher oil prices increase inflation, pushing central banks to tighten policies and raise interest rates, which negatively affects gold. Despite crises, investor behavior has shifted, with many moving toward the dollar or reassessing risks rather than turning to gold. Additionally, when prices begin to fall, fear among investors can trigger collective selling, accelerating the decline.

Expert insight: A necessary correction

In this context, financial markets expert Michel Qazah explained that the drop in gold prices brought them back to December 2025 levels, noting that the recent rise was parabolic, making a correction inevitable for several reasons, including the liquidity crisis affecting markets, particularly in Gulf countries, where capital is flowing out to Switzerland, Luxembourg, and others. This has forced some to liquidate part of their gold reserves to cover liquidity shortages and avoid imposing capital controls or currency exchange manipulation.

Qazah told Nidaa Al Watan that the second reason behind the drop in gold prices is the rise of the US dollar index due to the war, as well as US interest rates, which the Federal Reserve has kept stable while signaling caution before any rate cuts. He added that in the coming phase, interest rates will inevitably be reduced due to inflationary pressures and economies entering recession. This stagflation scenario places the US Federal Reserve in a volatile position, raising rates at times and lowering them at others, leading to market instability.

Lebanon’s gold: Real loss or paper loss?

Qazah believes that once the war ends at the end of April, gold will resume its upward trend, reaching between $5,000 and $5,500 per ounce in 2026. He therefore advises against trading gold at the moment due to significant price manipulation.

Regarding Banque du Liban’s gold reserves, he noted that the losses in gold value are accounting losses, as the central bank neither sells nor buys gold.