Gold's Glitter: How Azerbaijan's Oil Fund Is Shielding Its Wealth in Turbulent Times
In a world of economic uncertainty, one of the Caspian region's largest sovereign wealth funds is turning to an ancient asset for modern stability. The State Oil Fund of the Republic of Azerbaijan (SOFAZ), established to manage the nation's oil and gas windfall, has significantly increased its reliance on gold, a move now paying substantial dividends as prices for the precious metal soar.
"Gold serves as a critical hedge against external shocks, inflation, and broad market stress," a SOFAZ representative told Euronews. "A strategic allocation helps protect capital and reduces our overall exposure to volatility."
As of January 1, 2026, gold constituted 38.2% of SOFAZ's investment portfolio, a notable increase from the previous year. The fund began incorporating gold into its asset mix in 2012, a diversification strategy that has seen its reserves grow to 200 tonnes after purchasing 53.4 tonnes last year alone.
The timing appears prescient. Gold prices recently breached historic highs, surpassing $5,500 per ounce, before experiencing a sharp dip following former U.S. President Donald Trump's announcement of his intended nominee for Federal Reserve Chair. Markets swiftly corrected, with prices rebounding to around $5,000 per ounce by mid-week.
SOFAZ emphasizes that its strategy is not driven by short-term fluctuations. "Decisions related to the gold sub-portfolio are guided by the Fund's investment policy and overall risk-return balance," the fund stated. This long-term view positions gold as a stabilizer, aiming to safeguard Azerbaijan's strategic financial reserves and bolster resilience against global economic headwinds.
The fund's performance underscores the strategy's effectiveness. Over the past five years, SOFAZ has generated $22.7 billion in total investment returns. While equity investments—which have grown more than fourfold since 2012—contributed significantly, the appreciation of its massive gold holdings provided a crucial ballast during periods of market downturn and recovery.
Voices from the Market
Lena Kovac, Sovereign Wealth Analyst at Veritas Insights: "SOFAZ's aggressive gold accumulation is a textbook case of de-risking in action. For a commodity-dependent economy, it's a logical step to diversify away from the very hydrocarbons that created its wealth, especially into an asset with inverse correlation to the dollar and equities."
David Chen, Portfolio Manager at Global Horizon Capital: "The returns speak for themselves. Allocating over a third of a $45 billion fund to a non-yielding asset is bold, but in this climate, capital preservation is paramount. Other funds in similar positions are undoubtedly studying their model."
Marcus Thorne, Editor of 'The Hard Asset Report': "It's a desperate move disguised as strategy. Locking up capital in gold at record highs? This reeks of fear, not foresight. They're chasing past performance and will be left holding the bag when the bubble pops and liquidity is needed."
Anar Ibrahimov, Baku-based Economic Commentator: "For ordinary Azerbaijanis, this isn't just a financial report. It's about the long-term security of our national savings. Seeing the fund proactively protect our future against global instability is reassuring, even if the mechanisms are complex."
Related
SOFAZ’s Portfolio Evolution and Asset Classes
The fund's 2012 diversification pivot marked a turning point. Beyond gold, its equity portfolio—spanning public and private markets—has delivered a 305% return, contributing nearly $10 billion in gains and demonstrating a balanced approach to growth alongside its defensive gold position.