From 2010 onwards, central banks switched from being net sellers of gold to net buyers. This trend has continued with sector activity rising by 36% in 2017. In this article, we’ll take a look at key gold reserve facts, the ranks of over 50 of the top gold reserve countries and why gold reserves hold such importance.
Gold Reserve Facts
The top 10 countries with the largest gold reserves have remained largely unchanged over the last few years, below are a few facts about gold reserves:
- The United States remains the country with the largest gold reserve by a substantial margin.
- Russia has become the fifth largest after six successive years of being the largest gold purchaser and, in contrast, Venezuela has been the largest gold seller for two years running.
- Despite being in sixth place, China mines more gold than any other country.
- Australia is the second largest producer and has the largest gold mine reserves.
- Switzerland has the largest reserves of gold per capita.
- Gold is a governmental investment asset and safeguards against recession or inflation.
Below is a table showing the top 55 countries with the largest gold reserves and how much gold they hold in metric tons.
|Country||Metric Tons of Gold||Date||Percent of Foreign Reserves (Top 10)|
|1||United States||8,133.46||December 2018||75.2%|
|2||Germany||3,369.70||December 2018||Approx. 70.6%|
|5||Russia||2,066.20||December 2018||Approx. 17.6%|
|10||India||592||December 2018||Approx. 5.5%|
|11||Euro Area||504.77||December 2018|
|15||Saudi Arabia||323.10||December 2018|
|16||United Kingdom||310.30||December 2018|
|29||South Africa||125.30||December 2018|
|33||South Korea||104.40||December 2018|
Why Countries Store Gold as Reserves
The majority of developed countries have gold reserves as part of their central bank policy. The fact that gold, theoretically, will always hold some sort of value anywhere at any time gives it huge importance and with that comes valid reasoning for holding gold reserves. As well as this, gold remains the most traded commodity on Earth which is why countries, despite storage costs, choose to have gold reserves. The gold reserves themselves allow central banks and governments to have an insurance policy to fall back on if there were to be any severe economic collapse.
Gold has traditionally been a very important aspect of the central bank’s reserves. Holding a gold reserve provides a country with reduced credit risk as well as independence from a country’s economic policy. Gold is also an extremely durable and almost imperishable asset so holding it in a reserve is not an issue for its value or condition. Even if a country is in good financial standing now and has a strong currency, this is always subject to change. With the future always being, in some way, uncertain gold provides a stable, reliable fallback should there be financial pressures.
The value of gold does not follow the value of currency so when you combine the values of the two you create a more stable and more reliable system. A country may hold a gold reserve to make their currency more reliable even during global economic crisis. If a country experiences a huge decline in the value of their currency, they could support their currency by selling gold from their reserves. Ultimately, gold is very desirable in times of crisis. The gold reserves act as an insurance that can be used in the event of a crisis when currencies are under pressure.
History of Gold as a Store of Value
Soon after gold was discovered it became a symbol of royalty and wealth across the globe. Its resilience, beauty and rarity made it an excellent material for jewellery making and it eventually developed into a form of currency. In fact, it was gold that was largely responsible for the concept of money with gold coins being created in 700 B.C. The use of gold as money has a very consistent appearance throughout history which shows that it has always been highly desirable. In fact, it was highly desirable even before it had any monetary significance.
In the past, gold reserves were an important part of government policy and the gold was being held in order to meet the costs of waging war. As time went on, gold reserves were being collected by banks so they could redeem their promises to depositors. In the 19th century, banks would issue notes that were redeemable in gold on demand so it was important that the banks had a reserve of gold in order to be able to meet these demands. Each bank would have had a reserve of gold but later, these reserves shifted to central banks instead of commercial banks as the notes became central bank notes too.
Gold is able to be stored long-term as a way of protecting the wealth of the holder. Over 95% of the world’s gold is held in reserves and as the supply of gold grows at a very slow rate there has been an almost fixed amount of gold above ground for around 4,000 years. This reliable rarity of gold is what gives it stability as a purchasing power for banks and governments.
This brings us to gold reserves now that are held mostly as a form of insurance should there be an economic crisis. Where the gold is held and who holds it varies from country to country, some countries gold reserves are held by the government while others are held by the central bank and others are a combination of the two.