It’s no coincidence that gold is the common denominator in virtually every country’s portfolio of reserve assets. By some definitions, the dollar is still “king,” followed closely by the euro. In recent years, the Chinese yuan has also grown in popularity. (See below for more on this development.)
Even though these major currencies predominate as foreign reserves for central banks all over the world, they are merely fiat currencies. This naturally means that they are always eroding in value relative to truly tangible assets. Gold, on the other hand, provides the strongest bulwark against the ravages of inflation.
Gold as the Ultimate Store of Wealth
As the global financial order has increasingly stood upon shaky legs since the decoupling of the dollar from gold in the early 1970s, the reasons for central banks to hoard gold have multiplied over the years.
(If you’re surprised that the U.K., one of the world’s great financial centers, is absent from this list, look into the folly that befell the Bank of England in the 1990s when it auctioned off hundreds of tonnes of its gold reserves.)
Below is a list of the countries* that hold the top 10 national gold reserves, in metric tonnes:
India just cracks the top 10, yet almost twice as much gold is consumed annually by the populace (~900 tonnes)! The government has tried several schemes to transfer this privately held gold to its own coffers, but the people of India aren’t giving it up.
In regard to gold, the Dutch are perhaps best known for kicking off the wave of repatriation movements—sending gold reserves held overseas back home for safekeeping.
The Japanese government was forced to sell off some of its gold to handle the devastating 2011 tsunami and subsequent nuclear fallout—showing that gold is the best insurance policy imaginable.
Until recently, the Swiss franc was in large proportion backed by the country’s formidable gold reserves. Last year’s Swiss Gold Initiative to return to this policy may have failed, but it demonstrates how these independent-minded people are in-tune with the power of gold.
Russia’s central bank has been buying gold hand-over-fist in order to stem the collapse of the ruble. This seems the soundest strategy for surviving the kind of recession Russia currently finds itself in.
Since it became a major player on the global stage, China has been notoriously gold-hungry. With the incredibly fast (and perhaps clandestine) pace that the People’s Bank of China has grown its gold holdings, some speculate the government could have plan for a fully gold-backed yuan (alternately known as renminbi).
As the political climate in France moves right-of-center after years of socialist rule, adding gold to the country’s already-impressive official reserves has become more of a priority.
The Italians are perhaps more readily associated with the high quality of their gold jewelry. However, they also boast gold as the strength of their financial independence from the sovereignty-robbing effects of EU membership.
In some sense, Germany combines the traditional affinity for gold of the Swiss with the desires for repatriation of the Dutch. It only stands to reason that the largest economy in Europe would also have the continent’s largest stash of gold.
United States: 8,134t
To this day, the U.S. is still the top dog in terms of gold reserves, but its current holdings (more than double any other single country) is still a far cry from 20,000+ tonnes it held following WWII.
*This list excludes supranational organizations such as the IMF and World Bank, which also hold thousands of metric tonnes of gold. The respective rankings were taken from Business Insider. Total tonnage numbers have been rounded to the nearest whole number.
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