Today many claim that gold is not money anymore and its average price decreased in the last couple years.
It is true that gold is not an official medium of exchange anymore. Sadly, paper currency became ubiquitous around the world and is used in most countries including undeveloped ones.
It is also true that gold price has dropped in the last three years. For example, in 2012, a troy ounce* of gold had an annual average price of 1688.98 US dollars, in fact, it was the highest price since 1900! In contrast, today, on June 3 of 2016, an ounce of gold is 1,244.00 US dollars.
Yet, gold ownership is not only in the interests of investors anymore. In 2010 central banks in countries around the world started to buy gold rather than selling it as they did before. Although central banks did buy gold before 2010, they were selling more than they were buying which made them net sellers of gold. Now, central banks buy more than they sell, that is, currently they are net buyers of gold (see Figure 1).
Figure 1. Central banks’ gold purchases and sales since 1995. Source: Metals Focus
Below is the list of countries with the most gold reserves as of May 2016 (according to the International Financial Statistics).
1. United States of America. 8133.5 tonnes; foreign reserves: 74.9%
US tops the list as it’s the largest gold holder in the world. This amount is a little bit short of that owned by the next three countries combined, Germany, Italy and France.
The majority of gold is held at Fort Knox in Kentucky.
2. Germany. 3381 tonnes; foreign reserves: 68.9%
Although being second in the list, Germany holds 2.5 times less gold than US. Now the country is actively bringing its gold back, or repatriating, from foreign storage locations.
Nearly half of Germany’s gold is stored in Federal Reserve Bank of New York.
3. Italy. 2451.8 tonnes; foreign reserves: 68.0%
Italy is the third largest gold holder in the world and is only 16.2 tonnes ahead of France. In 2013, Mario Draghi, the governor of Bank of Italy at the time, emphasized that central banks need gold for financial safety to ensure protection against US dollar fluctuations (read here what exactly he said).
Similar to Germany, half of Italy’s gold is stored in Federal Reserve Bank of New York.
4. France. 2435.7 tonnes; foreign reserves: 62.9%
France’s gold holding is similar to that of Germany. Its leaders not only want country’s gold back from foreign vaults, they are also looking at buying more of it and planning to avoid selling it as much as possible.
5. China. 1797.5 tonnes; foreign reserves: 2.2%
There is evidence that China’s actual holdings are much bigger than officially declared by Chinese government. The actual amount might be well over 3,500 tonnes as in the last five years, along with Russia, China has been buying staggering amounts of gold. Moreover, its gold buying pace is expected to increase as China has introduced its gold-backed yuan on April 19 of this year.
Most of China’s reported gold is stored in-country. In fact, China is the country with the lowest amount of gold held in foreign locations.
6. Russia. 1460.4 tonnes; foreign reserves: 15%
Similar to China, Russia has been acquiring gold in relatively large amounts in the last several years. The country’s purchases increased after worsened relationship with the West in 2014 as a result of Crimean Peninsula takeover. In 2015, it bought about 206 tonnes of gold which made Russia the top gold buyer in that year.
7. Switzerland. 1040 tonnes; foreign reserves: 6.7%
Although Switzerland has eight times less gold than US, it has more gold per capita than any other country listed here.
8. Japan. 765.2 tonnes; foreign reserves: 2.4%
Japan is a relatively small country, however it has more gold than the whole African continent and Australia combined.
9. Netherlands. 612.5 tonnes; foreign reserves: 61.2%
Netherlands in the last years has been repatriating large amounts of its gold from US.
10. India. 557.7 tonnes; foreign reserves: 6.3%
India is the tenths country in the world with the most gold, however it has less gold per capita than any other country listed here.
* troy ounce (oz) is a traditional unit of measure and is used to measure the mass of precious metals including gold. One troy ounce is 31.1035 grams.
Main reference:
www.statista.com
I have always found this an interesting topic to how the different countries have gold reserves. I remember reading many years ago how Switzerland was the best-balanced country to debt load and gold backing reserves, and the States was in a much higher debt ratio in comparison.
Does that still hold true today?
Hello Travis,
Thank you for your comment. Yes, it is still true today. Currently, United States’s government debt to GDP is 104.5% while Switzerland’s is only 34.4%.
As of April 2016, US is on the 10th place in terms of government debt (Japan is on the 1st place) and Switzerland doesn’t even make the list of top 20 countries with the highest level of government debt.
In figures, today US government debt is 19,187,387 million US dollars while Switzerland’s is only 232,657 million US dollars (224,426 million Swiss franks)
Switzerland has always been known as financially stable country, including during the two World Wars.
Regarding gold reserves, like I mentioned above, Switzerland has more gold per capita than any other country in the world.
If want to know more look below:
US statistics: http://www.tradingeconomics.com/united-states/indi…
Switzerland statistics: http://www.tradingeconomics.com/switzerland/indica…
It’s not much of a surprise that the United States was the largest gold holder, especially with the Gold Reserve Act back in 1934. They increased the price of gold from $20.67 to $35 an ounce, which interested a number of foreign countries to sell gold to the US. It definitely helped the US build a gold reserve, even during a depression.
Hello again Kevin,
Useful to know – didn’t know that. Plus during the Second World War, US was selling war equipment and food to European countries and was payed back with gold! So, by the end of the war, as far as I know, it had about over half of all official gold reserves found in the world at that time!
Today, US is still ahead of all countries in terms of gold reserves it owns (I guess I should say official gold reserves).
Hello,
What an interesting list you have there. I guess that just shows how important gold is in the world. It’s like the backbone of the whole economy, if your currency collapses, you still have gold to trade with, which is why so many bigger countries are storing loads of it in the reserves. Do you personally think that the price of gold will go upwards in the next 10 years or will it go the other way ?
Hi Dejan,
Thank you for visiting.
Given the state that the US dollar is currently in, the world financial system sooner or later, faster or slower, will start to change. And you know, that in times of economic turbulence, people turn to good old tangible assets like buildings, land, precious metals. Don’t need to go too far back for examples – Brexit is a perfect event illustrating such behavior.
On the other had, if dollar continues to thrive, which I doubt, it won’t affect gold price too much. Of course, like in the course of the last decade, fluctuations in price would be there, but, obviously, like all other tangible assets gold price would never drop to zero or even close to that.