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).
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.