Gold reserves refer to physical gold bullion that is held by a country’s central bank. This is usually a portion of a nation’s total wealth, stored in the form of gold ingots.
Many nations, for security purposes, choose to store their gold reserves outside of their own banking systems. In the UK for example, the Bank of England stores not only the
UK’s gold reserves,
but a number of other countries’ reserves too.
Why do countries have gold reserves?
A country has gold reserves for several reasons, but chief of these is as an insurance policy against economic crash. The current global financial system is based on fiat currency; paper-based (and increasingly digital) money, that has no physical assets to back it. Although arguing the benefits/drawbacks of a fiat currency is beyond the remit of this page, one of the definite problems is that without anything to back it, a fiat currency has nothing to guarantee its value beyond the word of the issuer - the government.
Gold is a scarce precious metal and has been associated with wealth and value for thousands of years. To this day it remains a useful and valuable asset. In the same way that private investors use gold for insurance, so too do central banks. We reported in October 2019 that the Dutch National Bank were quoted saying that:
‘Shares, bonds and other securities: there is a risk to everything. If things go wrong, prices may fall. But, crisis or not, a gold bar always holds value. Central banks such as DNB have traditionally had a lot of gold in their house. Gold is the ultimate apple for the thirsty: the trust anchor for the financial system. If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet. That gives a safe feeling.’
In a worst-case scenario, holding gold reserves provides a country with an insurance should fiat currencies sink. If their fiat currency has become worthless, or near-worthless, then they still have physical gold to repay debts and to issue money.
Gold reserves by country
A number of countries have been increasing their gold reserves recently. With geopolitical turmoil dragging down the global economy, many countries are switching to gold to protect themselves in the event of a global economic crash.
According to the World Gold Council, as of January 2024 the top 20 countries by gold reserves are as follows:
- Spain - 281.58
- Lebanon - 286.83
- Kazakhstan - 309.38
- United Kingdom - 310
- Saudi Arabia - 323.07
- Poland - 333.71
- Portugal - 382.63
- Uzbekistan - 383.81
- Taiwan - 423.63
- Turkey - 478.97
- Netherlands - 612.45
- India - 800.78
- Japan - 845.97
- Switzerland - 1,040
- China - 2,191.53
- Russia - 2,332.74
- France - 2,436.91
- Italy - 2,451.84
- Germany - 3,352.65
- United States of America - 8133.46
Compared to the top 20, the top 10 account for a significant increase in the amount of gold held. As the country with the highest amount of gold reserves, the United States is significantly ahead of the rest of the world, with an amount almost equal to second, third and fourth place alone.
As mentioned above however, the gap is narrowing. Russia and China have both been increasing their reserves in the past few months, with both trying to protect their national wealth, and improve the independence of their currencies from the US Dollar. There are also suspicions of inaccurate holding counts from the States.
It should be noted however that we have omitted both the International Monetary Fund (IMF), and the European Central Bank (ECB) from the list., which would both easily fit into this list.
With economic uncertainty continuing to grow, these figures will likely continue to increase in the coming years.
