Gold reserves are important because it helps to assess a country’s creditworthiness. Governments maintain a large amount of gold in their reserves which is why it is known as ‘reserve currency’, which is used in performing transactions in international trade. Because currencies are influenced by market variables and fluctuate, Governments prefer to maintain high gold reserves which have a more stable value.
Here are a few countries with the largest gold reserves:
China is the world’s largest producer of gold, however they sell and reinvest the majority of the gold into the local market. This strategy changed to where China is increasing its need for gold and increasing its foreign reserves.
In 2015, the People’s Bank of China began sharing its gold purchasing activity on a monthly basis and as a result, in December of 2015, the Renminbi joined the Pound, Yen, Dollar and Euro as one of the International Monetary Fund’s reserve currencies. This inclusion also forced China to increase its gold holdings. As of the second quarter of 2018, China reports having 1842.60 tons of gold with 2.2% in reserves.
France actually has more gold in reserve than in active investment. Several years ago, France sold more than 500 tons, but then made the decision to maintain and grow its reserves. France currently holds 2,435.7 tons of gold in reserve. France actually has had the highest reserve percentage in gold investment and is maintained at 65%. There has been a lot of pressure to bring back all the gold from the foreign vaults back to France but this is a sensitive political issue.
Despite the recent economic crises that Italy has been going through, it has actually still done pretty well when it comes to maintaining its foreign reserves. Italy still does a little better than France, holding its foreign reserves at 68%. Unlike other countries, Italy has maintained their foreign reserves since a while and enjoys the support of Mario Draghi, President of the European Central Bank. Today, Italy holds 2,451.8 tons of gold in reserve.
Germany has the second largest gold reserves in the world, almost 66% of the country’s foreign reserves however it has been selling small bits over the years. At the end of 2017, Germany’s Central Bank announced that it had successfully repatriated gold bars from foreign vaults in the US and France worth almost 31 billion dollars. This translates to 743 tons were transferred. It was explained that they wanted to get the gold back to re-establish public trust and confidence. Today, Germany has about 3,381 tons with 68.9% in foreign reserves.
The US is the single largest holder of gold reserves in the world even though they are the third largest producer of gold. In the past 50 years, their reserves have fallen from 20,000 tons to 8133.5 tons of gold and 74.9% in foreign reserves. The US is one of the few countries whose foreign reserves has remained unchanged. A fun fact: the US has one of the highest gold allocations as a percentage of its foreign reserves – the country to have the highest ratio is Tajikistan, where the gold accounts for more than 88%. It is believed that the US gold reserves are held at Fort Knox Kentucky, Philadelphia Mint, Denver Mint, San Francisco Mint and the West Point Bullion Depository.