Gold is an investment asset that governments and central banks use to diversify their national assets. It can also serve as a hedge against inflation and fluctuating currency exchange rates.
As the world’s economy slows, central bank gold demand has hit a record high this year. Here’s a look at the countries with the largest gold reserves, starting with the United States.
1. United States
The United States of America is a country in North America that extends from the Atlantic Ocean to the Pacific. It shares borders with Canada and Mexico.
The country is the world’s third largest by land area. It is also the world’s most populous Christian-majority nation.
The United States holds the largest stockpile of gold reserves in the world by a considerable margin. It has almost as much gold as the next three largest countries combined (Germany, Italy, and France).
Germany is a large, rich country that is known for its high standard of living and orderly economic processes. It is a clean, safe and prosperous nation with a strong economy and educated population.
Germany has a long history of holding gold reserves abroad and in 2015 the Bundesbank announced that it had begun to repatriate some of these. Since then it has brought back 743 tons of gold bars from storage locations in New York and Paris.
Italy is the third-largest country in the world with most gold reserves. It holds 227,478 tonnes of the metal worth nearly $225 billion at current prices.
The country is facing budget difficulties and could use part of its reserves to plug them. That would be similar to the way France used its bullion to avert a tax rise.
In February, Italy’s ruling League party drafted a law that would eventually allow it to sell its gold reserves to solve its finances. However, its economics spokesman has dismissed suggestions that the government wants to do so as a way to fix Italy’s problems.
The country has an impressive 2.4435 tonnes (around EUR 80 billion) of gold reserves in its underground vault at La Souterraine. These are the equivalent of 4% of France’s GDP and debt.
France has long been a strong advocate for a pure gold standard. This position was often mirrored by official French criticism of the international monetary system, especially during the 1960-1968 period.
Switzerland is one of the world’s largest gold-producing countries. It is also a major exporter of gold.
The Swiss National Bank holds the vast majority of its gold reserves in physical form. These are held in the form of gold bars and coins.
China is currently the world’s sixth-largest gold reserveholder, and has been increasing its holdings in recent years. This increase is believed to be part of a plan to diversify the country’s foreign exchange reserves away from the United States dollar.
The People’s Bank of China, along with the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation, are all thought to hold large amounts of gold. However, due to state secrecy, the true size of these holdings is unknown.
The world’s third-largest economy, Japan has amassed a mighty hoard of gold. It’s also one of the leading gold consumers, which is driving demand.
The country’s rich history with gold is evident in its famous island of Sado, which Marco Polo referred to as the “land of gold.” It produced about 20% of the world’s gold in the 17th century, thanks to its coveted koban coins.
The gold reserve of India is the ninth largest in the world. It is worth about $1,135 billion at international prices, according to the World Gold Council.
Central banks have accumulated their gold reserves at a record pace this year. This is mainly due to a flight towards safer assets amid soaring inflation, according to WGC.
Demand for gold is likely to remain muted this year, though the lower trajectory of retail inflation should support urban demand. A strong wedding season and a lower INR are also expected to help (Chart 6).