Central banks around the world purchase gold to diversify their portfolios and hedge against inflation. They also buy it to boost economic stability.
Over the past several years, central banks have been net buyers of gold. This trend was spurred by an increase in unconventional monetary policies, such as massive bond-buying programs and low or negative interest rates.
Gold reserves by country vary widely, but many countries keep a significant amount of gold as a safe-haven and diversification measure. The United States has the largest holdings, followed by Germany, France and Italy.
However, China is one of the few nations that have a relatively small gold reserve relative to its overall foreign exchange reserves. In fact, Chinese gold holdings only make up 2.4% of its total reserves.
While China is the second largest economy in the world, its foreign exchange reserves are primarily dominated by US dollars. It therefore is unlikely that it wants to deplete those reserves as this would result in a sharp decline in the value of its currency, which is crucial for its economy.
All economies need to maintain a substantial amount of gold reserves for several reasons. First, they help strengthen the country’s currency during periods of high inflation and second, they allow countries to export more gold in the event of an economic crisis.
India, which ranks as the 9th largest gold-holding country in the world, has been accumulating more of the precious metal in recent months. The Reserve Bank of India (RBI) bought 1 tonne in December, according to data from the World Gold Council.
The central bank’s buying is aimed at diversifying its foreign exchange reserves in light of increasing global economic uncertainty, experts said. It is also part of a wider government effort to control imports that could depress the rupee and fuel current account deficits.
Russia is known as a country of ice and snow, but it’s also a booming mining hub for the yellow metal. It has a large gold resource base in the Ural Mountains and Siberia.
The country’s official reserves have nearly quadrupled since 2007, from 400 tonnes to over 1500 tonnes. The Bank of Russia primarily buys gold from domestic commercial banks.
The Russian government has been accumulating its gold reserves for years in the hope that this would protect it from Western sanctions. But there are limits to this strategy.
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Gold reserves by country are a key indicator of a nation’s economic health. The United States, Japan and Russia are among the world’s largest holders of the precious metal.
In a recent report, the World Gold Council said physical gold purchases had reached a 50-year high in 2020. This reflects the increasing role that gold plays in the global economy.
Taiwan is the world’s 14th-largest holder of official gold. Its central bank holds 423.6 tonnes of gold. It was one of the first nations to lift some of its gold import restrictions in 1986, but most of the accumulated gold is still held within Taiwan’s borders. Its gold demand has been rising steadily since the global financial crisis. It is also home to a number of commercial banks involved in the gold market, including Bank of Taiwan.