Golden sovereign: Which countries have the most gold reserves?

In times of uncertainty, gold has long been touted as a ‘safe haven’ – and never more so than during times of financial crisis like the one the Covid-19 pandemic has triggered worldwide.

While the ‘gold standard’ was abandoned in the 1970s, the metal is still held by central banks across the world for its ability to provide stability: it is perceived as less prone to political or economic volatility and can be converted to cash if necessary.

Even before the pandemic, the global economy was showing warning signs and many countries had begun to hoard more gold.

Central banks added 650 tonnes to their reserves in 2019, the second highest shift in 50 years, after 656 tonnes were added in 2018. Before the 2008 financial crisis, central banks were net sellers of gold worldwide for decades.

There has been a large effort by central banks to repatriate their gold as well, mostly from storage in New York Federal Reserve and the Bank of England – the two largest keepers of gold in the world.

Venezuela started repatriating its gold in 2011, shipping 160 tonnes from New York. A third of its holdings remain in London, but the UK won’t return it because it doesn’t recognise the Maduro government. Earlier this month, the UK High Court ruled against Caracas in a legal battle over access to $1bn of Venezuelan gold stored in the Bank of England.

Gold is also considered a good hedge against the risk of inflation because the rising cost of goods and services tends to erode the value of the dollar.

And as central banks print more money as part of attempts to stimulate economies, inflation is a palpable fear and assets like gold, which tends to hold its value in real terms over a long period of time, are considered a refuge against that risk.

In the first half of 2020, gold has enjoyed a remarkable performance, increasing by 16.8 percent in US-dollar terms and significantly outperforming all other major asset classes. By the end of June, it was trading at US $1,770/oz, a level unseen since 2012.

Since the start of 2020, Turkey’s Central Bank has purchased 148 tonnes, making it the largest official buyer of gold this year.

Adam Glapinski, governor of the National Bank of Poland, said that “gold symbolises the strength of [a] country”.

So which nations have stockpiled the most gold?

According to data compiled by the World Gold Council, here’s a list of the top 10 countries holding the highest official gold reserves:

1. United States

Tonnes: 8,133.5

Percent of foreign reserves: 78.9

The US has almost as much gold as the next three countries combined, and has the highest gold allocation as a percentage of its foreign reserves at 79 percent. Over half its reserves (4,583 tonnes valued at $236.4 billion) are held at the US Bullion Reservatory at Fort Knox.

2. Germany                      

Tonnes: 3,363.6                

Percent of foreign reserves: 75.2

Between 2012 and 2017, Germany repatriated most of its massive reserve – a total of 674 tonnes – from Paris and New York to Frankfurt.

3. Italy                                                    

Tonnes: 2,451.8

Percent of foreign reserves: 70.8

Unlike most countries, Italy’s gold is not owned by the state, but by Banca d’Italia, and held in vaults in Rome and at the Swiss National Bank, the Federal Reserve in New York and the Bank of England. While the country has come under financial duress, the Italian government made it clear that it had no intention of selling the Bank of Italy’s reserves to plug budget holes.

4. France                                              

Tonnes: 2,436

Percent of foreign reserves: 65

Much of France’s gold was acquired during the 1950s and 1960s, and is held in vaults under the Banque de France in Paris. France’s central bank has sold little of its gold over the past several years, and there have been calls to halt it altogether.

5. Russia                

Tonnes: 2,299.2

Percent of foreign reserves: 22.6

The Russian Central Bank has been the largest buyer of gold for the past seven years, and its reserves have increased by more than 400 tonnes in the past two years alone. In 2017, it bought 224 tonnes of bullion in an effort to diversify away from the US dollar, as its relationship with the West has grown chilly since the annexation of Crimea in 2014.

6. China                                

Tonnes: 1,948.3

Percent of foreign reserves: 3.4

China is the world’s largest producer, accounting for 12 percent of global mine production. It is also the largest consumer, as local demand for the yellow metal has been boosted by a growing middle class.

7. Switzerland                      

Tonnes: 1,040

Percent of foreign reserves: 6.5

While placed seventh, Switzerland owns the largest reserves of gold per capita. Much of its gold trading is done with Hong Kong and China.

8. Japan                  

Tonnes: 765.2

Percent of foreign reserves: 3.1

As the world’s third largest economy, Japan’s central bank has been one of the most aggressive practitioners of quantitative easing – in 2016 it lowered interest rates below zero – which has helped fueled a greater demand for gold.

9. India                                                      

Tonnes: 654.9

Percent of foreign reserves: 7.5

India is the second largest consumer of gold and one of the most reliable drivers of global demand, as the majority of the precious metal is imported. India’s festivals and wedding season, which runs from October to December, has historically been a boon for the trade.

10. Netherlands

Tonnes: 612.5

Percent of foreign reserves: 70.9

Back in 2014, the Netherlands repatriated 20 percent of its gold reserves from the vaults of the New York Fed to Amsterdam. In 2019, the Dutch National Bank called the yellow metal an “anchor of trust” and “the perfect piggy bank” for the financial system in preparation for economic doomsday.