The world's gold reserves are unevenly distributed over the globe. This has contributed to the fact that there were leading countries in terms of precious metal. And the rivalry between the states began many centuries ago, when the yellow alloy became the means of payment. These countries even now have a significant impact on the global economy. To understand the relationship between gold reserves and their level of development, we should learn more about this concept.
Gold and foreign currency reserve: what is it, what does it consist of, its functions
The state owns various means that contribute to its status. They are united by the concept of the gold and foreign exchange reserve or GER. This is the name given to assets that have a high degree of liquidity. They are of great value not only to the state, which owns a gold reserve, but also to other countries.
The gold and foreign currency reserve is one of the main levers of pressure on the processes shaping inter-state relations.
On the territory of Russia today a combined structure of foreign reserves is used. This is facilitated by the Central Bank of Russia, the Ministry of Finance and the Treasury. For comparison, other countries use different systems of management and control. For example, in Great Britain, the Ministry of Finance is the determining body. The Central Bank in this case is the executive body. If we consider Japan, then it is also a combined system, which is used by Russia. The U.S. gold reserves are formed according to a similar scheme.
The gold and foreign currency reserve is a concept that includes several main areas:
- funds in foreign currencies: these may be not only cash (dollars, euros, etc.), but also other means of payment, such as reserves in correspondent and impersonal metal accounts, securities, deposits, but provided that the maturity - up to 1 year, and the form allowed different (gold, loans from banks of high reliability), it also includes debt securities;
- Special drawing rights - the term implies assets that have been issued by the International Monetary Fund (IMF);
- position in the IMF - a reserve that is held by the IMF and corresponds to the amount of the down payment that a country pays on admission if there is a need to sell or buy this category of payment instruments;
- Monetary gold: this group includes precious metals of high purity (from 995 and above, but more often 999/1000), it can be gold, platinum or silver, and the form of release of precious products is always the same (coins, ingots), this direction is the most popular, directly affecting the position of the national currency.
The very notion of "foreign exchange reserves" speaks of the inviolability of the means of payment. They are used only in the most extreme case, when other options do not help to correct the current situation with a negative bias. The main functions of the gold reserves:
- creation of guarantees of the solvency of the state;
- eliminating the deficit when the country's balance of payments is in deficit;
- maintaining the exchange rate when it fluctuates, which forces the use of additional resources;
- performance of various actions to eliminate debts to other states (repayment of state loans, settlement transactions of various kinds);
- creation of reserves, which can be considered liquid, will strengthen the position of the state.
The concept of the gold reserve, how gold reserves are formed on its basis
First of all, the gold reserve is one of the components of the gold reserve. It affects its functions. Gold reserve is a precious metal, which is held by the Central Bank or the Ministry of Finance (arranged differently in different countries). Its value depends on currency market quotations. The universal international unit of accounting for the precious metal is the troy ounce.
The share of a country's gold reserve is some part of the gold reserve. But it is always different, which depends on the solvency of the state, its status on the world stage and literally on the amount of precious metal. The higher the share of monetary gold, the greater the influence of the country on inter-state relations. Usually gold reserves, which are in the accounts of the state, are replenished in different ways:
- by mining the precious metal;
- method of acquisition.
The function of countries' gold reserves. How many tons of gold in the world
The main task, which has long been solved by the gold reserves of states, is to ensure the value of the national currency. It is formed mainly by the volume of Au in the country. Accordingly, negative changes with the currency operating on the territory of a particular state may occur if the reserve of the precious metal has significantly decreased.
There are other functions of the gold reserve:
- adjusting the value of various precious metals;
- maintaining the ability to make international payments (Au is a reserve means of payment in this case);
- securing the insurance deposits of private individuals;
- use as collateral when it is necessary to repay a loan taken.
There are many options for the use of gold reserves, all of which are related to the state's position on the world stage. However, one country always contains much less monetary precious metal than the rest of the world - this is the natural distribution of resources. Thus, the total amount of gold on the planet (according to preliminary data) is more than 200 thousand tons. To understand whether it is a lot or a little, you should know how much Au is mined in 1 year - the average amount is 2.7 thousand tons around the world.
Top 10 countries of the world - leaders in gold reserves with the exact geometry of the storage today
The number of precious metal countries is constantly changing, so their positions in the ranking drop/higher. Only some of the states stay in one place. These are the leading countries in gold. They own a lot of precious metal. A huge gap from other states in terms of Au volume helps them maintain their positions.
The total share of gold of the top 10 countries is 70% of the total amount of yellow precious metal of the other states.
The graph clearly shows the distribution of the gold reserves of China, the United States, France, Russia and other leading countries:
1 place: which country has the most gold - the USA
America has long been considered the leader. The U.S. gold reserves are 8133.5 tons (information current as of 2021), or 78% of gold reserves. In addition to that, precious metal from other countries is also in the U.S. vaults. But it is not counted when determining the amount of gold. Recently there has been a tendency to reduce the share of Au of other countries in the U.S. territory. Previously, this way of storing valuable currency was chosen because of the instability in Europe and the world.
U.S. gold is held in the state today at the same volume as it was a few years earlier. The location of the repository is Fort Knox (in Kentucky). But only a portion of the U.S. gold reserve is held here. The precious metals are held in other cities:
- New York City (West Point);
- Colorado (Denver);
- New York: 33 Liberty Street, Manhattan.
2nd place: Germany
The amount of the precious metal is constantly increasing. Today the gold reserve of the country is 3,367.9 tons. When converted into gold reserves, this Au volume would be equal to 75% of the total amount of all Germany's valuables. In recent months the amount of precious metal has decreased by several tons. However, this has not changed the position of Germany among the top 10 countries. The country still holds the second place. Some of the precious metals are in the United States, Britain and France. Au was kept in the vaults of the central banks of these countries. Germany's gold reserve was distributed in this percentage ratio:
- Bundesbank (Frankfurt) - 50.6%;
- United States (33 Liberty Street, New York) - 36.6%;
- London State Bank - 12.8%.
3rd place: Italy - 2,451.8 tons
The volume of the highest grade precious metal is 2,451.8 tons. And this share has been retained by the country for the last twenty years. This indicates the stability of the economy. This amount corresponds to 69.6% of gold reserves. The state reserve consists of bullion, but not coins, as in many other countries. The bulk of the precious metal is stored in the Palazzo Koch (Via Nazionale, 91, Rome).
Italy shows confidence in other countries: the U.S., England, Switzerland, where about half of the gold reserve is still located.
4th place: France - 2,436 tons
The country is almost close to Italy in terms of precious metal volume. The list of leaders may change soon if this trend continues. However, the volume of precious metal has been on the same level for some time. It is almost twice as much as in the middle of the last century. France's gold reserve is 64.9% of the foreign exchange reserve. The precious metals are held at the headquarters of the Bank of Paris (on the -8th floor of the basement) at 31 Croix des Petits Champs. The vault is notable for its high reliability:
- is located a few tens of meters below the level of the river Seine;
- The room is equipped with everything you need: there are bathrooms, kitchen;
- The ceilings are supported by a large number of columns;
- underground premises can accommodate up to 3 thousand people.
France is one of the few states that keep its entire gold reserve on its own territory.
5th place: Russia - 2,298 tons
The total amount of gold in the country increased to 2,293 (data for the last quarter of 2021). This amount corresponds to 22.5% of gold reserves. Characteristics of the precious metal: Au is contained in bars and coins, the purity of the material is determined by the assay (not lower than 995).
Myth and Reality: It is believed that Russia holds a substantial portion of the gold reserve along with the U.S. gold reserve. Earlier, indeed, the Russian Federation invested large amounts of money by buying U.S. bonds. However, gradually the amount of Russian funds in U.S. vaults decreased to a few billion, and then further decreased. Today Russia returns the released gold to its gold reserves. It keeps it on its territory.
The country had the maximum amount of valuable metal in 1941 - 2,800 tons. Since then it has not yet been possible to repeat its own record. However, there has been a steady growth of Au - in recent years, its amount has increased by 100 tons. The location of the repository is at 6 Pravda St.
6th place: China - 1,948 tons
The country has a stock of Au equal to 1948 t. Despite the significant amount of valuable metal, the total amount of gold reserves is much larger. The gold reserve is 3.3% of the foreign exchange reserve. It is believed that the Chinese precious metal is contained in the official depositories of the state. However, it is not known exactly where. If you wonder how much gold China has, you can look at the data from previous years, as the amount of precious metal is not declining, on the contrary, slowly growing, but the increase is small (about 85 tons in 1 year).
7th place: Switzerland - 1,040 tons
The amount of yellow material has been at the same level for almost 8 years - 1,040 tons. This amount is 5.8% of the gold reserves. It is known that the bulk of the gold is contained under the headquarters of the national bank at Bundesplatz, 1.
In addition, another 20% Au is in England and 10% is at the Central Bank of Canada.
8th place: Japan - 846 tons
Over the past decade, the amount of the precious metal has remained at the same level. However, as of the first quarter of 2021, its quantity has increased by almost 80 tons. This precious metal accounts for 3.1% of the gold and foreign currency reserves. The yellow metal is stored in Tokyo. The storage room of the main building of the Central Bank is used for this purpose. In recent decades, the most valuable metal has been 846 tons. Until recently it was close to the minimum - 754 tons.
9th place: India - 695 tons
The volume of precious metal in India is 676 tons or 6.6% of gold reserves. Starting from 2013 until 2018 the Au volume was 557 tons. However, a few years ago there was a significant increase in its quantity. In addition, India stores gold in the UK. It used to be a last resort in order to get a loan to get out of a difficult economic situation. Today, the financial problem has been solved, the debt is paid. However, the gold is still kept in England, only now as deposit money. The address of the vault in Nagpur is Dr. Raghavendra Rao Road, Civil lines, P.B.No.15.
10th place: Netherlands - 612.5 tons
Today the volume of precious metal in the Netherlands is 67.8% of the foreign exchange reserves. The share of gold (612 tons) has remained unchanged for more than 8 years. This is not the highest figure, previously the amount of the yellow metal was 912 tons, but the current state of the economy is stable. This amount is distributed across several countries. A total of 31% is located in the Netherlands (storage facility in Amsterdam, Westeinde, 1).
The remaining share is divided between banks in New York, England and Canada.
Other international gold holders
Today, many other countries also contain Au, but their positions change more frequently due to similar (small) amounts of valuable material. List of countries with medium and small amounts of Au:
- Turkey - 526 tons;
- Taiwan - 423.6 tons;
- Kazakhstan - 400.6 tons;
- Portugal - 382.6 tons;
- Uzbekistan - 364.2 tons;
- Saudi Arabia - 323.1 tons;
- Great Britain - 310.3 tons;
- Lebanon - 286.8 tons;
- Spain - 281.6 tons;
- Austria - 280 t.
If one of the leaders is in a lower position, it means that the country is selling off some of the precious metal from its stockpile to meet debt obligations, to solve other problems related to the unstable economy. The growth of Au volume often indicates an increase in the amount of mined precious metal, the appearance of new deposits on the map, as, for example, it happened in India.
It is not only states that accumulate gold, the reserves of countries with little Au sometimes correspond to the volumes held by corporations, world-class companies.
Table: International financial organizations
In addition to state stocks, there are also global stocks. They are owned by large financial institutions. The most famous and influential of them:
| Name of organization | Share of gold, t |
|---|---|
| International Monetary Fund (IMF) | 2814 |
| European Central Bank (ECB) | 504,8 |
| Bank of International Settlements (BIS) | 102 |
The redistribution of funds of international financial organizations takes place when the composition changes. They are based on an agreement between countries and non-state institutions. When a new member is accepted, the size of the quota is also taken into account.
Table: World Investment Funds
The gold of the world is distributed not only between countries and large international organizations, some of the precious metal is owned by private investment companies. If you wonder how many of them hold large amounts of Au, you should study the table:
| Company name | Quantity of gold, t |
|---|---|
| SPDR GOLD Shares | 850,5 |
| iShares Gold Trust | 234 |
| Xetra-Gold | 213 |
Investment companies (ETFs) have advantages, among them are: minimum spreads to the London fixing, high liquidity. This explains why many well-known financiers have "gold funds" today.
The global trend of building up the gold reserve
The stock of precious metal plays an important role in sustaining the economy, as evidenced when a crisis strikes. Neither the U.S. gold reserve, nor Russian reserves or assets of international organizations are immune from decline. But the ability to conduct operations (buy/sell gold) allows you to survive the crisis, as it happened in 2008, then there is a new trend - building a reserve of gold. As a result, the demand for Au in recent years has increased dramatically.
Geopolitical and financial factors in the formation of gold reserves
There are different factors affecting the gold reserves. These include the extraction of the yellow metal from the bowels of the earth or the purchase of gold, and other ways of increasing the share of valuable means of payment. But politics and economics also have an impact.
Foreign Policy
Gold and securities and other means of payment may become a reserve in case international relations develop according to a new scenario: when unpredictable situations arise, including conflict situations. This affects the convertibility of currency, the imposition of sanctions, etc.
Foreign economy, loans
Countries holding gold reserves often act as creditors and may themselves become debtors. The collateral is directly Au. Once the debt is paid, the country can return its gold.
Domestic economy, inflation
The mismatch between the share of Au and money is one of the factors that create conditions for the depreciation of money. In this case, the ruble exchange rate becomes unstable, the balance of payments is disturbed, inflation occurs. On the example of Russia we can see how losses (previously reduced savings) during the crisis are made up for today.
The volume of gold reserves has almost reached the pre-crisis level of 2008, despite the fact that the price of gold and other means of payment has changed dramatically.
Video: gold reserves of different countries of the world
Commentary from a financial analyst
At all times, a profitable scheme was considered a simultaneous purchase of equal parts of monetary gold (we have them coins George the Victorious and the like, as well as bullion), currency, other assets. I recommend to consider buying only through a bank.
On the site you can choose a type of coin from the catalog, and buy by showing up in person. This will avoid the risk of getting a fake. If you search for gold from private individuals, no one will give a guarantee of its quality. When there is a need to use your own small stock of Au, you need to be sure of its high price, quality.
