Gold Chart

Central Banks and Gold

Central banks, international entities (e.g. International Monetary Fund) and governments are the single largest holder of gold in the world. These institutions controlled end of 2009 16.2 per cent (26,780 tons) of the worldwide available gold. All ever produced gold is estimated to be 165,000 tons (5.321 billon ounces). This corresponds to a market value of 7,950 billion US dollar, based on a gold value of 1427 dollar per ounce.

These are the central banks and institutions with the top 20 gold reserves:

top 20 gold reserves Central Banks and Gold

Interestingly, the private gold fund SPDR Gold Shares (not in this list) held 1,300 tons of gold in 2010, making it the sixth largest gold holder, after France (2,435 tons) and before China (1,054 tons).

In 1999 19 institutions signed the Washington Agreement on Gold (WAG). This ten year agreement restricts the sale of gold by its members to 500 tons annually. Signatories are the central banks having the Euro, the European Central Bank, the central banks of England, Switzerland and Sweden. During that time the central bank of England and Switzerland were the main sellers of gold.

Central banks in the west have been net sellers of gold, whereas those in the East have bought more gold than they sold. In the last years, several central banks, notably from Russia, India and China, have announced plans to increase their gold reserves. As a consequence, in 2009 central banks have become for the first time in 20 years net buyers of gold. In this year, net buying resulted in 470 tons of gold. The invigorated interest in gold can be traced back to the financial crisis, as this precious metal can be used as a hedge.

Gold has played a major role for the economic policy of a state, as many countries either issues gold coins as means of payment, or pegged the national currency to gold. This monetary system leads to a fixed exchange rate. Here the standard economic unit of account is a fixed weight of gold is called gold standard. Most Western countries followed the classical gold standards from the end of the 19th century until the 2nd World War. Central banks had the duty to keep the gold reserves at a certain levels to guarantee the gold pegging of their currencies.

The successor of the gold standard was the Bretton Woods System (1946 – 1971), under which many countries pegged their currencies to the US dollar. And the US Central Bank fixed the dollar to gold (with US$ 35 per ounce).

The end of Bretton Woods introduced floating exchange rates which diminished the role of gold as part of the monetary policy. Therefore, gold as part of the reserves of central banks shrunk from 60 per cent in 1980 to 8.6 per cent in March 2005. In September 2010, gold constituted 10.1 per cent of central banks’ reserves.

Read more:

Investment Demand for Gold
Jewelry Demand for Gold
Central Banks and Gold
Gold Production
Industry Demand for Gold
World Gold Production 1900 until 2010


Supply and Demand for Gold: 5 Market Forces

Filed under: Best Articles, Supply and Demand for Gold