【AUVESTA】The actual role and purpose of gold reserves, the official gold reserves rankings of various countries as of September 2021
Gold occupies an important position in the central bank’s reserve management, and the central bank is a pivotal gold holder
What are gold reserves?
As an important part of a country’s international reserve assets, gold reserves are related to the creditworthiness of a country’s foreign economic and trade. It plays a special role in stabilizing the national economy, curbing inflation, and improving international credit standing. This effect is quite significant in both developed and developing countries
As a part of international reserves, gold reserves are only one aspect of measuring national wealth. High gold reserves will strengthen the ability to withstand the impact of international investment funds, help making up for the balance of payments deficit, and help maintaining a country’s economic stability.
The role of gold reserves is to regulate the total money supply in the market from the perspective of money and banking
In the past 10 years, the central bank has purchased large amounts of gold to help keep the price of gold at a high level. But the record buying boom was suspended in 2020, when gold prices soared to record highs and the virus epidemic caused economic stagnation around the world. In the third quarter of 2020, some countries choose to sell part of their gold reserves, and central banks become net sellers
However, this trend seems to be rapidly reversing. The World Gold Council issued a report stating that global central banks were net buyers of gold in February this year. The largest purchaser of gold is India, which bought 11.2 tons of gold
Krishan Gopaul, the senior analyst at the World Gold Council, said on April 7 this year: We expect central banks to become net buyers in 2021, but the outlook for central bank demand in the near term remains delicately balanced.
Fewer than 100 countries in the world have large gold reserves. Of the 35,000 tons of gold reserves in the world, five countries have most of the gold resources. Only 34 countries in the world have more than 100 tons of gold reserves
United States: 8133.5 tons, gold accounts for foreign exchange reserves (%) = 0.761%
Germany: 3391.3 tons, gold accounts for foreign exchange reserves (%) = 0.732%
International Monetary Fund: 2,814 tons
China ranks 6th: 1054.1 tons, gold accounts for foreign exchange reserves (%)=0.017;
Japan ranks 9th: 765.2 tons, gold accounts for foreign exchange reserves (%) = 0.033;
India ranks 11th: 557.7 tons, gold accounts for foreign exchange reserves (%)=0.103;
The European Central Bank ranks 12th: 502.1 tons, gold accounts for foreign exchange reserves (%) = 0.333;
Taiwan ranks 13th: 423.6 tons, gold accounts for foreign exchange reserves (%) = 0.059;
Singapore ranks 26th: 127.4 tons, gold accounts for foreign exchange reserves (%) = 0.027;
South Korea ranks 40th: 70.4 tons, gold accounts for foreign exchange reserves (%) = 0.012;
Malaysia ranks 50th: 36.4 tons, gold accounts for foreign exchange reserves (%) = 0.015
Purpose of Reserve Gold
Why do countries need to reserve gold?
Gold is the most reliable means of value preservation. It has value in itself, so its purchasing power is relatively stable. Under the environment of inflation, the price of gold has risen simultaneously.
On the other hand, during deflation, the price of gold will not fall, because every political and financial situation in history has been turbulent, there has been a wave of buying gold.
Gold reserves are completely within the autonomous power of the country. A country can control its own gold without external interference.
Compared with paper money, gold has relative inherent stability, while paper money is affected by the credit and solvency of the issuing country or financial institution.
The debt is in a passive position and is not as reliable as gold. The role of gold as a national reserve cannot be ignored. Today, the total amount of gold exchange reserves in various countries is about 32,000 tons.
The practical role of gold reserves
- Reserve diversification
- Economic security
It plays an important and positive role in stabilizing the state-owned economy and maintaining currency stability. Gold is a unique asset, it is not directly affected by any country’s monetary policy and finances. When inflation occurs in the country, gold will not depreciate. Therefore, there is no risk, so keeping some gold at home is not afraid of inflation.
3. Material security
Many countries have implemented foreign exchange controls in the past, and what is more, all foreign exchange assets have been frozen. These measures have often had a great impact on reserves made up of foreign securities. When gold is reasonably held in the reserves, this effect will be reduced. The role of reserves is to prepare for emergency use. Complete liquidity is essential. There is no doubt that gold has exactly this characteristic.
4. Gold plays the role of “war fund”
In a state of emergency, all countries may need cashflow resources. Gold has liquidity and is a method generally accepted by all countries. In addition, gold can be mortgaged
5. The development of gold reserves can be used as a sign of the strength of countries
Powerful countries also have large gold reserves. This shows that gold is still a symbol of the comprehensive strength of various countries. Therefore, gold reserves are still valued by all countries in the world, especially developed countries. Therefore, as individuals, a country wants to reserve more gold, why don’t we personally save gold?
6. National deposits are for strategic reserves
7. Gold is not easy to damage, nor is it easy to depreciate like paper money
Therefore, holding gold by a government will increase public confidence. Some countries clearly recognize that gold has a strong supportive effect on their currencies. In addition, gold reserves are conducive to improving solvency. The main role of the official gold reserves of various countries is to serve as a reserve for international payments. The amount of a country’s gold reserves is closely related to its foreign debt solvency. If a country has gold in its reserves, the rating agency will give it the green light. Therefore, gold reserves are conducive to improving a country’s creditworthiness. This is true for a country and a company. If you also have some gold in your home, your creditworthiness must be very high
8. Holding gold is just like holding an insurance
In case of emergencies, the payment responsibility is guaranteed at any time. All in all, there are many benefits for the country to hold gold, so each of our families should be like the country. If we want to maintain stability, we should also save some gold.
Buying gold is a viable choice for alternative currencies and investment products. Your gold is always your stable reserve and can be changed back to currency at any time
If the price of gold falls, you will get more gold;
If the price of gold rises, you will get less gold and more cash;
In the long run, you will benefit from a better average price.
AUVESTA is a famous German gold company that has been operating since 2009, specializing in the purchase, sale and storage of physical gold, silver, platinum and palladium
Auvesta is an international company and one of the leading precious metal suppliers. It currently supports 109 countries to ship gold and also has more than 200,000 customers. Using Auvesta Online Depot online warehouse, you can store, buy, sell and store physical precious metals online
AUVESTA is currently one of the projects of Work Your Wealth. It has anti-inflation and value-added asset investment projects. It is a long-term investment and has high stability.
Won DFSI evaluation and praise for many times
Also featured in the famous German business magazine-Focus Money
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Starting from 1 Euros a month for the family’s gold savings plan
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