Which country consumes the most gold?
Gold reserves worldwide
Status: end of 2020
- USA has the largest gold reserves, followed by the Bundesbank
- Central bank acquisitions in 2020 total: 272.9 tons
- A decrease of 59% compared to the previous year
- The Turkish central bank bought the most gold in 2020
- From a global perspective, central banks have been net buyers of gold since 2009
What exactly does "gold reserves" mean?
As Gold reserves denotes the state gold holdings owned by a central bank or a finance ministry. Deviating from this definition, the gold of the International Monetary Fund (IMF) is also included in the gold reserves.
The function of gold reserves has historically been to back up a currency with gold. Today gold reserves form part of a country's international currency reserves and primarily serve as a financial reserve that can be quickly liquidated in an emergency.
The USA, Germany and the IMF have the largest gold reserves. China and Russia are the countries with the fastest growing gold reserves.
Top 20 central banks gold reserves, as of year-end 2020: (1)
|place||country||Gold reserves (tons)||corresponds to the proportion of total reserves|
|1.||United States||8133,5||78,7 %|
|18.||Saudi Arabia||323,1||4,1 %|
|19.||United Kingdom||310,3||10,5 %|
Recording and publication of the gold reserves
The central banks report changes in their gold holdings to the IMF, which shows these changes in its financial statistics. On the basis of this data, the lobby organization of the gold industry, the World Gold Council, publishes regular reports on the gold reserves of the central banks.
However, the specific amount of gold stocks alone is only of limited informative value. A central bank's gold ownership only becomes interesting when it is compared to the currency reserves. In absolute terms, the Chinese hold a high amount of gold, the percentage of which is in their currency reserves, still very low, but the trend is growing. The appetite for gold is likely to persist for years in some countries due to the need for broader diversification.
Development of gold reserves 19th century - today
Gold reserves in the classic gold standard (1844 - 1914/1933)
The function of state gold reserves has historically been the ideally complete and in practice at least extensive cover for a currency in circulation. Great Britain ushered in the era of the classic gold standard with the Bank Charter Act of 1844, which prescribed predominantly gold backing for new banknotes from the Bank of England. At the same time, other British banks were banned from issuing banknotes. In the German Empire, the gold standard was in effect from 1871 after France had to pay significant amounts of gold as reparations for the Franco-German War. In 1885 the states of the Latin Monetary Union followed and in 1900 the United States finally followed.
The decline of the classic gold standard began in 1914, mainly caused by the costs of the First World War. The idea of currency coverage by gold reserves while government spending rose sharply at the same time could not be upheld, so that the warring states ended convertibility. The attempts in the 1920s to reintroduce the gold standard and thus convertibility were ultimately unsuccessful. Britain finally finished the conversion in 1931 and the US in 1933.
The increased economic importance of the USA since 1900, which resulted primarily from its role as a financier of the Allied warring parties in World War I, can also be clearly seen in the country's rapidly increasing gold reserves. When the US introduced the gold standard in 1900, gold reserves totaled 602.5 tons. In 1935 the stocks were almost 17 times as high at 9,998 tons. No other country had anywhere near as much gold.
Gold Reserves in the Bretton Woods System (1944 to 1973)
In 1944, the gold dollar standard was introduced with the establishment of the Bretton Woods system. In this system, the US dollar took on the role of a gold-backed reserve currency, the value of which was set at 35 dollars per troy ounce. As in World War I, the USA received significant amounts of gold from European stocks in World War II. In 1945 the country owned almost 18,000 tons of gold. In 1950 the all-time high of 20,279 tons was reached.
The value of the other currencies in the Bretton Woods system was linked to the US dollar through fixed exchange rates. At the same time, the US Federal Reserve was obliged to exchange dollars for gold. Due to the gradual increase in the dollar volume in circulation paired with the exchange obligation, a continuous reduction in the US gold reserves began from the end of the 1950s. Significant amounts of gold were soon in the possession of other states such as Germany, which had foreign trade surpluses in dollars. By 1968, the US gold reserves had sunk to less than 10,000 tons.
From 1960 onwards there were increasing differences between the fixed gold price of $ 35 per troy ounce and the market price for gold. In retrospect, this development was inevitable. Ever larger dollar volumes were required for the rapidly expanding world trade. The USA itself also increasingly needed more money for welfare state and military expenditure. Since the amount of gold did not increase to the same extent as the amount of money, a rising gold price was the logical consequence. Interventions by the central banks in the gold market in the so-called London gold pool with the aim of defending the gold price of 35 dollars were ultimately unsuccessful.
In 1970, the gold backing of the US currency fell to 22 percent. In 1971 US President Richard Nixon unilaterally announced the convertibility of the dollar. When the European and Japanese central banks for their part abandoned the peg of their currencies to the US dollar in 1973, the Bretton Woods system came to an end.
Gold reserves in the system of free exchange rates (1973 to today)
In today's international currency system of free exchange rates, gold reserves serve the states as security and financial reserve, but have lost their currency-covering function. The total stock of global gold reserves at the end of the Bretton Woods system in 1973 was 36,798 tons. Several decades followed in which central banks, economists and private investors saw gold ownership as increasingly unimportant. Accordingly, the gold reserves slowly but steadily decreased. The bottom was reached in 2007 and 2008 when the combined global gold reserves were less than 30,000 tons of gold.
Gold reserves after the financial crisis from 2007
The bottom line is that in 2009 the central banks switched sides from net sellers to net buyers of gold. This historic U-turn was primarily a consequence of the financial crisis that began in 2007, which resulted in a massive expansion of the money supply and national debt in the USA, and later in other important currency areas such as the euro zone.
The signatory states to the CBGAs reduced their annual gold sales from over 350 tons in 2008 to almost zero in 2012 and have since played no significant role as either seller or buyer of gold. At the same time, a number of emerging countries began to increase their gold reserves, in some cases significantly, so that the total gold reserves currently amount to around 34,716.5 tons (as of February 2020).
Gold reserves in industrialized and emerging countries
Viewed as a group, the developed world, largely identical to the CBGA signatories and the US, still hold most of the gold reserves. But this imbalance is in an ongoing process of shifting in favor of emerging economies. Russia and China play a key role in this process. Both countries have greatly increased their holdings in recent years through gold purchases. Russia now ranks 6th and China 7th in the ranking of the largest gold reserves.
Development of the global gold reserves 1975-2020
|year||Total gold reserves world (tons)|
|2015 (October)||32,687.0 t|
|2020 (end of year)||35,196.9 t|
Source: IMF / IFS / World Gold Council, "World Official Holdings"
Central Bank Gold Agreements (CBGAs) 1999-2019
The principal monetary role of gold as part of the currency reserves was confirmed by the European Central Bank and 14 central banks of individual European states in 1999 through the Central Bank Gold Agreement (CBGA). In this agreement, the signatory states undertook to stabilize their gold reserves, which essentially meant no longer selling gold on a large scale. The sale of gold was limited to 400 tons per year. The IMF, the USA and other countries such as Australia joined the CBGA informally or separately announced that they do not want to sell gold on a large scale.
It was triggered by the UK's decision in May 1999 to sell over half of the UK's gold reserves. There were also ongoing gold sales in Austria and the Netherlands. Similar plans existed in Switzerland.
As a result, the Central Bank Gold Agreement was renewed every five years. Three successor agreements followed by 2019 (CBGA II-IV). Although the CBGAs had no legally binding effect on the central banks, they were adhered to with the exceptions in 2005 and 2007.
The fourth Central Bank Gold Agreement
The fourth agreement, the "Fourth Central Bank Gold Agreement", was last in force. It was signed in May 2014 and also lasted 5 years, i.e. until 2019. In this, the participants reaffirmed that they recognize the important importance of gold as a currency reserve, coordinate transactions and do not sell any significant gold holdings.
- Nationale Bank van België / Banque Nationale de Belgique
- German Bundesbank
- Eesti Pank
- Central Bank of Ireland
- Bank of Greece
- Banco de España
- Banque de France
- Banca d’Italia
- Central Bank of Cyprus
- Latvijas Banka
- Banque centrale du Luxembourg
- Central Bank of Malta
- De Nederlandsche Bank
- National Bank of Austria
- Banco de Portugal
- Banka Slovenije
- Národná banka Slovenska
- Suomen Pankki - Finlands Bank
- Sveriges Riksbank
- Swiss National Bank
On July 26, 2019, the ECB announced that an extension of the 4th CBGA beyond 2019 was no longer planned. The CBGA program therefore expired on September 26, 2019. The reason given was that the development of the gold market, as well as the general increase in the gold price since 1999, would make a new CBGA extension “no longer necessary”. The participating central banks had in fact no longer acted as gold sellers in recent years. The following overview shows how low the gold sales by the CBGA participants were at the end. Compared to the global transaction volume of all central banks, the quantities are hardly worth mentioning:
Identified sales under the Fourth Central Bank Gold Agreement (CBGA4) *
|Period||Quantity (in tons)|
|27.9.2014 - 26.9.2015||3.39 t|
|27.9.2015 - 26.9.2016||3.07 t|
|27.9.2016 - 26.9.2017||4.20 t|
|27.9.2017 - 26.9.2018||3.98 t|
|27.9.2018 - 26.9.2019||0.47 t|
* Source: World Gold Council, May 2019
Germany's gold reserves
Development of the German gold reserves
Immediately after World War II, Germany had no gold reserves. In the balance sheet of the Bank deutscher Länder (since 1958: Deutsche Bundesbank), gold is listed for the first time in 1951 with a stock of 24.5 tons. By 1968, the German gold reserves had multiplied to an all-time high of 4,033 tons. This development was made possible by the foreign trade surpluses that Germany generated during the economic miracle of the 1950s and early 1960s.
The decline in German gold reserves of around 650 tons between 1968 and 2015 is mainly due to a one-time sale of 435 tons to the US Federal Reserve in 1969 and a deposit of 232 tons into the currency reserves of the European Central Bank in 1999. Since 2001, the Bundesbank has also made small amounts of gold available to the Federal Ministry of Finance every year for the minting of commemorative coins.
Storage of the German gold reserves
For a long time, large parts of the German gold reserves were not only stored at the Bundesbank in Frankfurt am Main, but also abroad, namely at the Federal Reserve Bank in New York, the Bank of England in London and the Banque de France in Paris.
Criticism of the storage of German gold abroad
With the financial crisis of 2008, there was increased criticism of the storage of German gold reserves abroad. The criticism was sparked by a lack of inventories and an overall poorly transparent information policy of the Bundesbank with regard to gold storage. A change in the Bundesbank's accounting system also sparked suspicion. In 1998 the position "gold" was converted to "gold and gold receivables". The criticism ranged as far as downright conspiracy theories as to whether the gold was physically still there.
Transfer of German gold reserves from 2013 (repatriation)
After the Federal Audit Office had demanded a regular inventory of the German gold reserves in 2012 and the "Bring our gold home" initiative brought the topic to the attention of the public, the Bundesbank gave in to public pressure and announced a transparency offensive and repatriation. to want to bring some of the gold stocks stored abroad back to Germany. In the course of this repatriation, for example, all of the German gold was returned from France. The publication of a bullion list in 2015 was also an important signal of this new transparency.
Book "Das Gold der Deutschen"
The Bundesbank published the book at the beginning of 2018 "The gold of the Germans". The Bundesbank itself describes this book as another important part of its "transparency offensive". The book gives answers to all questions, such as:
- How did the German gold reserves come about?
- How much is stored where?
- Why is German gold stored abroad at all?
- Details on the repatriation of German gold
The book is highly recommended, provides conclusive answers and clears up unproven speculations about German gold.
Gold.de took a close look at the book:
As of December 31, 2017, the total amount of 3383.6 tons of German gold was distributed as follows:
- approx. 1715.5 tons in Frankfurt
- approx. 428.5 tons in England (Bank of England)
- approx. 1239.6 tons in the USA (Federal Reserve Bank of New York)
IMF gold reserves
The International Monetary Fund (IMF) was founded in 1944 as part of the Bretton Woods system and has outlasted its end in 1973 to this day. Its essential function was and is the granting of loans to states. With the special drawing rights established in 1969, the IMF has its own reserve currency, which, however, is not traded on the foreign exchange market and only exists as book money in the fund's accounts.
After the USA and Germany, the IMF has the third largest state and institutional gold reserves with currently 2,814 tonnes (as of July 2020). The origin of these reserves is based on the deposits of the member states determined in the quota system, from loan repayments, interest payments and payments in gold for other currencies. The IMF's last gold sale of 403.3 tons took place in 2009-2010 to improve the financial base for lending.
Gold reserves of the ECB
The currency reserves of the European Central Bank (ECB) are made up of the US dollar, Japanese yen, special drawing rights at the IMF and gold. The gold content of the original deposits by the national central banks of the euro area in 1999 was 15 percent. However, this proportion did not refer to the gold weight, but to the gold value, which is subject to market-dependent fluctuations. Of the original 747.9 tonnes of gold, after an interim high of 766.9 tonnes in 2015, 504.8 tonnes are currently still in the reserves of the ECB (as of December 2020).
- (1) World Gold Council, "Gold Demand Trends - Full Report 2020" and "World Official Gold Holdings". The latter was published in February 2021, including figures for the end of December 2020, and in some cases for November 2020.
- (2) World Gold Council, "World Official Gold Holdings" (Report at the end of 2019)
- (3) World Gold Council, "World Official Gold Holdings" (end of 2018 report)
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