2016 looks to be a profitable year for gold investors. The price per ounce of the precious metal rose about 20% (in USD) since January. That’s not too bad for a safe asset like gold, while bondholders and savers around the world suffer from low to negative interest rates (and, in the case of Romania, outrageous retail-banking fees).
Gold demand surged 21% in the first quarter of 2016 – driven by central banks and huge inflows to exchange traded funds – which is the fastest pace on record, according to a report from the World Gold Council released this week.
It’s a fairly safe bet, that interest rates will remain low/negative for quite some time to come. In combination with the slowdown in USD appreciation and reduced forecasts for global growth, this is an ideal environment for a further rise in gold from the current price of 1’275 USD towards 1’400 USD per ounce by year end.
So let’s have a look, where the biggest pots of gold are stored:
Here are the top 10 countries in the world with the largest gold reserves:
India currently holds 557,7 tonnes of gold, representing 6.8% of its foreign reserves. As a side note, India is the second-largest importer and buyer of gold.
The Dutch have 612,5 tonnes of the precious metal, accounting for a whopping 54.1% of its foreign reserves. De Nederlandsche Bank (DNB, The Dutch Bank) recently repatriated 120 tonnes of gold shipped to Amsterdam from New York. The goal is to keep 31% of its reserves at the central bank vaults in Amsterdam, versus the current 11%.
Japan’s has gold reserves of 765,2 tonnes, a number unchanged since 2001.
Banking may be big in Switzerland, but gold is also important. The country currently has 1’040 tonnes of gold, accounting for 7.5% of its foreign reserves.
Russia is currently also very active in gold. Reserves soared first from 532 to 936 tonnes, recently passed the 1000-tonnes-mark and are now at 1’460 tonnes. Why the sudden love for gold? Some see it as a sign the country is reducing its dependence on the USD and the EUR. Others see it as Russia fortifying its foreign reserves in the face of economic sanctions and a recession.
From 2008 to 2009, China’s central bank increased its gold reserves 75% to 1’054 tonnes. China has not updated its bullion reserves since then. As the world’s largest producer of gold, suffice it to say, China has been quietly adding to its reserves. According to the World Gold Council, chinese gold reserves are currently at 1’798 tonnes.
France currently holds 2’435,4 tonnes of gold, representing about 65.3% of its total foreign reserves. France has been pretty quiet on the gold front – neither buying nor selling gold since before 2010.
At 2’451,8 tonnes (65.9% of foreign reserves), Italy might have the third-largest holding of gold reserves, but they haven’t been that aggressive with adding to their haul. Italy’s central bank hasn’t added to its reserves since well before the new millennium.
The largest economy in the eurozone is the second-largest hoarder of gold bullion. The country currently has 3’384,2 tonnes of gold, which accounts for 67% of total foreign reserves. Germany only keeps 31% of its gold at home. The rest is being held by the Federal Reserve in New York (45%), London (13%), and Paris (11%).
- United States
The world’s largest economy currently holds 8’133,5 tonnes of gold, representing approximately 72% of its foreign reserves. Interestingly, U.S. gold reserves have been pegged at 8’133,5 tonnes since the first quarter of 2005.
In case you’re wondering..
- Romania ranks 35th with gold reserves of 103,7 tonnes or 10,4% of foreign reserves.
- Other institutions than central banks, for instance the International Monetary Fund (2814 tonnes), have their own substantial gold reserves.
- The biggest decrease in gold reserves in the last month was observed in Venezuela. The hard hit country (see this week’s post: ‘On The Brink Of Collapse’) was forced to sell 88 tonnes – almost a quarter of its total gold reserves – to obtain credit-lines or hard currency to finance much needed imports simply to survive.
A final note: As it is with country-rankings: The total value figures show only one side of the coin. To compare countries, it’s often useful to take the size resp the population into account.
This ‘per capita’ approach would lead to a table with ‘gold reserves per person’ in a country. As an example: The ‘population-factor’ between China (1’400 million) and Switzerland (8 million) is 175. With Switzerland’s gold reserves of 1040 tonnes, China should have over 180’000 tonnes to match Switzerland’s gold reserve per capita. Not very likely any time soon, especially given the fact, that all the gold ever mined in human history is just about 180’000 tonnes.
Due to its high density, 1 ton of gold equals a cube of no more than 37 cm on each side. Therefore, all the gold thats ever been mined, would create a cube not bigger than a medium sized house of about 21 meters on each side.
The gold investments pyramid
Ways to invest in gold