Gold is a chemical element with the symbol Au. Gold is a bright, reddish yellow and is dense, soft, malleable, and ductile. It is a relatively rare element and a precious metal.
Because gold is one of the least reactive chemical elements, is malleable, ductile, and resistant to corrosion, and can conduct electricity, it has many uses. Gold is used for jewelry, coinage, and other arts. It has been used in infrared shielding, colored-glass production, gold leafing, and tooth restoration. Additionally, gold is used for corrosion-resistant electrical connectors in computerized devices.
Currently, a ton of gold is worth about $64.3 million at $2,000 per ounce.
Widely used in the 19th and 20th centuries, the gold standard was a monetary system in which the standards economic unit of account is based on a fixed quantity of gold. Many nations who used the gold standards have abandoned it but still hold significant gold reserves.
A gold reserve is the gold held by a nation’s central bank to support the value of the national currency and, during gold standard eras, was used as a guarantee to redeem promises to pay depositors, noteholders, or trading peers. Additionally, reserves were amassed by governments to meet the costs of waging war and to acquire and hold “treasure,” as their policies emphasized the importance of doing so.
Gold reserves are very important to governments. Governments will buy large amounts of gold when inflation starts to rise as a counteraction against it.
Additionally, the value of imports and exports from a country is highly connected to the country’s currency. If imports exceed exports, the value of the currency declines, and vice versa. This means that a country that exports gold and has a surplus of gold reserves will see an increase in the strength of its currency.
Lastly, gold can also reduce the value of the currency used to buy it. If many transactions are made in gold, the affects the demand of the local currency and can cause inflation.
Global Gold Reserves
According to the World Gold Council, the market development organization for the gold industry, there are approximately 34,891 tons of gold reserves in the world as of Q1 2020.
The top ten central banks with the latest gold reserves have remained relatively the same over the past few years. ten countries with the largest gold reserves in the world are:
- United States.- 8,134 tons
- Germany - 3,364 tons
- Italy - 2,453 tons
- France - 2,436 tons
- Russia - 2,299 tons
- China - 1,948 tons
- Switzerland - 1,040 tons
- Japan - 765 tons
- India - 642 tons
- Netherlands - 612 tons
The United States has the largest gold reserves in the world at 8,134 tons, more than Germany and Italy combined. The U.S also has the highest gold allocation as a percentage of its foreign reserves at 76%. The majority of U.S. gold is held in Fort Knox in Kentucky.
Many central banks turned from being net sellers to net buyers in 2010. Russia has been the largest purchaser of gold for the last seven years, purchasing 274 tons in 2018 alone.