Why do countries increase their gold reserves?
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Why do countries increase their gold reserves?
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Gold reserves are stocks of gold within the country, created to ensure the value of the national monetary unit and the correction of the exchange rate of the domestic currency.

The gold reserve of the state serves as an insurance in case of an unfavorable economic situation and forms a "safety cushion" at times of a financial crisis. According to the World Gold Council, as of July 2018, global reserves of the precious metal amount to 33,735 tons.

We tell about states that substantially increase their gold reserves.


The gold reserve of Germany is growing

The central bank of Germany (The Deutsche Bundesbank) published a book "The Gold of the Germans" about the national gold reserve, demonstrating a transparent approach of the German government regarding the precious yellow metal reserve. It contains detailed information about the country’s gold and, in particular, the history of gold bars’ repatriation from the US depositories back to Germany.

In 2012, The Deutsche Bundesbank announced a plan to return the German gold reserve that was stored in the depositories of other states. According to the data, Germany plans to return300 tons of US-stored gold and 374 tons of gold from France to the Bundesbank depository until 2020.

Germany increases its gold reserves annually and intends to store most of the amount in its own system.

In 2018, the country became the leader among European countries in terms of the precious metals’ reserves and was ranked second in the world in terms of the national gold reserve’s volume.


India is expanding its gold reserves

Gold is one of the main elements in the life of Indians.

According to data for April 2018, the country's gold reserve increased by 2,5 tons. In this year’s February, the country bought 23 tons of gold in Switzerland, which exceeds the January amount twice. In March, India bought 12 tons of the precious yellow metal.

The Singapore Bullion Market Association reports that the demand for the precious yellow metal in the country is growing, amounting to 800 tons per year. According to statistics, every Indian family invests in the purchase of gold jewelry 20% of its annual income.

Now the country launched a special program that allows residents of India to get "gold" state bonds and monetize the personal reserves of the precious yellow metal.

Reforms aimed at improving the domestic gold market were designed to reduce dependence on imports of precious metals from other countries and to lead India to key positions not only in Asia, but also in the world.

Mongolia increases gold reserves

According to the Bank of Mongolia, in 2018, the state purchased 7 tons of gold to increase its gold reserve capacities.

According to the official information, last year, the state’s central bank bought 20 tons of gold worth of $800 million. Experts believe that Mongolia will increase the amount of purchased precious metals in this year’s second half.

The campaign "National Gold to the Fund of Treasures" was launched in Mongolia in May 2018. Local mining companies and individual prospectors should sell gold to the banking sector only, which will lead to its share increase in the state gold reserves.


China actively buys gold

The export of gold to the PRC shows a significant growth. According to the report of the Swiss Customs Administration that contains data on foreign gold trade, China became the largest recipient of the precious yellow metal in the early 2018.

In February, exports of gold from Switzerland amounted to 145 tons, of which 66 tons of the precious metal worth 2,7 billion dollars were bought by the PRC. Compared with the same period in 2017, gold export to China increased three-fold.

According to Switzerland data, in March 2018, 40,6 tons of gold were sent to China; an 80% increase over last year’s figures for the same period.

According to the official statistics, Switzerland sold to China and Hong Kong 231 tons of the precious yellow metal during the first three months of 2018.

For the first quarter of this year, 14 tons of gold were exported to the People's Republic of China from Russia, which is three times more than for the same period in 2017. Due to a sharp increase in demand for the precious yellow metal, the plan for its supply to the Celestial Empire is adjusted in the direction of a further growth.


An increase of Russian gold reserve

The Central Bank of the Russian Federation is increasing the amount of gold in the country's reserves. At the moment, the state's gold reserve accounts for 1928 tons, making Russia the fifth largest country in the world in terms of national gold volumes.

Experts within the field of the precious metals market believe that Russia strives to significantly increase the gold reserve not only to ensure financial independence, but also to effectively keep state savings from the devaluation of paper currencies. In addition to that, Russia stores gold reserves within the state, it is a good insurance in case of unforeseen circumstances. Analysts believe that the importance of the precious yellow metal in the country will only increase.

According to the International Monetary Fund, the gold reserve of the Russian Federation is growing at a record pace — it has increased by 1,100 tons since 2009.

Opinions of experts: the price of gold will increase

Experts of the analyst consulting company Capital Economics:

"The aggravation of the tense situation in the US economy will have a positive impact on the price of gold. Investors will want to return to the precious yellow metal as a safe and reliable asset for saving money. They will regard gold as an effective tool for protecting their capital from inflation."

Analysts of BMO Capital Markets, a subsidiary of the Canadian Bank of Montreal:

"It is important to monitor the developments in the precious yellow metal market. The precarious state of the US economy will create all the prerequisites for investors to draw their attention to gold as the most liquid asset. Micro- and macroeconomic conditions will have a favorable impact on its price. The main driver behind the precious metals’ rising prices remains the demand for physical gold. Especially in the countries of Asia, where it is an integral part of the national culture."

Gold is the most universal currency. The storage of personal savings in the precious yellow metal is the most reliable way of preserving and accumulating personal capital.


Gold is the guarantor of your Financial Security!

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Published: 18.07.2018
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