Which Central Banks Are Buying Gold Most Aggressively? Which Countries Own the Most Gold?

Goldman Sachs Raises Gold Price Target
Published on: Jan 21, 2024

In the past few years, the enthusiasm for gold purchasing by global central banks has been very high, with net buying in 2022 reaching the highest level since 1950, at 1,136 tonnes, and marking the 13th consecutive year of net purchases.

Preliminary data indicates that this trend continued into 2023. The World Gold Council (WGC) has stated that it’s unlikely for the scale of gold purchases by global central banks last year to reach the record levels of 2022, but it is almost certain that central banks will continue to make large-scale net purchases in 2023, and in some respects, this has exceeded their expectations.

According to the analysis by the WGC, the two main driving forces behind central banks buying gold are gold’s performance during crises and its role as a store of value. Coincidentally, last year saw a sharp rise in geopolitical uncertainty and rampant inflation.

Why Are Many Central Banks Willing to Hold Gold?

Central banks hold gold for a variety of reasons related to economic and financial stability:

  • Diversification: Gold is an important way for central banks to diversify their reserves. Gold prices often move inversely to the value of the US dollar and react differently to market conditions than other assets, providing the balance to the portfolio.
  • Hedge Against Inflation: Gold has historically acted as a hedge against inflation. As the cost of living increases, the price of gold tends to rise along with it, preserving the value of a central bank’s holdings.
  • Safe Haven: In times of uncertainty, whether due to economic, financial, political, or geopolitical reasons, gold is viewed as a safe haven asset. It tends to retain value or even appreciate when other assets do not, providing stability in crisis situations.
  • Store of Value: Gold is a long-term store of value. Unlike paper currency, which can suffer from inflation or may become worthless if a government collapses, gold has intrinsic value that has been recognized for thousands of years.
  • Trust and Confidence: Holding physical gold can enhance the trust and confidence in the currency and the financial strength of the country, especially in the eyes of the citizens and international partners.
  • Liquidity: Gold is highly liquid and universally accepted. It can be quickly sold on global markets at prevailing market rates if liquidity is needed by the central bank.
  • Independence from Other Countries: As gold is a physical asset that doesn’t rely on other countries’ promissory notes, holding it protects a country from credit risk and currency risks associated with assets denominated in foreign currencies.
  • Protection Against Defaults and Geopolitical Risk: Gold is not a claim on another government or financial institution, so it carries no counterparty risk. In the event of default by a counterparty, gold holdings remain unencumbered.

By holding gold, central banks aim to maintain overall financial stability and create assurance both domestically and internationally that they can meet their financial obligations and withstand economic shocks.

Adam Glapiński, President of the National Bank of Poland, says:

Gold is the most reserve-valued asset: it can diversify geopolitical risks, it is an anchor of trust, especially during turmoil and crises. In his view, holding gold is about financial security and stability. Even if someone were to cut off the power to the global financial system and destroy the conventional assets based on electronic accounting records, gold would still retain its value. Although the likelihood of such a scenario is extremely low, the old saying goes, ‘better safe than sorry.’ Central banks must be prepared for the worst-case scenarios, and this is why gold enjoys a unique status in foreign exchange management.

Which Central Banks Are Buying Gold Most Aggressively?

Data from the World Gold Council show that as of November 2023, the following countries have the largest gold reserve increases:

  1. China (78 tonnes)
  2. Poland (56.6 tonnes)
  3. Turkey (39.2 tonnes)
  4. Uzbekistan (6.5 tonnes)
  5. The Czech Republic (5.5 tonnes)

The only significant seller was Kazakhstan.

Which Countries Own the Most Gold?

According to the latest data from the World Gold Council, below are the top 20 countries and regions by gold holdings. Two pieces of information are notable here. First, Poland has entered the top 20 for the first time, and second, because of the rise in gold prices, almost all the countries have reported an increase in the percentage of gold in their total reserve assets.

  1. United States: 8,133.5 tonnes, 69.6% of total reserve assets
  2. Germany: 3,352.6 tonnes, 68.7%
  3. Italy: 2,451.8 tonnes, 65.5%
  4. France: 2,436.9 tonnes, 67.1%
  5. Russia: 2,332.7 tonnes, 25.7%
  6. China: 2,226.4 tonnes, 4.3%
  7. Switzerland: 1,040.0 tonnes, 8.4%
  8. Japan: 846.0 tonnes, 4.4%
  9. India: 803.6 tonnes, 8.6%
  10. Netherlands: 612.5 tonnes, 57.9%
  11. Turkey: 522.5 tonnes, 30.8%
  12. Taiwan: 422.4 tonnes, 4.7%
  13. Portugal: 382.6 tonnes, 72.9%
  14. Uzbekistan: 362 tonnes, 72.1%
  15. Poland: 358.7 tonnes, 12.6%
  16. Saudi Arabia: 323.1 tonnes, 4.7%
  17. United Kingdom: 310.3 tonnes, 11.6%
  18. Kazakhstan: 304.3 tonnes, 58.5%
  19. Lebanon: 286.8 tonnes, 53.9%
  20. Spain: 281.6 tonnes, 18.2%

The International Monetary Fund (IMF) holds 2,814.0 tonnes of gold, which would rank it third globally if it were a country. The European Central Bank holds 506.5 tonnes of gold, ranking 13th globally. Additionally, Venezuela has the highest proportion of gold in its reserve assets (84.5%).

China News Financial Service Gold Precious Metals