Gold has a certain aura about it for investors and countries. For most of history, gold has been a rare and valuable metal. As a result, people have invested in gold and it has been used as currency since ancient times. Moreover, since the late 1800s, countries have stored gold as reserves because it emerged as a currency. Eventually, it evolved into the gold standard.
The gold standard in various forms effectively concluded in 1971 when the United States stopped allowing the conversion of the U.S. dollar to gold. This action essentially ended the Bretton Woods system set up in 1944. However, many countries, including the United States, still hold substantial gold reserves.
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What is a Gold Reserve?
A gold reserve is a quantity held by a country’s central bank. During the gold standard era, gold was used as currency, and paper money would be redeemed for gold. Hence, national or central banks held gold to permit this exchange.
The gold standard ended in 1931 in Britain and 1933 in the United States. The federal government devalued the dollar and nationalized private gold holdings. From here, a quasi-gold standard developed where central banks could exchange U.S. dollars for gold. Countries held gold reserves to redeem for paper money because gold was convertible to U.S. dollars.
They also held it for trading, as a store of value, to support the currency, and fight inflation. It could also serve as currency with neutral nations during wars.
End of the Gold Standard
Eventually, private gold markets developed, causing a divergence between the official and market rates. Subsequently, high inflation combined with growing economies made the $35 per ounce peg untenable.
The Bretton Woods gold standard ended in 1971 when President Nixon stopped allowing the convertibility of the U.S. dollar for other nations’ central banks. However, this measure was meant to be temporary.
The Smithsonian Agreement devalued the dollar to $38 per ounce. But within one year, this peg became impractical too. So in early-1973, the dollar was devalued yet again to $42.22 per ounce. But the new exchange rate was unworkable in two weeks, and the dollar floated freely. At this point, the nation’s currencies were fiat money.
However, central banks still maintain gold reserves. Today, the countries with the most gold reserves typically have the largest economies.
U.S. Gold Reserves
The United States owns the largest gold reserves at approximately 8,133.53 tons at the end of March 2023. This amount is more than twice as much as the following country, Germany. This quantity is 261,143,153 Fine Troy Ounces, where one ton equals approximately 32,150.75 troy ounces. At the current gold market price of $2,056 per ounce, the United States gold reserves are worth $537,641,792,351.50. However, the book value is much lower because the statutory rate is only $42.2222 per Fine Troy Ounce.
Notably, the U.S. keeps most of its reserves in gold. According to the U.S. Treasury gold website, the gold is divided into quantities held in mints and by the N.Y. Federal Reserve Bank. The three U.S. mints are Fort Knox, Kentucky; West Point, New York; and Denver, Colorado. The tables below show the distribution by type and location.
|Federal Reserve Bank – Gold||Mint Gold – Deep Storage||Mint Gold – Working Stock|
|All Locations - Coins||Denver, CO||Federal Reserve Bank - Display||Federal Reserve Bank - NY Vault||Fort Knox, KY||West Point, NY|
Gold Reserves by Country
After the Great Recession, many countries reversed earlier trends and bought gold instead of selling it. However, the top ten nations have been relatively stable year-to-year. The International Monetary Fund (IMF) and the World Gold Council track the amount of each country’s gold reserves.
At the end of 2022, the top ten countries’ gold reserves were the United States, Germany, Italy, France, Russia, China, Switzerland, Japan, India, and the Netherlands.
The table below lists the top 50 countries by their gold reserves. In addition, the European Central Bank (ECB) and the Bank of International Settlements also have significant amounts of gold.
|Country||Abbreviation||Continent||Gold Reserves (tons)||Rank|
|United States||USA||North America||8,133.0||1|
|United Arab Emirates||ARE||Asia||54.9||45|
The country with the largest gold reserves is the United States.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.