Discussions involving gold hoarders tend to generate images of the stereotypical nervous Nellie hiding out somewhere in the wilderness. Uncivilized and irrational, they count their so-called barbaric stacks of gold, which are located next to a lifetime supply of canned goods. While this portrayal may be amusing, the biggest hoarders of gold are some of the most advanced nations in the world.
Global gold demand reached 3,756.1 tonnes last year, valued at $170 billion, according to the World Gold Council. Demand was down from the prior year due to heavy outflows in exchange-traded funds and similar products, but bar and coin demand surged 28 percent year-over-year as investors still had an appetite for hard assets.
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With gold prices posting their first annual loss in more than a decade, central banks around the world purchased 368.9 tonnes of gold in 2013, above the five-year average of 282.6 tonnes. Let’s take a look at the ten nations with the largest gold reserves, based on the latest international financial statistics and the WGC.
India officially holds 557.7 tonnes of gold, which represents 7.6 percent of its reserves. In 2009, the nation purchased 200 tonnes of gold from the International Monetary Fund for $6.7 billion. It was the IMF’s first such sale in almost a decade. India is the second-largest gold consumer in the world, and also a big believer in silver.
India is home to the tenth-largest economy in the world but consumes more silver than any other country. In 2013, India imported an estimated 5,400 tonnes of silver, according to Endeavour Silver. That is more than double the 1,900 tonnes imported in 2012 and higher than the recent peak of 5,049 tonnes imported in 2008. Of the world’s annual silver production, India consumes more than 20 percent.
With a large economy in relation to its population, the Netherlands holds 612.5 tonnes of gold, which represents 52.6 percent of its reserves. In 2013, a citizens committee in the nation filed a petition demanding the central bank release information about the Netherlands gold hoard, including the storage location. It is estimated that the majority of the nation’s stockpile is held abroad.
After two decades of low interest rates, it’s not too surprising that Japan has one of the largest gold reserves in the world. The nation holds 765.2 tonnes of gold, representing only 2.4 percent of its reserves.
Interestingly, the Japanese yen and gold became a well-known investment pick for 2014. Kyle Bass, founder of Hayman Capital, recently said that if he could only put on one trade for the next ten years it would be to purchase gold in yen.
Russia holds 1,034.7 tonnes of gold, which represents 8.3 percent of its reserves. Russia has more than doubled its gold reserves in recent years and is likely to keep buying. In 2011, Russian Prime Minister Vladimir Putin claimed the United States was “like a parasite” on the global economy and said the dominance of the dollar as a world reserve currency is a threat to the financial system. In 2013, Russia’s central bank added 77 tonnes of gold to its official reserves.
The land of international banking holds 1,040.1 tonnes of gold, which represents 7.8 percent of its reserves. Some citizens feel very strongly about gold. Last year, the Swiss People’s Party collected enough signatures to force a referendum on a proposal to prevent the nation’s central bank form selling any of its gold reserves and require it to hold at least 20 percent of its assets in the precious metal.
The world’s second-largest economy holds 1,054.1 tonnes of gold, which represents only 1.1 percent of its reserves. However, this underestimates China’s true holdings. The People’s Bank of China has not formally disclosed any changes to its gold holdings in years, and it’s widely believed that the central bank is purchasing gold to diversify its reserve holdings.
In 2009, China announced that it boosted its gold reserves by 454 tonnes via acquiring gold quietly over the previous five years. It represented an impressive 76 percent increase in gold reserves. Today, China is estimated by gold analysts to have around 2,000-3,000 tonnes of gold reserves. Meanwhile, consumer demand for gold in China exceeded expectations and set a new record of 1,065.8 tonnes in 2013, topping India’s 974.8 tonnes.
France holds 2,435.4 tonnes of gold, which represents about 64.3 percent of its reserves. The nation has been relatively quiet in the gold market, but six men were arrested in Paris and surrounding areas for involvement in stealing gold bars worth about 1.6 million euros from an Air France plane. On September 19, the gold was stolen from the plane shortly before it left Paris’s Charles de Gaulle airport. The plane was bound for Switzerland.
During the depths of the eurozone crisis, some analysts recommended that Italy use its gold stockpile to raise funds and restore confidence. However, the nation still holds 2,451.8 tonnes of gold, representing 65.9 percent of its reserves.
Much like Italy, speculation suggested that Germany might ultimately use its gold reserves to boost the European bailout fund, but this never materialized. Germany holds 3,387.1 tonnes of gold, which represents 67.1 percent of reserves.
At the beginning of 2013, Germany’s Bundesbank confirmed reports and announced that it will repatriate a portion of its foreign gold reserves. Over the next seven years, the central bank intends to store half of Germany’s gold reserves in its own vaults within the country, compared to only 31 percent now. The other half will remain in New York and London.
In a press release, the central bank explained said, “With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time.”
Despite ending the gold standard in 1971, the world’s largest economy holds 8,133.5 tonnes of gold, representing 71 percent of reserves. On August 15, 1971, President Nixon made the following statement that gold bugs will remember forever.
“In recent weeks, the speculators have been waging an all-out war on the American dollar. The strength of a nation’s currency is based on the strength of that nation’s economy — and the American economy is by far the strongest in the world,” he said. “Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators. I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.”
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Disclosure: Long EXK, HL, PHYS