Countries Buying the World’s Gold

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Gold prices may have just plummeted by double-digits — the biggest percent sell-off in four decades — but some of the world’s central banks are still buying up large amounts of the precious metal. Specifically, the central banks of six countries are adding gold to their official foreign reserves, according to The World Gold Council’s most recent report on global central bank holdings. These six nations have purchased large amounts of gold so far in 2013 or throughout 2012. And if their buying continues, their gold demand could offset some of selling pressure (which has driven gold price to below $1,400) in the future. Some nations may indeed continue buying because of central bank or currency issues.

Of course, a major market concern is that Cyprus is now likely a gold reserve seller. The World Gold Council shows that Cyprus’s 2013 gold reserve is only 13.9 tonnes, which is 61.9% of the small nation’s total foreign reserves. Concerns about selling from Cyprus are compounded by worries that larger troubled nations, including Italy, Portugal and Spain, may start selling gold to either raise capital or because of the existing Central Bank Gold Agreement sale programs. However, it does not appear that there is panic selling among most of these nations, so that effect can be discounted for the time being.

The six nations that could offset or at least mitigate gold sales by other central banks, institutions and individuals are Russia, Turkey, South Korea, Brazil, Kazakhstan and Iraq. In its analysis, 24/7 Wall St. has avoided specific speculation on why these nations may be acquiring gold because the reasons may differ from country to country.

It is worth noting is that the World Gold Council report evaluates central bank holdings and does not include investor and industrial demand in any of the countries. As recently as February, the World Gold Council showed that global central banks had bought the most gold since 1964. But India and China were no longer the demand mechanisms they had been in the past.

Many of the official central banks’ gold holdings of large nations, based on gross domestic product (GDP), are nearly the same as they were in 24/7 Wall St.’s last report: The 13 Countries That Own the World’s Gold. But if that changes and some of the troubled nations actually sell gold as a source of funds, then it be beyond the scope of retail investors and speculators to help keep gold price at even the current depressed levels.

Here are nations with largest gold reserves as measured by tonnes. This list includes the International Monetary Fund and the European Central Bank.

  • The United States (#1) was static at 8,133.5 tonnes
  • Germany (#2) was down slightly at 3,391.3 tonnes (April 2013), versus 3,401.8 tonnes in late 2011
  • The International Monetary Fund (#3) was static at 2,814 tonnes
  • Italy (#4) was static at 2,451.8 tonnes
  • France (#5) was static at 2,435.4 tonnes
  • China (#6) was static at 1,054.1 tonnes
  • Switzerland (#7) was static at 1,040.1 tonnes
  • Russia (#8) increased reserves from 851.5 tonnes in late 2011 to 976.9 tonnes (April 2013)
  • Japan (#9) was static at 765.2 tonnes
  • The Netherlands (#10) was static at 612.5 tonnes
  • India (#11) was static at 557.7 tonnes
  • The European Central Bank (#12) was static at 502.1 tonnes
  • Taiwan (#13) was static at 423.6 tonnes
  • Portugal (#14) was static at 382.5 tonnes

24/7 Wall St. has analyzed the World Gold Council data and added comments on how and why the central banks of Russia, Turkey, South Korea, Brazil, Kazakhstan and Iraq could act as the stabilizing mechanisms for gold if selling pressure continues. If history is a measure, it seems highly unlikely that retail buyers and speculators will start another wave of gold purchases. Central banks buy gold in support of their currencies, and the recent massive drop may give the central banks that can a chance to increase their gold holdings.

GDP and population estimates were both taken from the CIA World Factbook.