As the global economic crisis has been heating up over the past few years and money has been printed to compensate at alarming levels many have turned to Gold hedge against inflation and possible collapse of fiat currencies. The US alone has tripled the monetary base since the 2008 banking collapse and created trillions of dollars out of thin air.
The most interesting point is that central banks, the very institutions that have been printing the money, are buying gold up by the tons. In 2009 central banks started turning to gold and for the first time since 1997 they became net buyers; prior to that they were slowly liquidating their positions.
In a recent report by the World Gold Council it is estimated that central banks/governments own 16.5% of the world’s gold supply, totaling around 30,000 tons. So which countries own the most and what are they valued at in today’s market?
15. Venezuela- 403.1 tons valued at $20.64 billion
14. Portugal- 421.5 tons valued at $23.9 billion
13. Taiwan- 466.8 tons valued at $23.9 billion
12. ECB- 533.3 tons valued at $28.33 billion
11. India- 614.6 tons valued at $31.47 billion
10. Netherlands- 674.9 tons valued at $34.56 billion
9. Japan- 843.3 tons valued at $43.17 billion
8. Russia- 915.2 tons valued at $46.85 billion
7. Switzerland- 1,146.2 tons valued at $58.68 billion
6. China- 1,161.6 tons valued at $59.47 billion
5. France- 2,683.8 tons valued at $137.4 billion
4. Italy- 2,701.9 tons valued at $138.33 billion
3. IMF- 3,101.3 tons valued at $158.77 billion
2. Germany- 3,747.9 tons valued at $191.89 billion
1. USA- 8,965.6 tons valued at $459.04 billion
Gold makes up a portion of each one of these countries currency reserves. The average across the world is 11% of reserves are allocated to gold. Some of these countries have as little as 1.6% (China) and some have as much as 84.8% (Portugal). But one thing is true, most countries are attempting to boost their gold reserves through purchase and mining.
If central banks are buying gold as a currency diversifier, shouldn’t you? It just makes sense to protect your assets from the alarming amount of money printing that is going on, especially if you live in the US. The dollar has lost more than a third of its value since 2001 while gold has risen over 500%, more than making up for the loss in the dollar. Can you see why central banks are favoring the US dollar over gold?