Gold is a popular investment, and many people are interested in who owns the most. It’s often considered a hedge against inflation, recession and currency crises.
Central banks hold large quantities of gold as a way to protect their currencies from the volatility of currency markets. This has helped drive the price of gold higher over time.
1. The U.S. Federal Reserve
Gold is a key reserve asset for many central banks and governments worldwide. It serves as a hedge against inflation and the threat of economic calamity.
However, today’s governments no longer require all their money to be backed by gold. They still store huge stacks of bullion to guard against hyperinflation or another monetary crisis.
A major reason why gold is so important to a country’s financial stability is because it carries no credit risk, meaning that it can be used to finance the country’s debt without exposing it to the risk of defaulting on its loans. This can be especially crucial in times of economic turmoil when it may be difficult for a government to meet its debt obligations.
In the United States, for example, a large portion of the country’s gold is held in vaults at the Federal Reserve Bank of New York. The rest of the country’s gold is stored in mint facilities at Fort Knox, West Point, and Denver.
2. The European Central Bank
The European Central Bank is a European institution, founded in 1998 to which the countries of the Eurozone have transferred their monetary powers. Its official role is to combat inflation within the Eurozone.
The ECB has its own legal personality and is governed by European law. Its capital is about EUR11 billion, which is held by the national central banks of the member states as shareholders. The capital is allocated to each of the national central banks using a key that is based on their populations and GDPs, which is adjusted periodically.
In 1999 when the Euro was created, each of the founding member national central banks transferred a quantity of foreign reserve assets to the ECB. These included gold and other precious metals.
India is home to the world’s largest privately held gold hoard, estimated by the World Gold Council to be worth $1.5 trillion at current prices. It’s mostly lying idle as India goes capital hungry, but the government has been trying for years to monetise the gold.
One way has been to encourage families to borrow money against their gold jewelry. Banks and other financial institutions have boosted the number of branches offering loans against gold.
People have been lured into these loans by lower interest rates and the fact that the gold could be auctioned to repay the loan if they didn’t pay it back. It’s a form of credit that is still common in rural areas, and borrowers are using the gold as their only security.
The latest effort to limit gold holdings is a step in the right direction. But it’s not a very practical solution.
Switzerland is a small, landlocked country centered around the Alpine region of Central Europe. It is one of the wealthiest and most developed countries in the world, with high employment rates, a thriving economy and one of the highest gross domestic product per capita.
Swiss banks are also well known for their privacy policies, which have earned the country a reputation as one of the safest places to store your money. They also have some of the lowest corporate tax rates in the world, making them an attractive destination for investment.
The international gold trade is conducted mainly through banks and privately owned independent gold dealers in Switzerland. As such, the industry is not well known for its transparency. This has resulted in a series of scandals, including the “blood gold” that has been allegedly sourced from Peru, Togo and Burkina Faso. This is a serious issue because it involves tampering with the rights of native peoples to self-determination and ownership of their ancestral lands.