- by Graham Holton
- The Guardian
- Issue #2118
The data is based on 2013 figures released by the IMF’s International Financial Statistics and demonstrates that 88% of the world’s gold reserves are held by 20 countries. Graphic: Karus Chains – Wikimedia Commons (CC BY-SA 4.0) / edited.
In July 2024 Reuters reported an increasing number of countries were repatriating their gold reserves from the US and UK as protection against possible sanctions. The US currently holds 4,600 tonnes of gold in its Bullion Depository at Fort Knox, and a large amount in the Federal Reserve Bank in New York. The freezing of almost half of Russia’s US$640 billion in gold and foreign exchange reserves by the G7, and the seizure of other countries’ assets, led to central banks around the world withdrawing their gold reserves to hold them in their own central banks.
In 2019, when the Venezuelan government tried to retrieve its gold reserves, it was sanctioned by the US government. In August 2020 the US seized millions of dollars’ worth of Iranian fuel bound for Venezuela, the largest-ever seizure of its kind. In July 2022 London’s High Court ruled against Venezuela withdrawing US$1 billion from the Bank of England. Recently the US seized Venezuelan President Nicolas Maduro’s airplane in the Dominican Republic (see ‘Global Briefs’, page 13, this issue).
Other countries trying to retrieve their gold reserves have been knocked back. When Germany’s Bundesbank asked the Federal Reserve to investigate the gold it held in the US, the Fed refused, saying it was a threat to US financial security. Some analysts believe these gold reserves have been used as collateral by the US Treasury and the Federal Reserve and are no longer available. Instead, in 2017 Germany was able to repatriate 674 tonnes of gold from Paris and New York.
At the beginning of the Ukraine conflict in February 2022, the Biden administration transferred Russian assets frozen in US banks to Ukraine, supposedly to help rebuild the country. The seizure sent shockwaves through the global capital markets. The unilateral seizure of other countries’ assets has caused many countries in the Middle East and Africa to withdraw their gold from the US and UK. These include South Africa, Nigeria, Egypt, Ghana, and Saudi Arabia. The Central Bank of Russia now holds all its gold bullion within Russia.
Recently, India has substantially increased its gold reserves to 822 tonnes. This year, India’s Reserve Bank purchased 24 tonnes of gold in four months, one and a half times more than all gold it purchased in 2023. In early 2024 India removed 100 tonnes of its gold from London to India’s central bank.
Geopolitical tensions have resulted in increased gold reserves and record gold purchases by central banks around the world, forcing international gold prices to record levels. The World Gold Council reported that the price of gold in August had increased to US$2,513 per oz. In 2023, Algeria held the largest gold holdings in Africa with 174 tonnes. This was followed by Libya with 147 tonnes, Egypt with 126 tonnes, and South Africa with 125 tonnes. Billions of dollars in gold reserves disappeared from the Libyan Central Bank in 2011, when NATO destroyed Libya. In early 2024, Beijing held more than 2,260 tonnes of gold, the sixth largest national gold holder, predominantly stored domestically.
US control of international markets has weaponised the dollar by imposing financial sanctions on countries it has disputes with. In reaction, countries have de-dollarised. According to an Invesco survey of central banks and sovereign wealth funds, many countries have been spooked by these sanctions and seizures, and prefer to hold their gold in their own central banks. According to a Reuters survey of central banks: “Almost 60 per cent of respondents said it had made gold more attractive, while 68 per cent were keeping reserves at home compared to 50 per cent in 2020.” Central bank net demand, mainly from China, Turkey and India, totalled 290 tonnes in the 1st quarter of 2024. This was the strongest start to any year on record.
It’s more than fifty years since the US went off the gold standard, but gold reserves are still an important reserve asset. As for the US dollar, there is currently no alternative to it being the world’s reserve currency, despite a number of countries trying. In 2022, the US dollar accounted for 51 per cent of global reserves. This is expected to drop to 40 per cent by 2030. China, Russia, Brazil, and Iran have started cross-border local currency settlements, and the BRICS Organization and the Shanghai Cooperation Organization are considering a settlement system that bypasses the US dollar.
The US likes to throw its weight around with sanctions, but as the story of gold reserves show, the sanctions can come back to bite the bully that weilds them.
