Which Countries Have The Highest Amount Of Gold Reserves? This Is Where India Ranks Among The Top 10
Countries keep gold reserves because they are crucial for economic stability, especially during financial uncertainties. In the late 1800s and much of the 1900s, the gold standard was a global practice. This meant countries backed their paper money with gold, setting a fixed exchange rate between their currency and a certain amount of gold. People could exchange their paper money for gold at this rate.
Although the gold standard was officially abandoned in the 1970s, many countries still hold gold reserves. The demand for gold is increasing due to economic uncertainty. Central banks now prefer gold as a safe asset. Gold reserves play a key role in determining a country's creditworthiness and overall economic health, even as the global economy changes.
Why Do Countries Have Gold Reserves?
Countries keep gold reserves for several reasons:
- Stability: Gold is seen as a stable and reliable store of value, boosting confidence in a country's economic stability during uncertain times.
- Currency Support: Historically, gold has supported the value of a country's currency. Even without the gold standard, some countries still use gold reserves to maintain currency stability.
- Diversification: Gold is a tangible asset that helps diversify a country's portfolio, reducing risks associated with other asset fluctuations.
- Inverse Relationship with the US Dollar: Gold tends to increase in value when the US dollar declines, helping central banks protect their reserves during market volatility.
- International Trade and Finance: Gold reserves can settle trade imbalances or serve as collateral for loans, enhancing a country's creditworthiness and influence in the global economy.
- Hedge Against Crises: Gold's value often rises during economic downturns or geopolitical uncertainties, protecting against inflation and currency devaluation.
What is India's Ranking in Gold Reserves?
India ranks 9th in the world for gold reserves. With a strong cultural connection to gold and a history of using it as a store of value, India's gold reserves help maintain economic stability and are an important part of its financial system.
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Top 10 Countries by Gold Reserves in 2024??
| Rank & Country | Gold Reserve (in tonnes) | Gold Reserve (in $ millions) | Holdings in % |
|---|---|---|---|
| #1 United States of America | 8,133.46 | 579,050.15 | 71.33% |
| #2 Germany | 3,352.65 | 238,662.64 | 70.56% |
| #3 Italy | 2,451.84 | 174,555.00 | 67.55% |
| #4 France | 2,436.88 | 173,492.11 | 68.61% |
| #5 Russian Federation | 2,332.74 | 166,076.25 | 28.14% |
| #6 China | 2,262.45 | 161,071.82 | 4.64% |
| #7 Switzerland | 1,040.00 | 69,495.46 | 8.04% |
| #8 Japan | 845.97 | 60,227.84 | 4.67% |
| #9 India | 822.09 | 58,527.34 | 8.98% |
| #10 Netherlands | 612.45 | 43,602.77 | 60.47% |
RBI Moves 100 Metric Tonnes of Gold to Domestic Vaults
The Reserve Bank of India (RBI) has transferred 100 metric tonnes of gold from the United Kingdom to domestic vaults in FY24, marking one of the largest gold movements since 1991. This move increases India's total gold holdings to 822 metric tonnes in FY24, with a significant portion still stored in foreign vaults, including the Bank of England.
This transfer comes in the wake of rising geopolitical tensions and the West's freezing of Russian assets, which have heightened concerns about the security of overseas assets. The RBI's decision reflects these concerns and underscores the importance of securing assets domestically.
What Are Gold Reserves?
Gold reserves are the gold held by a country's central bank, serving as a backup for financial promises and a store of value. India, like many other nations, stores some of its gold reserves in foreign vaults to spread out risk and facilitate international trading.
Where Does the RBI Store Its Gold?
- India's gold reserves are primarily stored at:
- The Bank of England, known for its stringent security protocols.
- The Bank for International Settlements (BIS) in Basel, Switzerland.
- The Federal Reserve Bank of New York in the United States.
Why Does the RBI Store Gold in Foreign Banks?
During India's foreign exchange crisis in 1990-91, the country pledged some of its gold reserves to the Bank of England to secure a $405 million loan. Despite repaying the loan by November 1991, India opted to keep the gold in the UK for convenience. Storing gold overseas facilitates trading, swaps, and earning returns, though it also poses risks, particularly during geopolitical tensions and conflicts. The recent freezing of Russian assets has raised concerns about the safety of assets kept abroad, likely prompting the RBI's decision to relocate a portion of its gold reserves to India.
With its substantial gold reserves, the RBI can influence local gold prices by deploying some of its holdings domestically. The bank has been increasing its gold purchases, especially as global faith in the US dollar wanes. Last financial year, the RBI added about 27.47 tonnes of gold to its reserves, bringing the total to 794.63 tonnes. The increased gold reserve serves as a hedge against financial crises, helping to manage inflation and currency devaluation.
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