Central Bank Gold: Who Holds the Most and Why It Matters

Most central banks would be sellers of gold in the bulk of the 1990s and early 2000s. They have been buying since 2010 and at the fastest rate in over 50 years since 2022. This change is one of the most significant structural changes in the gold market and accounts for the fact that gold rose even when the rest of the indicators were bearish.

This article clarifies what central bank gold reserves are, who holds the most, why governments are purchasing gold, how to interpret the data and what it can and cannot tell you.

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The reasons behind central banks' gold reserves

Central banks have foreign exchange reserves to back up their currency, meet foreign obligations and to ensure the stability and confidence of the financial system. Typically, these reserves are kept as government bonds and deposits in leading currencies such as the U.S. dollar and euro in addition to gold. Unlike currencies, gold provides characteristics such as:

• No counterparty risk. Gold is not "somebody else's responsibility" and gold can't be defaulted.
• Diversification. It does not follow bonds or currencies.
• Crisis liquidity. There is no set, predetermined, rate at which gold can be sold or pledged in emergencies.
• Confidence. Huge gold collections represent solid growth and health.
• Protection from sanctions. Physical gold in a country's own vaults is not subject to financial controls of other governments.

This latter factor gained significance after February 2022 when foreign central bank reserves of Russia were frozen due to its invasion of Ukraine. This was deemed as an indicator that foreign-held reserve assets may be limited. The World Gold Council has also conducted an annual survey of central banks, which finds that there is great interest in gold.

Who holds the most

Gold holdings data is gathered by the World Gold Council from the International Monetary Fund's International Financial Statistics and from national sources. Rankings fluctuate over time but have tended to look as follows over the last few years:

• The United States is the biggest, holding over 8,000 tonnes, and gold makes up most of its reserves.
• Germany, Italy and France: each over 2,000 tonnes.
• Large countries, notably Russia and China, are among the biggest buyers, and significant purchases have been made in recent years. The amount of Chinese reported holdings represents a relatively small portion of the country's overall reserves, with prospects for expansion.
• The top ten also include Switzerland, Japan and India.

The table you see below is the most recent World Gold Council table which shows the current rankings, and as the countries buy or sell, the positions change.

The buying surge

Central banks shifted to net buying after 2008 financial crisis, after many years of net selling. In 2022, it picked up significantly. World Gold Council data shows net central bank purchases tripled from the 2010s' 400 to 600 tonnes per year to reach more than 1,000 tonnes in 2022, 2023 and 2024. The countries that have purchased it include Turkey, India, China, Singapore, Poland and many more. Emerging-market central banks have been the most active for many reasons, in part to drive down dollar dependence.

For comparison, 1,000 tonnes is approximately equal to 32.15 million troy ounces. If the price is $2,000 per ounce, 1,000 tonnes would be worth approximately $64 billion. Official buying at that level is a significant percentage of total annual mine production, and thus can influence the market.

The legacy of central bank sales

The first Central Bank Gold Agreement (Washington Agreement) was signed by a group of European central banks in 1999. It limited the amount of gold that signatories could sell in a year, to prevent the market from becoming chaotic because of the Bank of England's gold sales around this time. The agreement was renewed on a number of occasions and the final agreement expired in 2019 with no renewal, by which time sales had virtually ceased.

How to read central bank data

The numbers are good but not perfect.

• Reporting lags. The data presented here may be a month or more out of date because countries report to the IMF with a lag.
• Unreported purchases. Not all purchases are reported at the time of the purchase; and some analysts believe there are more purchases than are reported. The World Gold Council distinguishes purchases reported from the estimation of unreported purchases.
• Tonnes versus value. If the quantity of gold in reserves does not change, then the value of the reserves will increase with an increase in the gold price. Make sure to see if the statement is about weight or value.
• The proportion of reserves made up of gold. A high share implies there is less room for potential further purchases, while a low share (as in some emerging economies) implies more room.

But official demand is no guarantee of increasing prices. As the previous articles in this series detail, interest rates and a strong dollar can still push gold prices down.

Disclaimer: This article is designed to provide information for educational purposes only and should not be taken as a financial, investment, tax or legal recommendation. Figures are subject to change; please refer to the most recent publications by the World Gold Council and IMF.