A Look at the World’s Gold Reserves

Currencies are backed up by gold as a form of security and used as a guarantee of payment. Although the gold standard was abandoned long ago, governments still have confidence in the precious metal and its worth has actually increased in the 21st century.

History of Gold Reserves

Although having no major chemical use, man has valued gold over other elements throughout history. It’s mutual appreciation as an accepted currency paved way for the world economy to commence and expand.

The introduction of paper money would begin to pose problems for governments all over the world, mainly because credit now relied on something which, in principle, was worthless. It was because of this that states began to devise and regulate the Gold Standard, a process to install the required controls on money.

Over time, gold moved from responsibility of the government to the central banks in most countries. These central banks were now accountable to hold a reserves sufficient enough to cope with redemption demands, as well as the demands for gold from commercial banks.
The international Gold Standard was thriving into the 1900’s and it turned out to be an effective economic system up until the Great War and Depression. However, these events changed the scope of gold as viable system for most countries. This was compounded when President Nixon pulled away from the Gold Standard in 1971, moving the global economy into a more free floating market.

Value of Gold

Despite this, governments still kept gold in reserve and its value began to steadily increase from the 1970’s to the present day. By the end of 1979 the price of gold per kilogram was valued at $12,643. In today’s market, the figure is has grown to over $36,000. A record high of $57,488 was reached in November 2011.

Many individuals invest in gold in the event of a major financial depression, having something to fall back on if paper money seriously declines in value. Others simply trade in the commodity like they would on the stock market, hoping to make a quick profit.

Today’s World Gold Reserves

Gold reserves in the modern climate are typically used as a precautionary measure, acting as a safeguard against plummeting currency values. States only utilise its reserves for the settlement of international transactions, a rare occurrence in any case. However, if a major economic power such as the United States or Germany decided to get rid of all their reserves, the price of gold would plummet drastically across world markets.

There is a reported 171,300 tonnes of gold holdings in the world, manifesting in the form of industrial equipment, pieces of jewellery, gold bars and coins. In terms of reserves, the U.S has the highest proportion of the world’s gold with 8,133 tonnes, notably higher than the International Monetary Fund with 2,814. In comparison, the UK only has 310 tonnes of gold stockpiled in the Bank of England, roughly 10% of its national reserves.

You can find out more about the world’s gold reserves with this interactive infographic by Physical Gold.