A Central Banker’s Guide to Gold as a Reserve Asset - Second edition

This year marks 50 years since the end of gold’s formal link to currency. In the half-century that has passed since this milestone, the world has evolved in ways that were probably unimaginable to the political and economic leaders of that time. As the world has changed, so too has the role of gold. Whereas central banks steadily sold down their gold reserves for several decades after the end of the Bretton Woods system, they have since re-emerged as net buyers of gold for the past eleven years, with emerging market countries leading the way.

As of July 2021, central banks held 35,527 tonnes of gold, representing approximately 17.6% of the above-ground gold stock. Recent years have only reinforced the strategic importance of gold in a central bank portfolio. From the 2008 Global Financial Crisis (GFC) to the disruptions wrought by the COVID-19 pandemic, gold has provided a buffer against financial instability. Geopolitical uncertainty and a prolonged low interest rate environment have also added to gold’s strategic importance. As these factors continue to weigh on reserve management strategies, it makes sense that so many central banks have turned to gold. 

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