How Does a Country’s Gold Reserve Affect its Economy?





The Gold Standard Era





Top Countries with Expanding Gold Reserve System

  • Untied states of America








  • European Countries Using the Euro



  • Venezuela Learnt the Lesson




Venezuela gold reserve since 1990-2017
  • Tajikistan

You may get astonished if you knew that Tajikistan, one of the poorest countries with 30% poverty, holds 81% of its reserves in gold, that puts it on the top of the list above USA. The 81% represents only 14.4Tones.

Tajikistan’s GDP was 7.8 billion in 2016, most depending on agriculture products and metals export. In fact, Tajikistan does not rely on gold for a reason, but because their main income rely on emigrated work force in Russia and exporting its product to neighbors countries like Russia, Turkey, Kazakhstan and Afghanistan.

Tajikistan gold reserve 1998-2017

Shrinking Gold Reserves Countries

  • United Kingdom

On the other side of the coin it seems that some emerged economies have different point of view. Unlike the rest of Europe, UK has a different gold policy. The UK decided on the 7th of May 1999 to sell a big portion of its gold reserve in a short period to replace it by a basket of currencies including the new currency (Euro). UK gold reserves dropped from 590 Tons on 1999 to 310 tons today which represents only 8.6% of the UK reserve.

UK gold reserve from 1999-2017

The decision was taken after new amendments made by the BOE. The policy targeted the high unemployment rates and price instability occurred in the mid 90s that formed a huge drop in UK exports. Graham Yong, a senior manager of foreign exchange division in the BOE, said about the change of UK gold reserves policy: “holding in the reserve is amid at achieving a return on them by lending a portion to the market”. However the UK decided to decrease 2/3 of its gold reserves, yet, the kingdom still ranked 17 on the list by amount not percentage.

  • Commonwealth Realm

On the footsteps of UK, Canada and New Zealand followed, but more aggressively. Gold standard was adopted by Canada in June 14, 1853, and by 1999 the Bank of Canada decided to sell its gold reserves. The economic reasons that made Canada and New Zealand get rid of all of their gold reserves to be 0% remain unclear.

Australia is a country with a strong economy heavily focused on mining holds only 79.9 tons of gold reserve representing 6% of its allover reserves. Australia gold reserves raised slightly its gold reserves from 79.7 in 1999 to 79.85 in 2017. The Common wealth countries are some of the richest countries in gold mining field and hold the biggest portion of gold production combined. Australia is the second producer in the world with 270 Tons, Canada comes Fifth with 170 Tons, and south Africa comes seventh with 140 tons a year.

  • Chinese and Russian axis

China was the last country to join the gold standard system in the early years of the twentieth century instead of the silver cover. China ranked Fifth by the amount of gold with 1842 tons of reserved gold representing only 2.6% of its reserves which connect China to the gold shrinking policies countries.

On the footsteps of China, Russia followed to be one of the shrinking gold policy countries by holding only 1645 Tones representing 16% of its total reserves; however, doubts relate to Russian numbers since the central bank of Russia shows different numbers than those claimed by the gold council.

Gold as jewelry retail sales, both in China and Russia is extremely popular and those considered to be the cheapest places to buy gold. China ranked first gold seller with 455 tons, Russia comes third 250 tons yearly.

Final Words

The gold reserve is a wide topic and there are many subjects to be discussed. For instance, there must be connection among gold trade, gold reserves and gold prices. What are the effects of gold prices on governments reserved gold? and the most important question, what will be the impact after the end of raw gold? In general, I would like to sum up the main ideas of that topic:

  • However gold never loses its value as a store mean, its role in current economy differs from age to age. It started as a coin in itself, and then turned to standard cover of banknotes, later it took different path by being used as governmental reserves and classical uses (jewelry and store of value) including the medical and automobile industry. Moreover, the relation between banks and gold also changed from phase to phase.
  • We can classify countries regarding their gold reserve system into three types; a) USA and Eurozone that own the most desired currencies, have no way but to hold their reserves in gold and give a little space to less desired currencies. Bear in mind that USA is the fourth gold producer. b) Emerged economies such as the Commonwealth countries have different perspective by liquidating the reserved money to be used for development and other emerged countries had followed their footsteps – Japan and Switzerland. c) Emerging economies such as Russia, China and India adopt the same idea of the second group as an inevitable result to develop the currently stagnating economy.
  • Venezuela is a vivid exam of failed policy, by which a country insisted to ignore the facts by challenging the international monetary systems and stagnating all of its oil income into gold only. That was one of the reasons that caused the country a severe crisis in 2015, resulted that the reserved gold was sold in lower price in 2016.
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