Tag: #internationalreserves

ICAEW chart of the week: Gold

With President Trump planning to visit Fort Knox to check up on the US government’s gold reserves, my chart for ICAEW this week looks at just how much gold is owned by governments around the world.

According to the latest statistics from the World Gold Council, sourced principally from the International Monetary Fund (IMF), governments and international financial institutions around the world own 35,864 tonnes of gold. Much of this gold sits in the Bank of England, Fort Knox and in central bank vaults around the world.

At a price of around £74 per gram, the total value of ‘government gold’ adds up to somewhere in the region of £2.7trn. This is estimated to be around one-sixth of the total above-ground stock of gold in the world.

While the US is the largest individual holder of official gold reserves with 8,133 tonnes of gold worth around £600bn, the 27 countries of the EU and the European Central Bank collectively own a total of 11,719 tonnes of gold worth approximately £870bn. This includes Germany with 3,352 tonnes, Italy 2,452 tonnes, France 2,437 tonnes, Netherlands 615 tonnes, the European Central Bank 507 tonnes, Poland 448 tonnes, Portugal 383 tonnes, Spain 282 tonnes, Austria 280 tonnes, Belgium 227 tonnes, Sweden 126 tonnes, Greece 115 tonnes, Hungary 110 tonnes, Romania 104 tonnes and other EU member states with 281 tonnes.

The next biggest holder of gold is the IMF with 2,814 tonnes (worth around £210bn), followed by Russia with 2,336 tonnes (£175bn), China 2,280 tonnes (£170bn), Switzerland 1,040 tonnes (£77bn), India 876 tonnes (£65bn), Japan 846 tonnes (£63bn), Türkiye 615 tonnes (£46bn), Taiwan 424 tonnes (£31bn), Uzbekistan 383 tonnes (£28bn), Saudi Arabia 323 tonnes (£24bn), the UK 310 tonnes (£23bn), Lebanon 287 tonnes (£21bn) and Kazakhstan 284 tonnes (£21bn).

The total for other countries adds up to 3,194 tonnes worth, or around £235bn or so, including Thailand 235 tonnes, Singapore 220 tonnes, Algeria 174 tonnes, Iraq 163 tonnes, Venezuela 161 tonnes, Libya 147 tonnes, Brazil 130 tonnes, Philippines 130 tonnes, Egypt 127 tonnes, South Africa 125 tonnes, Mexico 120 tonnes, Qatar 111 tonnes, South Korea 104 tonnes and the Bank for International Settlements 102 tonnes. 

While the level of official gold holdings is partly driven by the economic size of the countries concerned, it also depends on their reserve strategies, with US, German, French and Italian gold holdings making up around 75%, 74%, 72% and 71% of their official reserves respectively, in contrast with 6%, 9%, 11% and 15% for China, Switzerland, India and the UK, for example. 

President Trump’s plan to visit Fort Knox to personally inspect his nation’s gold holdings reflects one of the benefits of investing in a physical commodity such as gold – you can count gold bars, weigh them and check their purity, as well as admire its shiny quality. He may have a less satisfying experience in verifying any future strategic crypto-currency reserve, where entries in a ledger are somewhat more ephemeral.

This chart was originally published by ICAEW.


ICAEW chart of the week: UK International Reserves

We take a look at the UK’s official international reserves that are held to safeguard sterling and support monetary policy.

Step chart showing components of the UK International Reserves. Gross reserves: £101bn foreign currency securities and deposits, £36bn IMF, £15bn gold, £23bn other instruments. Liabilities: (£109bn) other instruments Net reserves: £66bn

Our chart this week is on the UK International Reserves, which comprise foreign currency securities and deposits, gold, investments in the International Monetary Fund (IMF), and other financial instruments primarily used to manage sterling as a national currency and support monetary policy.

As illustrated by the chart, the combined total of UK government and Bank of England international gross reserves was £175bn at 31 March 2022, comprising £101bn in foreign currency securities and deposits, £36bn invested in the IMF, £15bn in gold and £23bn in other financial instruments. This was offset by £109bn in liabilities to arrive at net reserves of £66bn.

According to the Bank of England, the £101bn in foreign currency securities consisted of £75bn in bonds and notes issued by foreign governments, £15bn in foreign government money market investments, £6bn in foreign central bank deposits and £5bn in private sector securities. The £36bn invested the IMF comprises £6bn in IMF reserves (effectively the IMF’s share capital) and £31bn in Special Drawing Rights (SDRs), a government-specific financial asset underpinned by a basket of currencies (US dollar, Euro, Chinese Yuan, Japanese Yen and sterling). The UK government also owned or had rights to 9,976,041 fine troy ounces of gold worth £15bn on 31 March 2022, while other financial instruments of £23bn included £20bn of claims against counterparties on account of reverse repo transactions.

Reserve assets were offset by £109bn in liabilities, comprising loans and securities used to finance reserve assets, repo obligations, and derivative financial instruments including foreign currency forwards, cross currency interest rate swaps and sterling interest rate swaps.

Not shown in the chart is the split between the UK government’s net reserves of £66bn, consisting of £151bn in gross assets less £85bn in liabilities, and the Bank of England’s approximately zero net reserve position, consisting of £24bn in gross assets (£12bn in foreign currency securities and bonds plus £12bn in other financial instruments) less £24bn in liabilities.

The Bank of England manages both its own foreign currency reserves, used to support its monetary policy objectives of controlling inflation, and the UK government’s international reserves, most of which sit in the Exchange Equalisation Account established in 1932 to provide a fund that can be used, when necessary, to regulate the exchange value of sterling. In normal circumstances the Bank of England’s main objectives in managing the reserves are to ensure the liquidity of sterling, the liquidity and security of the reserve assets themselves, and to ensure the reserves are managed in a cost-effective way.

In normal circumstances, the reserves are not used to actively intervene in foreign exchange markets, but are kept ‘in reserve’ on a precautionary basis in case there is any change in exchange rate policy in the future or in the event of any unexpected shocks. More prosaically, they are used to provide foreign currency services for government departments and agencies needing to transact in foreign currencies, as well as to buy, hold and sell SDRs as required by the UK’s membership of the IMF.

Although relatively small in the context of over £1trn a year in UK public spending and £2.3trn in public sector net debt, the UK’s international reserves provide HM Treasury and the Bank of England with a substantial amount of firepower in the foreign exchange markets should there ever be a need to intervene to support sterling. Fortunately, almost all of the foreign currency securities and deposits held in the reserves are invested in governments and central banks of allied countries, a contrast to the position of Russia, which has seen a substantial proportion of its international reserves frozen following its invasion of Ukraine.

One piece of good news amid all the economic gloom at the moment is that the UK International Reserves aren’t hitting the headlines. Because when they do, you really will know that all is not well.

This chart was originally published by ICAEW.