The World Gold Council released information on the gold reserves held by central bank in tones as well as percentage of total reserves. This provides one story on how gold is used as a reserve asset. Of course, the data only extends through the first quarter of 2007, but it is the most recent information available. There were two major surprises within the data.
Gold reserves across all central banks over the last reported year declined. There were few cases where gold reserves actually increased. The only large exception was Qatar which actually increased its reserves by 14 times from .6 to 8.4 tonnes. The next largest absolute increase was Russia which increased its holdings by almost 14 tonnes. This increase is consistent with the large inflows from energy production. However, other oil producing countries like Saudi Arabia did not add any gold to their reserves.
Gold as percentage of total reserves also fell but here there was a more variation. The increase in gold prices coupled with the decline in the dollar was the cause for the increase in reserve percentages.
The run up in gold prices over 2007 was driven by private buyers and less by the behavior of central banks at least through the first quarter of the year. The more interesting numbers will arrive in 2008 when we see whether there was a movement out of the dollar and into the hard asset.
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