Recent statistics from the World Gold Council (WGC) have placed India, the world’s top consumer of gold, as the country with the 11th largest gold reserve. The report points out that the sub-continent’s holding is currently estimated to be around 607 tonnes. Interestingly, if the listing had only considered countries, India would have secured the tenth position. However, the inclusion of the International Monetary Fund (IMF), boasting a considerably large reserve of 2,814 tonnes, has pushed India to the eleventh spot.
Global Gold Reserves Ranking
The United States leads globally with the highest gold reserves, tallying up to 8,133.5 tonnes. Germany follows closely in second place with 3,369.7 tonnes. As far as Asian countries are concerned, both China and Japan surpass India in terms of gold reserves.
The drive for gold primarily originates from central banks belonging to emerging markets. The uncertainty in geopolitical and economic spheres has led to these banks diversifying their holdings. The WGC notes that this diversification is at the heart of the ongoing high demand for gold.
About World Gold Council
The World Gold Council, a nonprofit association, brings together the world’s most influential gold producers. Based out of London, the WGC interacts with markets that consume nearly three-quarters of the world’s annual gold consumption.
The organization, made up of 25 members and numerous gold mining companies, was established to stimulate the usage and demand for gold. It does this through active marketing, research, and lobbying.
Gold & Its Role in the Economy
Historically, gold has played a major role in shaping the world’s economy. Up until the 20th century, gold was the standard reserve currency globally. In fact, the United States adhered to the gold standard all the way up until 1971. The principle was simple; any paper money issued needed to have an equivalent amount of gold in the reserves as backup.
Impact of gold on the Economy and Currency
The role of gold today has evolved from being a standard reserve currency to serve multiple purposes in the economic environment.
| Role | Impact |
|---|---|
| Hedge against inflation | Gold is sought after during times of inflation due to its inherent value and scarcity. By virtue of its finite supply, gold is able to maintain value better than other types of currency. |
| Strength of Currency | When a country is a net exporter or it exports gold, the strength of its currency increases. This is because when gold prices rise, the total exports’ value of that country also increases. |
Effects of Gold Trading on Currency Value
In the same vein, a country’s currency value is negatively affected when it imports more than it exports. Consequently, this diminishes the currency’s value. On the flip side, a net exporter sees an increase in the strength of its currency.
When central banks resort to printing more money to acquire gold, they inadvertently create an excess supply of currency. This escalates the overall supply and eventually reduces the currency’s value that’s used to purchase the precious metal.
