The Big Reveal of Global Central Banks' Gold Reserves: Why Are Countries Stockpiling Gold?

Gold, a hard currency that has been regarded as a store of value for centuries, still holds an unshakable position among central banks today. Although paper money no longer requires gold backing, the uncertainty in the global economy and geopolitical risks have made the stance of central banks very clear: the more gold reserves they hold, the more secure they feel.

Why are central banks obsessed with hoarding gold?

Don’t think it’s just out of tradition. Data from the World Gold Council shows that by the end of 2020, physical gold purchased for national reserves reached the highest level in the past 50 years. Economic turmoil, inflation expectations, dollar depreciation pressures—all these factors make central banks see gold as the last line of defense against risks.

Interestingly, as confidence in the US dollar wavers, many countries are diversifying their foreign exchange reserves. The proportion of gold in total reserves continues to rise, and some countries are even “bottom-fishing,” significantly increasing their holdings.

How do central banks store these gold reserves?

These vaults are not your ordinary safes. Central banks store gold in deep underground, heavily guarded facilities. The famous secret underground vault in the City of London is where gold from many countries is stored. The Federal Reserve Bank of New York, the Bank of England, the Bank of Canada, and the Swiss National Bank are also popular storage locations.

Interestingly, while this international storage method facilitates gold exchange and cross-border flow, it has also led to disputes—such as Venezuela’s attempt to retrieve its gold from the Bank of England, which ultimately failed.

Global gold reserve rankings

1st: United States - 8,133.53 tons

The US has nearly 4,763 tons more gold than Germany, the second-ranked country. However, the US faces skepticism. On one hand, there are transparency issues—people have questioned the authenticity and quantity of gold stored in New York and Fort Knox; on the other hand, some experts suspect that the US’s so-called gold reserves may include gold from other countries, counted as its own. Even more critically, much of the US gold was purchased long ago, and if refined into higher-purity bars, the total amount could shrink significantly.

2nd: Germany - 3,355.14 tons

Germany’s gold is stored in Frankfurt, New York, and London. During the Cold War, German gold was evacuated to allied countries. In 2013, the German central bank announced plans to repurchase over 40% of its overseas gold holdings. This decision sparked controversy but was also seen as highly transparent, boosting investor confidence. Germany also displays some gold at the Frankfurt Museum of Currency and Payments to satisfy public curiosity.

3rd: Italy - 2,451.86 tons

Italy’s gold reserves are among the most stable globally. Since 1999, this figure has remained roughly unchanged at around 2,452 tons. Despite economic fluctuations, gold acts as a ballast, maintaining stability. This underscores Italy’s high regard for gold as a national asset.

4th: France - 2,436.34 tons

France’s gold reserves used to rank higher but were significantly sold off during the tenure of former Finance Minister Sarkozy. In May 2004, Sarkozy launched a gold sale program aimed at using the proceeds to invest in foreign currencies and bonds to reduce France’s debt. This operation cut France’s gold reserves by 20%. Currently, all of France’s gold is stored at the Banque de France headquarters in Paris.

5th: Russia - 2,332 tons

Russia surpassed China in 2019 to become the fifth-largest gold reserve holder globally. This is part of President Putin’s strategy from a decade ago to gradually increase gold reserves. For Russia, which often has disagreements with the US, the dominance of the US dollar as the international reserve currency has prompted it to seek alternatives. Gold has become the optimal choice for hedging against dollar risks and protecting assets. After the Ukraine war, the pressure on the ruble further highlighted the strategic importance of gold reserves.

6th: China - 2,010.51 tons

China’s transformation is fascinating—from a major gold producer to a major gold reserve holder. It took considerable time for this shift. The People’s Bank of China (PBOC) rarely disclosed gold reserve data before; between 2000 and 2015, it was only reported four times. Since 2019, the PBOC has been updating data more frequently. In April 2019, the central bank increased gold reserves for four consecutive months, adding 42.9 tons in a single month.

Interestingly, the actual size of China’s gold reserves remains a mystery. The delayed disclosures have led to doubts about the true scale of China’s holdings, but according to official figures, China remains in the top six globally.

7th: Switzerland - 1,040.01 tons

Switzerland is like a retirement home—long-term holding of its gold reserves. Thanks to its banking sector, tax haven status, and neutrality in geopolitics, the country faces relatively low systemic risks. About 70% of Swiss gold is stored at the Swiss National Bank in Bern, 20% at the Bank of England, and 10% at the Bank of Canada. Rumors of Nazi gold lost during WWII have not shaken the credibility of Switzerland’s financial system.

8th: Japan - 845.98 tons

Japan’s gold reserves have remained largely unchanged for years. After the Fukushima nuclear disaster in 2011, Japan halted regular gold purchases and later sold some gold to stabilize its economy. Since then, there have been no major moves. The Bank of Japan prefers to increase dollar reserves rather than gold, mainly to protect the yen assets.

9th: India - 787 tons

As the world’s second most populous country and the second-largest gold consumer, India’s obsession with gold rivals its demand for currency itself. Last year, India quietly added 6 tons of gold to its reserves. Although this seems modest, in the context of India’s unstable economic and political situation, such an increase is seen as a positive signal. Over half of India’s gold is stored domestically, with the rest held at the Bank of England and the Swiss Basel.

10th: Netherlands - 612 tons

The Netherlands has historically been one of the countries most willing to sell gold, but since late 2022, it has not made any moves. Its presence in the top ten is mainly due to Turkey’s significant reduction of gold reserves during 2020 and 2021. Interestingly, the Netherlands used to store most of its gold in New York (accounting for 51%), but later decided to bring most of it back home. Currently, Dutch gold is stored in Amsterdam, New York, and London, with about 110 tons still at the Bank of England.

The invisible influence of the London vault

Beyond the top ten, the Bank of England itself holds 310.3 tons of gold, ranking 16th globally. More importantly, the Bank of England acts as a “safe deposit” for global gold—many countries store their gold there.

This intermediary role can sometimes cause trouble. When the storing country wants to retrieve its gold, the attitude of the Bank of England becomes crucial. Venezuela is a typical example: after a government change, the Bank of England refused to release the gold. Romania also officially requested to withdraw gold from London in 2019.

However, central banks still prefer to keep gold in London mainly because of the convenience of gold swaps. Gold stored at the Bank of England can be flexibly used for short-term currency exchanges, such as USD or GBP, which is vital for liquidity management. This is why, despite numerous disputes, many central banks continue to keep their gold in London.

Current insights

Looking at the current state of global gold reserves, the importance placed on gold by central banks is steadily increasing. Inflation pressures, dollar depreciation, geopolitical tensions—all are fueling a “global central bank gold race.” Countries that have increased their gold reserves over the past decade seem to have made wise decisions. In the future, more nations may continue to boost their gold holdings, viewing gold as the ultimate insurance policy against uncertainty.