Gold has been a premium asset for centuries, acting both as a store of wealth and a means of exchange. Whether used in specie, a currency peg, or debt collateral, it has always been synonymous with prosperity. Subsequently, gold is an attractive asset to central banks, governments, and financial institutions around the globe.
The World Gold Council (WGC) estimates that about 190,000 metric tons of bullion have been mined over the course of human history ― a relatively small figure. Given its limited supply, the question of “who owns the world’s gold?” is an important one.
International Gold Holdings
Since the early 1970s, gold has not functioned as the backbone of the global monetary system. When the U.S dollar was withdrawn from the gold standard in 1971, the Bretton Woods monetary system collapsed, officially ending the dependence of international commerce on bullion.
Although gold no longer serves as a currency peg, governments and central banking authorities remain committed to stockpiling gold as a store of wealth. As of year-end 2017, the world’s top 10 gold proprietors were:
| Country/Institution | Stocks (tons) |
|---|---|
| United States | 8,133.5 |
| Germany | 3,373.0 |
| International Monetary Fund (IMF) | 2,814.0 |
| Italy | 2,451.0 |
| France | 2,435.9 |
| China | 1,842.6 |
| Russia | 1,778.9 |
| Switzerland | 1,040.0 |
| Japan | 765.2 |
| Netherlands | 612.5 |
Taking a quick look at this table, two observations immediately jump out as proof of gold’s global financial importance. First, two of world’s top five gold producing nations (Australia and Canada) didn’t have large enough reserves to make the list. Second, the International Monetary Fund isn’t a country; it enjoys no military or governmental protections. The IMF exists solely as a global banking giant and functions as an independent entity reliant upon bullion.
Central Banks, ETFs, and the Public
It’s no secret that central banks are big fans of acquiring gold. Because gold is a viable hedge against systemic and financial risk, stockpiling bullion is better than acquiring huge amounts of fiat currency.
The institutional gold hoarding trend has been historically evident, with central banks around the world periodically padding their reserves. Recently, for the year 2018, central banking authorities purchased 651.6 metric tons, the most since 1967. The leaders in this frenzy were the central banks of the United States, Russia, Turkey, Poland, and India.
In addition to central banks, exchange trade funds (EFTs) also actively accumulate gold. For physically backed ETFs, securing gold reserves is an integral part of ensuring the fund’s security. Here are the two largest and their respective bullion holdings:
| Fund | Total Reserves | Ounces Per Share |
|---|---|---|
| SPDR Gold Trust | 24 million ounces | 0.0946 |
| iShares Gold Trust | 8.8 million ounces | 0.0096 |
Despite central bank and ETF bullion stocks, the largest buyers of physical gold are individual people ― specifically, purchasers of jewelry. More than 2000 tons of gold each year is converted to jewelry before being sold to the public. Among all of the world’s citizens, it’s estimated that the people of India hold the largest amount of bullion, about 22,000 tons.
Due to gold being in finite supply, concerted buying from central banks, ETFs, and the public can drive prices significantly higher. Of course, the opposite is also true: Large block sales can lead to a flood of bullion on the open market. As with most commodities, supply and demand forces rule when it comes to asset pricing.
Getting Started with Gold Futures
Trading gold futures offers many advantages to market participants. Holding physical bullion can be a hassle because storage fees and asset security are major concerns. In addition, ETF offerings feature considerable maintenance costs and per trade fees. Conversely, gold futures contracts offer supreme liquidity and leveraging options for risk appetites of all kinds.
A great place to get started in bullion is by reading the gold futures overview available at Daniels Trading. Featuring product specifications, quick facts, and current market outlooks, it’s a rock-solid jumping off point into the precious metals trade.
