Africa is the third-largest gold producing continent in the world, and has gold mining activities in more than 21 of its countries.
Ironically, the cumulative official gold reserves of the countries of Africa is 572 tonnes, with Algeria topping at 174 tonnes, Libya following at 117 tonnes, and Egypt in the third position, at 80.73 tonnes. This is the equivalent of 2.5% of the official gold reserves of the Top 10 global gold sovereigns.
Considered a ‘safe haven’ during crises, gold – the yellow metal – is being stockpiled by central banks around the world, adding 650 tonnes to their reserves in the last year.
In times of uncertainty, gold has long been touted as a ‘safe haven’ – and never more so than during times of financial crisis like the one the Covid-19 pandemic has triggered worldwide.
While the ‘gold standard’ was abandoned in the 1970s, the metal is still held by central banks across the world for its ability to provide stability: it is perceived as less prone to political or economic volatility and can be converted to cash if necessary.
Even before the pandemic, the global economy was showing warning signs and many countries had begun to hoard more gold.
Central banks added 650 tonnes to their reserves in 2019, the second highest shift in 50 years, after 656 tonnes were added in 2018. Observe that before the 2008 financial crisis, central banks had been net sellers, not buyers, of gold worldwide for decades.
Central banks had made efforts to repatriate their gold, mostly from storage in New York Federal Reserve and the Bank of England – the two largest keepers of gold in the world.
Venezuela started repatriating its gold in 2011, shipping 160 tonnes from New York. A third of its holdings remain in London, but the United Kingdom has refused to return Venezuela’s gold, sitting on the excuse that it doesn’t recognise the Maduro government. A UK High Court had ruled against Venezuela in a legal battle over access to $1bn of Venezuelan gold stored in the Bank of England. The case is currently before the Supreme Court of the United Kingdom, for determination.
Gold is considered a good hedge against the risk of inflation because the rising cost of goods and services tends to erode the value of the dollar.
And as central banks continue to print more money as part of attempts to stimulate economies, inflation is a palpable fear and assets like gold, which tends to hold its value in real terms over a long period of time, are considered a refuge against that risk.
Adam Glapinski, governor of the National Bank of Poland, has been quoted as saying that “gold symbolises the strength of [a] country.”
Data compiled by the World Gold Council indicate that the US holds 8,135.5 tonnes in its official gold reserves, representing 78.9% of its foreign reserves.
The US has almost as much gold as the next three countries combined, and has the highest gold allocation as a percentage of its foreign reserves at 79 percent. Over half its reserves (4,583 tonnes valued at $236.4 billion) are held at the US Bullion Reservatory at Fort Knox.
Germany follows with 3,363.6 tonnes of gold holding in its official reserves, representing 75.2% of its foreign reserves.
Between 2012 and 2017, Germany repatriated most of its massive reserve – a total of 674 tonnes – from Paris and New York to Frankfurt.
Italy holds 2,451.8 tonnes of gold in its official reserves, representing 70.8%.
Unlike most countries, Italy’s gold is not owned by the state, but by Banca d’Italia, and held in vaults in Rome and at the Swiss National Bank, the Federal Reserve in New York and the Bank of England.
France’s gold official reserves amount to 2,436 tonnes, representing 65% of its foreign reserves.
Much of France’s gold was acquired during the 1950s and 1960s, and is held in vaults under the Banque de France in Paris. France’s central bank has sold little of its gold over the past several years, and there have been calls to halt igold sales altogether.
Russia holds2,299.2 tonnes of gold in its foreign reserves, representing 22.6% of its total foreign reserves.
The Russian Central Bank has been the largest buyer of gold for the past seven years, and its reserves have increased by more than 400 tonnes in the past two years alone. In 2017, it bought 224 tonnes of bullion in an effort to diversify away from the US dollar, as its relationship with the West has grown chilly since the annexation of Crimea in 2014.
China holds1,948.3 tonnes of gold in its official reserves, representing 3.4% of its total foreign reserves.
China is the world’s largest producer, accounting for 12 percent of global mine production. It is also the largest consumer, as local demand for the yellow metal has been boosted by a growing middle class.
Switzerland holds 1,040 tonnes of gold in its official reserves, representing 6.5% of its foreign reserves.
However, Switzerland owns the largest reserves of gold per capita. Much of the gold trading of Switzerland is done with Hong Kong and China.
At 765.2 tonnes, Japan, the third largest world economy, holds 3.1 % of its total foreign reserves in gold. Through its mastery of the practice of quantitative easing, Japan in 2016 lowered interest rates below zero – which helped fuel a greater demand for gold.
India, with 654.9 tonnes of gold reserves – representing 7.5% of its total foreign reserves – is the second largest consumer of gold and one of the most reliable drivers of global demand, as the majority of the precious metal is imported.
India’s festivals and wedding season, which run from October to December, have historically enhanced the trade in gold.
Netherlands holds 612.5 tonnes of official gold reserves, representing 70.9% of its total foreign reserves.
In 2014, the Netherlands repatriated 20 percent of its gold reserves from the vaults of the New York Fed to Amsterdam. In 2019, the Dutch National Bank described gold as an “anchor of trust” and “the perfect piggy bank” for the financial system in preparation for economic doomsday.
