Central banks are contributing to world gold demand. The latest data from the World Gold Council indicates even more changes among the nations holding the most in gold reserves. Those are also some of nations whose creditworthiness is now under question during the debt crisis in Europe. Researchers at 24/7 Wall St. looked at the nations with the highest gold reserves, as well as two institutions, to see how each might affect future gold demand.
While investment demand was the key driver to increased gold demand during the past quarter, central bank gold buying and selling are going to be a key factor for demand ahead. The council projected that central bank demand is expected to continue as creditworthiness woes of western governments has come front and center.
In fact, the council also cited many new central bank entrants have emerged as they move to diversify reserves. Further, the council sees this increased central bank activity trend continuing into 2012.
This list reviewed the nations that hold the lion’s share of the world’s gold reserves, according to the World Gold Council’s International Financial Statistics. Of course, many nations will have new gold reserve data in 2012. And some of the data remained unchanged from prior months. Nevertheless, it is the purpose of the list to show which nations probably are increasing or lowering their gold reserves into 2012 and why.
The European credit crisis and emerging market weakness are what is likely behind central banks’ demand. Total gold demand rose 6 percent in the third quarter from a year earlier to 1,053.9 tonnes. This equates to roughly $57.7 billion — an all-time high in value terms. Investment was the large driver for increased gold demand, while jewelry demand was soft.
These are the countries that own the world’s gold.
13) Venezuela holds 365.8 tonnes.
Venezuela increased its gold reserves by nearly 5 percent. Oil sales and business nationalization (or seizure) has continued to add more wealth to the nation’s government.
Venezuela’s population is only 27 million and it is the sole Latin American country among the top nations holding gold. In 2010, Venezuela bought 3.1 tonnes, according to the World Gold Council. That’s after buying 4.1 tonnes locally in 2009. Venezuela has continued adding gold, and if history is an indicator, it is likely to keep adding gold.
12) Portugal holds 382.5 tonnes.
Surprisingly, one of the PIIGS nations (Portugal, Italy, Ireland, Greece, Spain), Portugal, is also a top holder of gold. The European nation has a population of almost 11 million people. Does this go back to the days of its empire building ambitions, or is it because the nation was able to remain neutral in World War II?
If Portugal is really in such dire straights, perhaps the Europeans could start demanding that Portugal pledge some of its gold reserves to bolster its finances. Portugal has already been a part of the prior Central Bank Gold Agreement as a seller in recent years, so it seems logical that the nation would be selling to hold up on its debt and entitlement obligations.
11) Taiwan holds 423.6 tonnes.
Taiwan is another surprise as one of the world’s largest gold holders. It has a vast electronics sector, and maybe its high gold holdings help it stay financially relevant in its long ongoing confrontation with China. The nation is already considered wealthier than many neighboring countries on a per capita basis. The accumulation of gold by China makes it unlikely Taiwan would sell much gold now.
10) India holds 557.7 tonnes.
India’s gold holdings are still officially the same as they were at the beginning of the year, but it seems likely that it will increase its central bank holdings. The nation has about 1.2 billion people and its economy is growing — even though the government has fought inflation in 2011.
Gold is so entrenched in Indian culture that India is likely to continue accumulating more. Almost one-third of the world’s jewelry demand comes from India, and the country acquired 200 tonnes of the IMF gold sales in late-2010. India would seem to be a buyer of gold not just in 2012, but in the years ahead.
9) The Netherlands holds 612.5 tonnes.
Another relatively small nation with only 16.6 million people is ranked as a top holder of gold. The nation used to hold even more gold but it was a seller of gold from at least 2003 to 2008 under the Central Bank Gold Agreement in Europe. The country’s gold holdings seem unlikely to change very much in 2012.
8 ) Japan holds 765.2 tonnes.
Japan has had to deal with two decades of a sluggish economy and its currency is considered a safe-haven for international investors. The Japanese people are known for keeping cash under their mattresses. The yen feels inflated with its huge debt-to-GDP and no growth. Prices for Japanese goods are getting too expensive for foreigners due to the strength of the Yen. The country is also still recovering from its tsunami and nuclear incident from earlier in 2011. Perhaps Japan will have proven to be a seller in 2011 rather than trying to bolster its foreign currency reserves. If not, maybe it should be.
7) Russia holds 851.5 tonnes.
Russia has been gobbling up gold to bolster the ruble in the past and this appears to be the case this year as well. The new figure of 851.5 tonnes of gold compares to a previous figure earlier this year of 784.1 tonnes. The council had also noted earlier that Russia accumulated some 120 tonnes during the first 10 months of 2010, and that was after adding over 100 tonnes in 2009 and almost 70 tonnes in 2007. The new figure was because of increased purchases after the prior cut-off date. With Russia having vast oil and commodity reserves and with Russia aiming to increase its clout in the world as a financial powerhouse, it seems a shoe-in that it will have proven itself as a buyer of gold into 2012.
(Jon C. Ogg—24/7 Wall St./The Blaze)