World Clock

Sunday, 29 August 2010

For the US Gold Reign's Supreme as Emerging Markets Shift away from the Dollar

An article in this weekend (28th/29th August) FT Magazine, shows that according to the World Gold Council 70% of US foreign currency reserves are made up of Gold, substantially more than any other country in the world. (see figures below)

1. US - 8,133.5 Tonnes
2. Germany - 3,407
3. IMF (who recently announced it was selling 160 on the market with just under 3,000 tonnes)
4. Italy - 2,451.8
5. France - 2,435.4
6. Russia after its buying spree last year now has 668 tonnes
7. ECB (European Central Bank) with 501 tonnes
9 UK - 310

As far as China is concerned, which given that it now produces more gold than any other country in the world comes 8th on the list. However that could change depending on US fiscal policy and whether China still continues to believe that US can manage its debt and continues to buy its treasuries.

As emerging market central banks continue to diversify their own portfolios, Rogoff co-author of This Time it’s Different says they “will probably raise the share of gold in their foreign exchange reserves”. This is because their shift from an over-reliance on the dollar to currencies such as the euro is not “sufficient diversification against the risk – which is low, but certainly non-trivial – of a generalised global inflation.

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