Gold as a reserve today

IMF gold reserves

IMF gold reserves refers to 3,217 tonnes of gold held by the International Monetary Fund. It is currently priced at a range of $40 and $50 a troy ounce ($1,300 to $1,600/kg), a price that was fixed in the 1970s before the Nixon government stopped pegging the U.S. dollar to the gold and instead allowed the market forces to set the dollar's worth. An attempt to revalue the gold reserve to today's value has met resistance for different reasons. Canada, a major gold producer, is against the idea of revaluing the reserve, as it would flood the market with gold and therefore depress its price. It is also not clear whether the gold reserve is a property of IMF or member countries.

Three quarters of the gold reserve was contributed by G5 members, namely Germany, UK, France, Japan and United States.

Investment gold reserves

In April 2006, the gold exchange-traded funds by the World Gold Council and COMEX Gold Trust by iShares held 488 tonnes of gold in total for private and institutional investors. In 2004, it was estimated that the Indian public held 13,000 tonnes of gold in jewelry or other forms.

Gold as a reserve today

During the 1990s Russia liquidated much of the former USSR's gold reserves, while several other nations accumulated gold in preparation for the Economic and Monetary Union. The Swiss Franc left a full gold-convertible backing. However, gold reserves are held in significant quantity by many nations as a means of defending their currency, and hedging against the US Dollar, which forms the bulk of liquid currency reserves. Weakness in the US Dollar tends to be offset by strengthening of gold prices. Gold remains a principal financial asset of almost all central banks alongside foreign currencies and government bonds. It is also held by central banks as a way of hedging against loans to their own governments as an "internal reserve". Approximately 25% of all aboveground gold is held in reserves by central banks.

In addition to other precious metals, stores of value also include real estate. As with all stores of value, the basic confidence in property rights determines the selection of which one is chosen, as all of these have been confiscated or heavily taxed by governments. In the view of gold investors, none of these has the stability that gold had, thus there are occasionally calls to restore the gold standard. Occasionally politicians emerge who call for a restoration of the gold standard, particularly from libertarians and anti-government leftists. Mainstream conservative economists such as Barro and Greenspan have admitted a preference for some tangibly backed monetary standard, and have stated that a gold standard is among the possible range of choices.

Both gold coins and gold bars are widely traded in deeply liquid markets, and therefore still serve as a private store of wealth. Also some privately issued currencies, such as digital gold currency, are backed by gold reserves. In effect, the holder of such currencies is long on gold and short on their own fiat currency, writing checks on their account.

In 1999, to protect the value of gold as a reserve, European Central Bankers signed the "Washington Agreement", which stated they would not allow gold leasing for speculative purposes, nor would they "enter the market as sellers" except for sales that had already been agreed upon. A selling band was set. This was intended to prevent further deterioration in the price of gold. (See Washington Consensus)

The end of the Great Commodities Depression has affected the price of gold as well, gold prices rising out of a 20-year trading bracket. This has led to a renewed use by monetary authorities of gold to back their currencies, but has not constituted adoption of a gold standard for money. In fact, the reverse is the case—the more expensive gold is, the more expensive the acquisition project to create a gold standard becomes.

Copyright 2008 - France BtoB from Wikipédia