Gold as International Reserves: A Barbarous Relic No More?

33 Pages Posted: 17 Jan 2023

See all articles by Serkan Arslanalp

Serkan Arslanalp

International Monetary Fund (IMF)

Barry Eichengreen

University of California, Berkeley

Chima Simpson-Bell

International Monetary Fund (IMF)

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Abstract

After moving slowly downward for the better part of four decades, central bank gold holdings have risen since the Global Financial Crisis. We identify 14 “active diversifiers,” countries that purchased gold and raised its share in total reserves by at least 5 percentage points over the last two decades. In contrast to the diversification of foreign currency reserves, which has been undertaken by advanced and developing country central banks alike, active diversifiers into gold are exclusively emerging markets. We document two sets of factors contributing to this trend. First, gold appeals to reserve managers as a safe haven in periods of economic, financial and geopolitical volatility, when the return on alternative assets is low. Second, the imposition of financial sanctions by the US, UK, EU and Japan, the main reserve-issuing economies, is associated with an increase in the share of central bank reserves held in the form of gold.

Keywords: International Reserves, Gold, Sanctions

Suggested Citation

Arslanalp, Serkan and Eichengreen, Barry and Simpson-Bell, Chima, Gold as International Reserves: A Barbarous Relic No More?. Available at SSRN: https://ssrn.com/abstract=4326301 or http://dx.doi.org/10.2139/ssrn.4326301

Serkan Arslanalp (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Barry Eichengreen

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Chima Simpson-Bell

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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