Central Banks

Sovereign wealth funds, like many other investors, are under pressure to generate returns in a low-yield, low growth environment. Many are expanding into alternative assets to seek growth and income opportunities. Despite this, few sovereign wealth funds have invested in gold due to ongoing misconceptions about gold’s performance, financial behaviour, and liquidity.

Unprecedented monetary policies (including quantitative easing and negative nominal interest rates) have had the unintended consequence of dramatically reducing the pool of investable assets available to reserve managers. 

This paper reviews the different approaches to gold accounting demonstrated by central banks and discusses the elements of a common approach for central banks.

A report by the World Gold Council, “Central bank diversification strategies – rebalancing from the dollar and the euro”, examines the growing trend of central banks’ actively looking to diversify their reserve portfolios.

Across Europe, economic growth is faltering and in many Eurozone countries, sovereign debt yields are dangerously high.

The World Gold Council has been exploring ways that Eurozone Member States could use their gold reserves to help bring down the cost of borrowing.

We believe that using a portion of a nation's gold reserves to back sovereign debt would lower sovereign debt yields and give some of the Eurozone's most distressed countries time to work on economic reform and recovery.

The following video explores why such a measure could offer an alternative to austerity for the Eurozone.

Natalie Dempster, Director of Government Affairs, World Gold Council, discusses gold-backed bonds with Professor Ansgar Belke.

Dr. Andrew Lilico, of Europe Economics, discusses his paper The use of Gold as Collateral for Eurozone Sovereign Debt. The paper assesses the World Gold Council’s proposals on gold as collateral for Eurozone sovereign debt, especially in the case of Italy and Portugal.