Foreign Reserve Management

Ezechiel Copic, Director, Central Banks and Public Policy in conversation with Kenneth Sullivan, author of the new report Guidance for Monetary Authorities on the recommended practice in accounting for monetary gold on why the World Gold Council commissioned this guidance and how it can benefit monetary authorities.

The World Gold Council is pleased to announce the release of its "Guidance for Monetary Authorities on the recommended practice in accounting for monetary gold".

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.

For many decades, the US dollar has been the main reserve currency worldwide and it still accounts for more than 50% of international reserves. However, its share has been gradually declining, while that of other currencies, like the Chinese RMB, has grown, signalling the potential emergence of a multicurrency reserve system.

Emerging-market central banks have begun increasing their gold allocations. This study considers optimal gold-allocation ranges for a foreign reserve portfolio from multiple perspectives, when reserves are measured both in US dollars and from a local currency perspective. The study concentrates on nine different emerging-market currencies, including the Indian rupee, Singapore dollar, Brazil real, and Thai baht.

Demand for gold is likely to rise as the world heads towards a multi-currency reserve system under the impact of uncertainty about the stability of the dollar and the euro, the main official assets held by central banks and sovereign funds. This is the conclusion of a wide-ranging analysis of the world monetary system by Official Monetary and Financial Institutions Forum, (OMFIF), the global monetary think-tank, in a report commissioned by the World Gold Council, the gold industry’s market development body.

Demand for gold is likely to rise as the world heads towards a multi-currency reserve system under the impact of uncertainty about the stability of the dollar and the euro, the main official assets held by central banks and sovereign funds. This is the conclusion of a wide-ranging analysis of the world…