بانک های مرکزی و پازل های طلا

We study the curious patterns of gold holding and trading by central banks during 1979–2010. With the exception of several discrete step adjustments, central banks keep maintaining passive stocks of gold, independently of the patterns of the real price of gold. We also observe the synchronization of gold sales by central banks, as most reduced their positions in tandem, and their tendency to report international reserves valuation excluding gold positions. Our analysis suggests that the intensity of holding gold is correlated with ‘global power’ – by the history of being a past empire, or by the sheer size of a country, especially by countries that are or were the suppliers of key currencies. These results are consistent with the view that central bank’s gold position signals economic might, and that gold retains the stature of a ‘safe haven’ asset at times of global turbulence. The under-reporting of gold positions in the international reserve/GDP statistics is consistent with loss aversion, wishing to maintain a sizeable gold position, while minimizing the criticism that may occur at a time when the price of gold declines.

The patterns of gold holding remain a debatable topic, especially at times when the relative price of gold has appreciated while the global economy has experienced the recessionary effects of the global 2008–2009 crisis. While most of the debate deals with the private holding and trading of gold, we focus on the curious patterns of gold holding and trading by central banks. Specifically, we study two puzzles: the passive holding of sizable gold quantities by OECD central banks during most of the last fifty years, and the tendency to report international reserve valuations excluding gold positions. While this omission is reasonable for central banks with negligible positions, it’s more puzzling for OECD central banks that continue holding, mostly passively, large stocks of gold. Fig. 1 shows the remarkable persistence of gold positions (Billion ounces) for most OECD countries during past years. With the exception of several discrete step adjustments, central banks keep maintaining passive gold stocks, independently of the market price of gold. Another puzzle is the synchronization of gold sales by central banks, as most reduced their positions in tandem. As the central banks’ adjustment of gold positions may move markets, one may expect central banks to stagger their stock adjustments, yet this has been the exception. Full-size image (78 K) Fig. 1. Gold holding in Billion ounces. Figure options In an era when ‘plastic money’ and ‘electronic money’ gain importance in providing intermediation services, the case of holding, mostly passively, large piles of precious commodity remains an enigma. By revealed preferences, central banks keep viewing gold as a useful part of their portfolio. We compare the patterns of Non-Gold International Reserve/GDP and Gold/GDP ratios, applying a prevailing econometric specification for explaining international reserves. Our analysis suggests that the intensity of holding gold is correlated with ‘global power.’ While we focus on the OECD countries, we include also the two emerging “super countries”, China and India, noting that their recent gold holdings increased in tandem with the sharp rise in their economic power. These results are consistent with the view that a central bank’s gold position signals economic might. This status is not a free lunch, as for most of the sample the return on gold was lower than the return on US government bond. Yet, at times of global turbulence, gold has retained the attractiveness of offering a potential hedge (Baur and McDermott, 2010).1 The tendency to under report gold positions in the conventional international reserve/GDP statistics remains a managerial issue that deserves explanation. A possible take on it is that, as a rule, most central banks prefer portfolios offering a stable valuation in terms of the chosen basket of global currencies. Central banks refrain from holding stocks, thereby giving up possible gains from diversification and a higher expected yield (recall that during most of the past 50 years, stocks outperformed bonds, a situation dubbed ‘the equity premium puzzle’). A possible explanation for central banks portfolios is that being a public institution, diversification into equities is risky. Central bank managers face the downside risk of being blamed for large declines in a central bank’s portfolio valuation at times of weakening equity markets, while getting very limited gratitude at times of bullish equity markets. These reward patterns encourage ‘loss-aversion’ on behalf of central bank managers, as sizable equity positions come with the risk of a manager’s job termination during bad times.2 In these circumstances, the volatility of the price of gold possesses a challenge for international reserves managers. Not reporting the market value of gold as part of the international reserve position may be a working solution for a central bank wishing to maintain a sizeable gold position, while minimizing the criticism that may occur at times when the price of gold declines. Similar incentives apply when the central bank is concerned that capital gains associated with gold appreciation may be taxed by the fiscal authority, whereas capital losses associated with Gold depreciation would be viewed as reflecting portfolio mismanagement. In either case, the central bank is exposed.

Our study showed that Gold retains its unique status in central bank portfolios – sizable physical positions that are held mostly passively, reported at historical valuation. A central bank’s gold position retains the stature of signaling economic might. The intensity of holding gold is correlated with ‘global power’ – by a history of being a past empire, or by the sheer size of a country, especially by countries that are or were the suppliers of key currencies. The tendency to under report gold positions in the conventional international reserve/GDP statistics is a working solution for the central bank’s wish to maintain sizeable gold positions, while minimizing the criticism that may occur at times when the price of gold declines.