According to the World Gold Council, which tracks official gold bullion holdings, Saudi Arabia now holds gold reserves of 322.9 tons, more than double the 143 tons previously reported. The Saudi central bank, officially the Arabian Monetary Authority (SAMA), did not disclose where the additional gold came from.
Because the WGC gathered the information from a footnote in the latest SAMA quarterly report that read “Gold data have been modified from the first quarter 2008 as a result of the adjustment of the SAMA’s gold accounts,” there is speculation that the central bank had previously owned the additional 179.9 tons but not reported them as official holdings.
Regardless of where the gold came from, Saudi Arabia, which is the world’s fourth-largest holder of foreign exchange reserves, is now the 16th largest gold holder. This put Saudi Arabia ahead of such countries as Great Britain and Spain. Still, the Saudi gold holdings make up only 2.8% of the country’s total reserves. The WGC’s Saudi revelation came only a year after China revealed that it was holding 1,000 tons of gold, more than double what it had previously reported for years.
In decades past, any news about central banks was about selling. So damaging was central bank selling and speculation about still more central bank selling that in 1999 fifteen European central banks agreed to what is now called the Central Bank Gold Agreement, which limits selling by those banks. The goal of the agreement was to provide for a more stable gold market so as not to damage the third world nations that relied on gold exports for foreign exchange. Now, some analysts are saying that this year, for the first time in nearly two decades, central banks may be net buyers of gold.
Earlier this year, the Indian central bank bought 200 tons from the IMF. (Although reported last year, the sale took place officially this year. Additionally, had India not stepped forward, that 200 tones would have been sold under the Central Bank Gold Agreement.) Further, Russia, China and other countries are adding to their reserves on a regular basis by purchasing from domestic producers.
While the world is not yet set to go back on a gold standard, it appears that monetary authorities are again recognizing the value of gold. Undoubtedly, central banks adding to their gold holdings has played a major role in the price of gold reaching record highs. Continued central bank buying can only add to upward pressure on the price.