Gold and foreign exchange reserves of the countries of the world. What is it - a gold and foreign exchange reserve?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Gold and foreign exchange reserves are the reserves of foreign currency and gold of the country. They are kept in the Central Bank. These funds are at the disposal of government bodies. Gold and foreign exchange reserves are used in settlements for foreign trade transactions, to pay off the country's external and internal debt, as well as for investment projects.

Need to create

Gold and foreign exchange reserves are required to cover the temporary excess of payments for various types of international payments over budget revenues. The size of the reserves held by the country's central bank is an important indicator. Its value characterizes the ability of the state to make constant payments related to external payments.

In other words, foreign exchange reserves are highly liquid financial assets. They are under the control of those state bodies that carry out monetary regulation.

These funds, if necessary, are used to finance the resulting deficit in the country's balance of payments.

Signs of gold and foreign exchange reserves

The stocks held by the country's Central Bank have the following characteristics:

-are national highly liquid reserves, which are among the main instruments of state regulation in the implementation of international payments;

- are evidence of the state's strong financial position;

- are the guarantor of the stability of the national currency;- ensure the uninterrupted fulfillment of the country's international obligations.

Composition of foreign exchange reserves

Stocks held by the Central State Bank are divided into two groups of assets. The first of these includes gold, which can be in coins and bars, as well as platinum, silver and diamonds. These assets can always be put up for sale or otherwise used, which will allow you to fulfill your obligations to repay the external debt.

Gold and foreign exchange reserves of the second group are funds in foreign currency. In Russia, it includes the euro and the US dollar. The assets of the second group in our country are represented by the currency of Japan, as well as special positions and rights in the IMF.

Management of gold and foreign exchange reserves

Three models have been developed and are in operation that determine the relationship for the disposal and distribution of state reserves. Gold and foreign exchange reserves are owned by the Treasury or the Ministry of Finance. At the same time, purely technical functions are assigned to the Central Bank.

Some gold and foreign exchange reserves of the countries of the world are subject to a specific management mechanism that has been chosen byState Treasury. So, for example, it happens in the UK.

Gold and foreign exchange reserves of the countries of the world can be owned by the Central Bank of the country. He is also the manager of these reserves. This model is adopted in Germany and France. The central banks of these countries manage their gold and foreign exchange reserves and make independent decisions on the structure of building state reserves. Mixed models for the disposal and ownership of gold and foreign exchange reserves are adopted in Russia, Japan and the USA.

Government stock requirements

The reserves that each country creates are insurance. They are able to protect the national economy of any state from possible macroeconomic risks. In this regard, the gold and foreign exchange reserves of the Central Bank must meet a number of requirements. One of them is versatility. This means it can be used in all industries and applications.

Gold and foreign exchange reserves should also have the ability to quickly move in space.

Any stock placement provides for their return over time. That is why the maintenance and formation of gold and foreign exchange reserves requires certain costs. The Central Bank does not receive income from the storage of stocks. However, with a sufficiently large number of them, the state may decide to issue loans to other countries at interest.

Impact on inflation

Do the gold and foreign exchange reserves of the country have an impact on the growth of the depreciation of the money supply? This issue is still controversial. There is a certainthe view that with the growth of reserves, the amount of money supply in the country decreases, which helps to reduce inflation. However, most scholars do not agree with this position. They argue that with the growth of government reserves, the inflation rate in the country will certainly rise.

Security of the gold and foreign exchange reserve

Providing a certain level of government stocks allows you to perform a number of tasks. Among them are the following:

- supporting the country's currency;

- maintaining confidence in government policy;

- monetary management;

- avoiding shock during a crisis by reducing external vulnerability and maintaining the liquidity of financial resources in foreign currency;

- maintaining the country's rating as a reliable and self-confident state;- the role of the support of the national currency, backed by external assets.

Russia's gold reserves

The reserves of the Central Bank of our country are formed from two parts. One of them is the excess revenue received by the federal budget. It was from them that in 2004 the formation of the stabilization fund of the Russian Federation took place. The second component is international reserves, which are managed by the Bank of Russia. These funds, expressed in foreign currency, have different functions and sources of formation. However, at this stage, their investment in the country's economy is considered inappropriate.

Russia's gold and foreign exchange reserves, as of November 22, 2013, amounted to 505.9 billion US dollars. Their main share falls on euros and dollars (90%). Nine percent is gold.

Gold and foreign exchange reserves of the Russian Federation are presented mainly in US dollars (over 64%). Only twenty-seven percent of the stock structure is allocated to the euro. These indicators testify to the dollar orientation of the export-import operations of Russian manufacturers.

There is a trend towards the growth of foreign exchange assets held in the reserves of the Central Bank. This is facilitated by the strengthening of the Russian stock market. In this regard, the share of monetary gold in the reserves is constantly decreasing. This is due to a drop in the reliability of these investments. Over the past two decades, the growth in the price of gold has significantly lagged behind inflationary processes. In addition, this asset is not liquid. It cannot be converted into cash in a short time. In addition, gold does not bring any income to the Central Bank. In this regard, the shift in emphasis in favor of foreign exchange assets becomes clear.

Similar trends are typical for other countries. The central banks of a number of states (Holland, Belgium, Australia, etc.) have already started selling gold from their reserves.

US gold reserves

America's reserves include all the currency that is in circulation. This does not take into account the funds that lie in the cash vaults of the authorities. In addition, the composition of US gold and foreign exchange reserves includes the finances of commercial banks stored in the accounts of state reserve banks.

When calculating the extended dollar overhangincludes the monetary base, consisting of the debt of the authorities, decreasing by the amount of those obligations that are on the balance sheet of the Federal Reserve System. When calculating this indicator, the amount of international liabilities and assets of the country's authorities is taken into account.

The US gold and foreign exchange reserves (according to the analysis) provide only fifteen percent of the money supply. If those who are holders of government securities decided to redeem them because of their lack of confidence in the dollar, then the value of the security of the money supply would be only three percent.

The US remains the world's largest holding of gold, despite the fact that the current volume of this precious metal is almost three times lower than the post-war maximum. At the same time, the total reserves of the Central Bank of Europe and all European countries amount to more than ten thousand tons of gold, which is higher than this indicator in the United States.

Economists analyze data on the ratio of gold reserves available to the country, and the amount of its public debt. In this regard, Switzerland is the best position, and the United States is the worst.

To become the first among the states of the world community in terms of the volume of accumulated gold, the United States of America was allowed by their geographical position and geological features. Only during the first five years of the so-called "gold rush" was mined about three hundred and seventy tons of precious metal. This explains the high share of gold in the state reserve of the country. It is currently about seventy-fourhalf percent. In mass terms, this is 8133.5 tons.

It is also quite natural that the world's largest gold vault has been built in the USA. It is owned by the Federal Reserve Bank. The fact that the eurozone has a larger amount of yellow metal in par value is explained by the fact that the International Monetary Fund is located on its territory. However, gold reserves in Europe are under the control of the United States Congress. Even the decision to sell the precious metal should be subject to a US resolution.