Would Paper Money Be Outdated Soon

By: Azhar Azam

Where all the countries around the world are in hot pursuit of US dollars or Euros to brace foreign exchange reserves, strengthen economies and perk up credit rankings to draw investors’ attentions, these currency issuing economies are relying on Gold!

United States has the largest gold reserves in the world holding 8,133.5 tons, over 72% of total reserves, according to “International Financial Statistics, February 2016” published by World Gold Council. Click here to download latest world official gold reserves by country.

In countries, Germany (2nd), Italy (3rd) and France are (4th) are holding 3,381T (66%), 2,452T (64%) and 2,436 T (60%) are the next three both in terms of gold and percentage of reserves.

China though is the sixth largest gold holder in the world but its ratio to reserves is meager 1.8% despite it has constantly been adding gold to its reserves in 2015. It has nearly gold purchases of in excess of 100 tons in the latter half of the preceding years and the purchase trend is expected to continue this year as well. Russia has also been pushing on gold purchases and has added 21.77 tons of gold to its reserves in January whereas its total addition of gold reserves stood at 208 tons in 2015. It could nevertheless stack gold 13% of reserves which may catch a further boost up this year.

According to United States Geological Survey, the top gold producing countries in the world as of 2011 are (largest to smallest) China (362,000 kg), Australia (258,000 kg), the United States (234,000 kg), Russia (199,642 kg) and South Africa (181,000 kg). The USGS also estimates that an estimated 171,300 metric tons of gold has so far been mined historically by 2011:

• 29,500 tons held by central banks as official stocks,
• 33,000 tons held privately as investment,
• 84,300 tons held privately as jewelry, 20,800 t in other fabricated products, and the remaining 3,600 tons unaccounted

Moreover, World Gold Council in “Gold Demand Trends Full Year 2015” published on February 11, 2016 bares that despite the gold demand increase of 4% year-on-year, full year demand virtually remained unchanged. The demand for the full year 2015 slightly dipped to 4,212 tones, -14 tones in comparison to previous year. BBC shared some interesting facts related to total gold above the ground quoting “Warren Buffett, one of the world's richest investors, says the total amount of gold in the world - the gold above ground, that is - could fit into a cube with sides of just 20m (67ft)”. “A cube made of 171,300 tons would be about 20.7m (68ft) on each side. Or to put it another way, it would reach to 9.8m above ground level if exactly covering Wimbledon Centre Court.”

It is highly consequential that developed world is now reluctant to rely on paper money realizing the importance of precious metals and foreseeing their future economic growth in yellow metal. The United States at top while China and Russia are heavily buying gold although its prices are volatile. Nonetheless we might not be seeing the renaissance of “Gold Currency” in near future but the footsteps are being followed anyways!