Economy

Do Private Individuals Own More Gold Than Governments?

gold bars in vault

Almost all the gold ever produced throughout history is still in existence above ground, a testament to gold’s ability to endure. But who owns it all?

We know roughly how much gold is owned by world governments, over 30,000 tonnes. And we estimate that there are over 170,000 tonnes of gold in existence throughout the world. But not all of that gold is in a readily accessible form.

The device on which you’re reading this article, for instance, uses gold in its electronic connections. And worldwide thousands of tonnes of gold are used in electronic devices, many of which may very well be sitting unused in a corner somewhere, or possibly even at the bottom of a landfill.

The best estimates we have are that total investment ownership of gold, such as gold coins or bars, narrowly edges out total government gold ownership. Although if you look at the numbers from some developed countries, you would wonder how that’s the case.

In countries such as Germany, France, and the Czech Republic, private ownership of gold in some cases is more than double that of government gold ownership. If that relationship were to hold true in the US, it would mean that US investors owned closed to 10% of estimated world gold holdings.

Jewelry holdings are also significant, accounting for roughly half of all gold owned in the world. You’ll read about Indian temples and the massive hoards of gold they have accumulated over the centuries, or about how gold jewelry forms an important part of gold investment in India, China, and other Asian countries. But gold jewelry ownership is largely dispersed, and therefore difficult to estimate with any great degree of accuracy.

That’s why, when it comes to discussing gold ownership and gold demand, a lot of focus comes down to the two major holders of investment-grade gold: central banks and investors.

Why Central Banks Own Gold

Central banks will officially downplay the importance of gold, despite the fact that governments and international institutions collectively own over 30,000 tonnes of the yellow metal. They like to point out that gold doesn’t yield anything, isn’t productive, and just sits in a vault. Yet central banks not only retain their gold sitting in vaults, but more and more often today they’re adding to their gold holdings.

While gold may not play an active role in the day to day conduct of monetary policy or play a role in the normal operation of foreign exchange reserves, there’s a reason central banks continue to hold it. They know that if the current monetary system comes crashing down, and if all their other assets become worthless, they’ll still have gold to fall back on.

While central banks may try to deride gold publicly as a barbarous relic, they’ll never relinquish control over their gold holdings. And if you asked them to sell their gold on the open market if they actually believe it to be of no use, you can predict what response you’ll get.

Why Individuals Own Gold

Individual investors own gold for largely the same reasons. Gold has been a reliable store of value and protector of wealth for centuries. When paper money gets inflated into worthlessness, those who own gold always have a valuable tangible physical asset they can fall back on.

Gold has a reputation for gaining value even during times of financial turmoil. When stocks, bonds, and other financial assets lose value, gold is often increasing in value. For instance, gold nearly tripled in price in the aftermath of the 2008 financial crisis, while stocks struggled to regain their pre-crisis highs.

Gold also has a reputation for protecting against inflation. During the 1970s, gold’s average annualized gains were over 30%, at a time when inflation ranged as high as 11% and stock markets were nearly flat over the course of the decade. With inflation in the US today pushing higher than it has been in 40 years, the allure of gold and its ability to protect against inflation is growing.

These are powerful reasons to invest in gold, and with the economic outlook for the US not looking so bright today, more investors than ever are looking to protect their portfolios. Many thousands have looked to gold and silver to defend the value of their investments, and for good reason.

If stock markets end up crashing, which many fear they will, investors could lose out on trillions of dollars worth of accumulated gains. But if stock markets crash, there’s also a high likelihood that gold will increase in price. Therefore many investors are banking on gold increasing in price in the future while stocks crash, and have started shifting their portfolios out of stocks and into gold.

Investing in gold can be just as easy as investing in conventional financial assets too. With a gold IRA, you can invest in physical gold coins or bars while also enjoying the same tax advantages as a conventional IRA account. And if you have assets in a 401(k), 403(b), IRA, TSP, or similar account that you want to protect, you could roll them over into a gold IRA tax-free.

If inflation is your big worry, you can also make direct purchases of gold coins or bars, helping you to protect non-tax-advantaged assets such as bank accounts, money market accounts, or cash. With inflation at 7% and possibly rising higher, holding cash is increasingly becoming a money loser.

The advantages of gold are many, which is why both central banks and savvy investors continue to own it. And now you can make gold a part of your wealth protection strategy too.

The precious metals experts at Goldco have over a decade of experience helping people just like you benefit from owning gold. Call Goldco today to find out more about how gold can help you protect your hard-earned wealth.

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