World Gold Council

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Context:

According
to the latest report by the World Gold Council (WGC), India, which is the
world’s largest consumer of gold, has the 11th largest gold reserve, with the
current holding pegged at 607 tonnes.

  • India’s overall position in terms of
    total gold holding would have been tenth had the list included only countries.
  • International Monetary Fund (IMF) is
    included and is third on the list with total gold reserves of 2,814 tonnes.
  • The U.S. tops the list with gold
    reserves of 8,133.5 tonnes, followed by Germany with 3,369.7 tonnes.
  • Among Asian countries, China and Japan
    have more reserves when compared to India.
  • The demand for gold was concentrated
    among emerging market central banks, with diversification the key driver in the
    face of ongoing geopolitical and economic uncertainty.

World
Gold Council

  • The
    World Gold Council (WGC) is a nonprofit association of the world’s leading
    gold producers.
  • Headquartered
    in London, the WGC covers the markets which comprise about three-quarters
    of the world’s annual gold consumption.
  • It
    is a market development organization for the gold industry which includes
    25 members and many gold mining companies as well.
  • The
    WGC was established to promote the use of and demand for gold through
    marketing, research and lobbying.

Gold
& Economy

As
Currency:
 Gold was used as the world
reserve currency up through most of the 20th century. The United States used
the gold standard until 1971.

The
paper money had to be backed up by equal amount of gold in their reserves.

Although
the gold standard has been discontinued, some economists feel that we should
return to it due to the volatility of the U.S. dollar and other currencies.

  • As
    a hedge against inflation:
     The demand for gold
    increases during inflationary times due to its inherent value and limited
    supply. As it cannot be diluted, gold is able to retain value much better
    than other forms of currency.
  • Strength
    of Currency:
     When a country imports more
    than it exports, the value of its currency will decline. On the other
    hand, the value of its currency will increase when a country is a net
    exporter. Thus, a country that exports gold or has access to gold reserves
    will see an increase in the strength of its currency when gold prices
    increase, since this increases the value of the country’s total exports.

Since,
the central banks rely on printing more money to buy gold, they create an
excess supply of the currency. This increases the supply and thereby reduces
the value of the currency used to purchase it.

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