№ 11/2017

Fìnansi Ukr. 2017 (11): 110–126https://doi.org/10.33763/finukr2017.11.110

MONETARY POLICY

BORTNIKOV Gennadiy ¹

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0001-8388-6721

Monetary gold as a component of international reserves

It is noted that gold shall retain its essential role as a component of the international reserves of any country. The global financial crisis has given rise to prices, and even after the end of this crisis, the growth continues. We observe that the period of lowering prices is followed by growth with recovery of decline. This means that the central bank can receive a steady return on investment in gold in the long run outlook. The analysis of the dynamics of international reserves and gold reserves by countries globally allows to find that in 2014–2017 average share of gold stock in reserves increased from 9 % to 10 %, but in many developed countries, central banks hold more than 50 % of gold in reserves, including developed countries (the USA, Germany, Italy, France, the Netherlands, Portugal, and Greece). One of the main reasons for the growth of gold reserves is the sovereign debt crisis, which prompts banks to curtail government bond investments. The author recommends that the optimal size of the gold reserves be identified individually and stabilized with subsequent increase in the volume of monetary gold. The global trend is to build up or at least stabilize gold reserves. The central bank uses gold to maintain liquidity, protect against the depreciation or impairment of other international reserves, carry out gold lending operations, and place gold on deposits in eligible central banks, as well as increase public confidence in itself as a monetary policy authority. The pricing mechanism for gold is characterized by monopolization at the international level (international transactions of central banks with gold), and there is a complex combination of diverse factors that affect the supply and demand of gold. It is necessary to introduce standards for the disclosure of gold reserves for reasons of national financial security and adopt the legal provision in Ukraine on the requirement to approve the sale of gold reserves by the central bank with the Government of the country.

Keywords:gold, gold reserves, monetary policy, international reserves, central bank, international finance

JEL: E42, E58, G21

Bortnikov G. . Monetary gold as a component of international reserves / G. . Bortnikov // Фінанси України. - 2017. - № 11. - C. 110-126.

Article original in Ukrainian (pp. 110 - 126)

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