It’s a common misconception that the world’s major central banks and monetary authorities own large quantities of gold bars. Most of them do not. Instead, this gold is owned by the sovereign states that have entrusted it to the respective nation’s central bank, and the central banks are merely acting as guardians of the gold. Tracing the ownership question a step further, what are sovereign states? A sovereign state is an entity with legal personality that is represented by one government. And with each government representing the people of that sovereign state, in essence, the large gold hordes managed by the central banks are in fact pools of gold owned by the state for the benefit of its citizens.
Owned by the State
When ownership of gold reserves resides with the associated sovereign state, the central bank or monetary authority is officially appointed to act on behalf of the state in holding and managing that state’s gold reserves.
For example, the Deutsche Bundesbank has stated that:
‘The Deutsche Bundesbank holds and manages the national foreign reserves of the Federal Republic of Germany’
Likewise, as per its Statutes, the Banque de France highlights that it:
‘shall hold and manage the State’s gold and currency reserves and shall enter them on the asset side of its balance sheet pursuant to the terms and conditions of an agreement it enters into with the State.’
This post was published at Bullion Star on 9 Jan 2017.
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