The World is in a Gold Fever, But This is Where It's Stored
The global gold fever is pushing central banks around the world to face a new dilemma regarding the locations of their reserves. The value and function of gold as a hedge against global risks heavily depend on where the precious metal is stored.
According to The New York Times, the two largest gold storage centres in the world have traditionally been in New York and London, managed by the Federal Reserve Bank of New York and the Bank of England, respectively. Both cities also serve as global gold trading hubs with a proven track record of secure storage for over a century.
More than 500,000 gold bars are stored at the Federal Reserve in New York as of the end of 2024, making it one of the world’s largest monetary gold vaults. Although it peaked in 1973, gold’s role in the global financial system began to diminish after the United States abandoned the gold standard as a backing for the dollar.
Since 1970, central banks in developed countries such as the United States and Europe have tended to sell more gold than they buy. Nevertheless, as of the end of 2024, they still control around 57% of global gold reserves, with the United States, Germany, Italy, and France as the largest holders.
In recent years, developing countries have become the main buyers of gold, in line with the increasing need for reserve diversification. However, the issue of storage locations is now a concern, particularly for countries wary of geopolitical risks and potential sanctions.
These concerns have widened following the escalation of global geopolitical tensions, including dynamics in US-Europe relations. Some parties in Europe are beginning to question whether gold reserves should be stored domestically for strategic security.
For example, Germany and Italy have diversified their gold storage locations between domestic sites, New York, and London. Nevertheless, both countries emphasise that they have no plans to repatriate all their gold reserves to their home countries.
One of the main reasons for continuing to store gold in New York and London is the proven security factor. To date, there has never been a theft of gold from either vault, even in extreme conditions such as World War II when London’s gold was secretly moved to Canada.
Additionally, liquidity is an important consideration because both cities are global gold transaction centres. By storing gold there, central banks can easily buy and sell without needing to physically move the gold.
More than 60 central banks are known to store gold at the Bank of England, which holds around 430,000 gold bars in nine vaults. This system allows inter-central bank transactions to be conducted efficiently without physical gold transfers.
Several countries are adjusting their storage strategies in line with increases in gold reserves. India, for instance, has added to its gold reserves while reducing the proportion stored abroad, while Turkey once moved all its gold from New York and Switzerland to domestic storage before relocating some to London.
Poland also plans to balance its storage locations between domestic, New York, and London to strengthen national resilience. Meanwhile, the Czech Republic chooses to store most of its gold in London to take advantage of transaction opportunities and income from gold lending.
On the other hand, transparency regarding storage locations remains an issue because many central banks keep this information secret. Countries like China and Brazil are known to have increased their gold reserves but do not disclose detailed storage locations.
Although the dominance of New York and London remains strong, financial centres like Hong Kong are beginning to position themselves as new alternatives for global gold storage. Looking ahead, the trend of central bank gold purchases is expected to continue increasing, making storage location strategies a crucial factor in managing foreign exchange reserves.