logo

What are gold reserves of national banks


https://www.ipn.md/en/what-are-gold-reserves-of-national-banks-7966_1047390.html

The Republic of Moldova is a state that keeps almost all the country’s reserves in foreign currency. The last report by the National Bank of Moldova shows the official foreign exchange reserves on February 22 this year came to about US$ 2.808 billion (2.808,270.40bn), while the gold reserve was slightly over US$ 3 billion (3.207.52bn).

Contacted by IPN, former minister of defense Veaceslav Negruța, currently Transparency International Moldova expert, said the central bank holds a small gold reserve because the country does not have gold resources and has never been an important player on the regional or world gold markets. The gold of the National Bank of Moldova’s reserve was inherited from the National Treasury after this institution was liquidated.

According to Veaceslav Negruța, the fact that the Republic of Moldova keeps most of its serve in foreign currency is an advantage as the foreign currency does not involve large maintenance costs and is manageable in transactions. Periodically, the National Bank invests a part of its foreign exchange reserves in foreign capital markets and the made profit returns to the Bank’s treasury.

The expert noted the practice of the central banks of the states that kept an important part of the nation’s reserves in gold had been mainly applied before the crisis of 1929-1933. In that period, the golden reserves represented an important factor that guaranteed the value of the national currency. After that crisis, the national banks changed the approach and stopped building their monetary policies on the held gold reserve, focusing on the foreign exchange reserves, the GDP and other factors. Currently, the central banks periodically trade a part of the gold reserves in order to make profit, but this is not easy as it is hard to anticipate the evolution of the price.

The ex-minister said the keeping of large quantities of gold implies higher costs. The gold needs special maintenance and storage conditions, including capacities to ensure its protection and security. The states that do not have enough gold reserve storage capacities choose to keep a part of the gold in other countries for money. Switzerland has considerable storage capacities and many states keep their gold reserves in banks there.