Central Banks and Gold Puzzles

Joshua Aizenman and Kenta Inoue

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: We study the curious patterns of gold holding and trading by central banksduring 1979-2010. With the exception of several discrete step adjustments,central banks keep maintaining passive stocks of gold, independently of thepatterns of the real price of gold. We also observe the synchronization of goldsales by central banks, as most reduced their positions in tandem, and theirtendency to report international reserves valuation excluding gold positions.Our analysis suggests that the intensity of holding gold is correlated with ‘globalpower’ – by the history of being a past empire, or by the sheer size of a country,especially by countries that are or were the suppliers of key currencies. Theseresults are consistent with the view that central bank’s gold position signalseconomic might, and that gold retains the stature of a ‘safe haven’ asset at timesof global turbulence. The under-reporting of gold positions in the internationalreserve/GDP statistics is consistent with loss aversion, wishing to maintain asizeable gold position, while minimizing the criticism that may occur at a timewhen the price of gold declines

Keywords: Social and Behavioral Sciences; International reserves; Central banks; Gold; exchange rate regimes (search for similar items in EconPapers)
Date: 2012-02-26
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.escholarship.org/uc/item/7bx7h0q4.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: Central banks and gold puzzles (2013)
Working Paper: Central Banks and Gold Puzzles (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt7bx7h0q4

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().