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Why Do Some Countries Love Gold?

Gold is a curious commodity.  It can be used in things from electronics and computers to dentistry and medicine.  It’s used in aerospace, medals, and awards.  Women especially love the aura around wearing gold as jewelry.  And, of course, the finance and investing world is well acquainted with the world’s most well-known store of value through the ages.  


This background, though, only scratches the surface at potential areas to look for answers as to why some countries like gold more than others.  


The reason for the question stems from the following graphic.  The figure shows the holdings of gold by country divided by the Gross Domestic Product (GDP) of a country.  


Fascinatingly, the country with the largest gold holdings as a percentage of their GDP is Uzbekistan.  Amazingly, Uzbekistan holds enough gold that its holdings sum to almost 90 percent of its GDP.  Just amazing.


The next largest holder of gold is not far behind.  Lebanon’s holding of gold amount to almost 85 percent of its GDP.  The two leading countries are far ahead of the remaining top 20 countries for gold holdings as a percentage of GDP.

In third and fourth places are Libya and Tajikistan at around 37 percent each.  Rounding out the top five is Kazakhstan at around 25 percent.


Interestingly, the first western world country on the list is Portugal at just under a quarter of its GDP in gold holdings.  With the state of the Portugal government’s finances, it’s likely a good thing that Portugal holds so much gold.  


Following Portugal is a country with a much stronger government balance sheet – Switzerland.  The Swiss, who are seemingly synonymous with gold, have gold holdings just under a quarter of their GDP.  


The remaining countries in the top 10 include the Kyrgyz Republic (around 20 percent), Bolivia (around 20 percent), and Italy (around 18 percent).


Thinking Through the Reasons

In seeing the list of the top 20 countries for gold holdings as a percentage of GDP, perhaps the first question that comes to mind is why.  Why would some of these countries place so much wealth in gold?


Three reasons probably explain most of the findings.  


First, some countries’ central banks must hold so much gold as a backing for their currency.  A smaller, relatively unknown country wishing to finance spending or support their currency must have some backing outside of fiat currency.  Not everyone is the European Central Bank or the Federal Reserve.


Second, some countries may have ulterior motives for accumulative gold.  For instance, speculation abounds that Russia would like to create a gold-backed cryptocurrency that completes with the US dollar.  Countries wanting to accomplish such a feat would need large sums of gold as backing.


Third, some countries simply trust gold more than other commodities.  Think Germany or Switzerland.



Gold, the much beloved commodity used from industry to finance, is held in quite different quantities across the world.  Although need to support a currency or government spending explains some of the divergence, other reasons are more speculative or culturally based.  The one thing that seems relatively certain is that everyone trusts gold, at least more so than any fiat currency.