Luigi Federico Signorini: Introductory remarks - 2023 Central Bank Gold Custodian conference

Introductory remarks by Mr Luigi Federico Signorini, Senior Deputy Governor of the Bank of Italy, at the 2023 Central Bank Gold Custodian conference, Rome, 18 May 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Half a century after the demise of the Bretton Woods system, in which gold still theoretically functioned as the ultimate monetary anchor, the metal continues to account for a significant share of official reserves. According to the World Gold Council, central banks hold around 17 per cent of all the gold that has been mined throughout history. IMF data show that gold accounts for more than 17 per cent of reserves. This share decreased from the early 1980s up to the Global Financial Crisis, but subsequently rose again.

The year 2022 stands out. The total demand for gold was the highest on record since 1950 (1,135.7 tonnes). Several central banks contributed to this trend. The most active players were the Central Bank of Turkey, which reported an increase of 148 tonnes in its holdings, and the People's Bank of China (62 tonnes) Egypt, Qatar, Iraq and India each reported net purchases of more than 30 tonnes. 

So much for Keynes's 'barbarous relic'. For some reason, gold still has an appeal. But why?

According to the last annual central bank survey conducted by the World Gold Council,7 the reasons they hold gold are, in order of importance: 1) historical presence in the balance sheet; 2) price performance in times of crisis; 3) role as a store of value; 4) absence of default risk; 5) portfolio diversification; and 6) lack of political risk. Let me quickly elaborate on each of these factors.