Why do all Countries buy Gold?

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The Global market of Gold reserves

The paradox of the modern world is that despite the exit from the Gold Standard used to back the money turnover, the overwhelming majority of developed countries still keep most of their reserves in monetary gold. Thus, in spite of the fact that the governments of the leading countries abandoned the national currency gold coverage, the very fact of possessing gold instills confidence in the ability to pay bills.

The table below shows countries with the largest gold reserves in tons according to the World Gold Council.

Country / Organization	2018	Share in %
1 United States	8,133.5	73.5
2 Germany	3,369.8	68.9
3 IMF	2,814.0
4 Italy	2,451.8	65.3
5 France	2,436.0	58.5
6 Russia	1,998.5	16.8
7 China	1,842.6	2.2
8 Switzerland	1,040.0	5.0
9 Japan	765.2	2.4
10 Netherland	612.5	65.9

Thus, the largest economies in the world, which are issuers of fiat money, believe in gold more than in their own reserve currencies. The United States of America, which actually imposes the dollar as a means of settlement through political and economic pressure, owns the largest gold reserves in the world. The gold reserves of the United States are 8,133 tons, which is 74.5% of their gold and foreign exchange reserves.

Germany owns gold in the amount of 3,370 thousand tons, which is 69.9% of the gold and foreign exchange reserves of this country. France keeps 2,436 tons of gold in its gold and foreign exchange reserves, which accounts for 58.5% of its gold and foreign exchange reserves.

The desire of Central Banks to provide themselves with gold has been growing over the past decade. Knowing the ropes of the situation, Central Banks worldwide have become net buyers instead of net sellers of gold. In 2017, the growth in the volume of gold purchased by Central Banks increased by 36 percent and amounted to 366 tons of net purchase, despite the fact that sales decreased by 55 percent to the lowest level since 2014. In the current situation, no one wants to sell their gold. It is planned that the next 2019 year will be the year of maximum demand for gold from Central Banks. According to the World Gold Council, in 2018, the demand for gold has increased by 42 percent, while net demand in the first quarter only amounted to 116.5 tons. Central Banks foresee a dramatic rise in the value of gold and consistently convert their fiat assets into precious metal.

In 2018 Russia has been actively buying gold. China has created the first exchanges where commodities will be traded without the participation of the dollar, thus also significantly increasing the demand for gold. The Central Banks of India, Turkey, Brazil, Kazakhstan and other developing countries behave in the similar way. They are actively buying gold, taking advantage of a period of low prices, which is obviously coming to an end. The situation on the global market of gold reserves is crystal clear and sends a message to private investors actively increasing their own investments in gold-backed assets to take necessary actions. With reference to the long-term trend of gold appreciation Gold Standard created cryptocurrencies backed by gold and in this way enabled the most far-sighted investors to acquire assets which are the basis of a full-fledged gold circulation.

7 Things You need to know about Gold in the 21st Century

• According to the World Gold Council, world gold holdings make 187,200 tons.

The major amount is held by Central Banks, as private investments and jewelry. With an average spot price of $1,225 per ounce, the value of the global gold reserve can be estimated at $7.7 trillion. Is this a lot or a little? To compare, the total value of all banknotes and coins issued in the world is $7.6 trillion. Thus, behind every dollar or euro that you have ever held in your hands there is gold with a higher value.

• The world’s major economies believe in gold more than in any other reserve currencies.

The United States of America is the custodian of the largest gold reserves in the world. It owns 8,133 tons of gold, which is 74.5% of their reserve assets. Germany comes the second in the world and the first in Europe and owns 3,370 thousand tons of gold, which is 69.9% of reserve assets of this country. The other top ten countries with the largest gold reserves are: China, Russia, Japan, Switzerland, Italy, France, the Netherlands and India.

• Gold has gained increasing credibility from Central Banks over the past decade.

Beginning from 2010, the Central Banks all over the world have turned from net gold sellers into net gold buyers. In 2017, their activity increased by 36% and amounted to 366 tons of net purchase, which is a significant increase since 2016. Last year, the gross sales in the official sector fell to the lowest level since 2014 by 55%, which resulted in the fact that the holders ceased to sell the available gold. The current 2018 year has become the year of the strongest demand for gold by Central Banks. According to the World Gold Council, in the first quarter of 2018 such demand increased by 42% compared to the same period of the previous year, and the net demand was 116.5 tons. This indicates that Central Banks foresee a sharp rise in the value of gold, which historically is considered as a safe haven asset.

• Gold gains increasing credibility with professional investors.

As the global debt continues to grow and the global economy becomes more unstable, individual investors are actively investing in gold, which has historically proved itself in times of economic decline and geopolitical uncertainty. The current situation is obvious for professional investors, who give gold an increasing share in their portfolios. According to the World Gold Council, the annual volume of gold bought by investors has increased by no less than 235% over the past three decades.

• Nowadays the rate of gold is in large part artificially held back by adopting regulations affecting its price.

A case in point is the “Dodd-Frank Wall Street Reform and Consumer Protection Act”, which directly restricted the right of residents to trade precious metals, including gold. However, due to regulatory restrictions, the investment potential of gold has remained the same; it is being artificially held back, and preferences are given to unsecured fiat money, since fiat money is what the most countries of the world base their debt-built economy on. Financial bubble of unsecured fiat money definitely cannot grow for long. What will happen if its bursts? The answer is obvious: there will be a sharp depreciation of fiat money and need in such assets that have real value, primarily in gold.

• In the 21st century the best investments are gold-covered assets.

Traditionally gold as an investment tool has several forms – gold bars, investment gold coins and gold sand. In different countries the purchase of gold is subject to various taxes, including the value-added tax. Thus, taxes artificially reduce the investment attractiveness
of gold and reduce the effective rate of return. Consequently, the best investments are those that are allocated to assets secured by gold and possess all the advantages of metal gold.

• In the 21st century Gold Standard created Physical Gold in Digital Form.

In 2018, Gold Standard developed a cryptocurrency secured by physical gold. Having a gold equivalent KBC may be used both as an investment tool and a blockchain-based cryptocurrency specifically designed to be used as a generally accepted digital payment.
Being physically linked to gold, the new cryptocurrency is also a liquid payment instrument, which allows making prompt necessary payments while maintaining the reliability of investments. By means of technological innovations in the 21st century gold has not only strengthened its position in the global economy but has also acquired new forms that allowed it to confidently enter the digital future.

Physical Gold in digital form

After blockchain was introduced, when it became clear that money can be transferred as freely as information, the Gold Standard team realized that this technology will make such a revolution in the financial world as the Internet made not long ago in the information dissemination environment. Tomorrow it would be impossible to think of something connected with money without blockchain and cryptocurrencies.

Paying bills, shopping, getting salaries and wages, your savings and investments will be based on blockchain technology. But although the question “How to transfer money via the Internet?” was answered, the question “How to ensure value and reliability of transferred money?” still remains open. Cryptocurrencies come and go, their value grows and falls, which in fact prevents their rapid integration into real economic relations. The solution turned out to be quite obvious and reliable just as blockchain itself. Gold Standard created the KaratGold Coin project and as a part of it issued a cryptocurrency covered by physical gold.

The main idea on which a new KBC cryptocurrency stands is very simple: money secured by gold is better than money secured by nothing. In 2018, Physical Gold in Digital Form appeared. The KaratGold Coin is a blockchain-based cryptocurrency specifically designed to be used as a generally accepted electronic payment. This coin is linked to physically deposited gold in the form of the so-called CashGold, a true gold standard. A certain number of KaratGold Coins can be exchanged for the corresponding amount of CashGold at any time.

At the same time Gold Standard developed operating mechanisms that will allow owners, retailers and governments all around the Globe to use the modern blockchain-based currency covered by gold. The next logical step was globalization of the proven solutions and creating a world blockchainbased payment system based on a cryptocurrency backed by gold.

The existing global payment system, which is controlled by banks and governments, solves problems of financial megastructures and the state but not of its users. For users, it remains inefficient, fragmented, slow and expensive to maintain. In a few years, when making quick and cheap global transactions within the gold value payment system created by Gold Standard it will be difficult to believe that people could exchange pieces of paper and took a word of financial corporations secured by nothing. Since by that time blockchain will have been fully based on gold.

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