Central Banks and gold

The official WGC numbers for 2013 saw world central banks collectively buy 368 tonne ($17.6b), the fourth consecutive year of net purchases.  Note these are official figures so exclude the 500 tonne that appears to be the Chinese central bank purchases in 2013 we’ve previously reported.  Why do central banks hold 18% of all the gold ever produced?  Italy’s central bank put it well…

"Not only does it have the vital characteristic of allowing diversification, in particular when financial markets are highly integrated, in addition it is unique among assets in that it is not issued by any government or central bank, so its value cannot be influenced by political decisions or by the solvency of any institution.  These features, coupled with historic ... and psychological reasons, stand in favour of gold's importance as a component of central bank reserves.  Gold underpins the independence of central banks in their ability to (act) as the ultimate bearer of domestic financial stability.”