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Central Banks Diversify Euro and American Dollar Reserves

On the long term, Central banks are considering the change of allocation in their investment portfolio, reducing the share of  US dollars and euros. If in 2000 the US dollar was the favorite, by the end of 2012 banks’ preference dropped considerably and US dollar’s share of total reserves declined from 62% to 54%. Moreover, Central banks consider that the best investment would be primarily in gold (as a deep and liquid market with no credit risk and with an optimal allocation of approximately 8% of the portfolio) and secondly in the alternative reserve assets (Australian dollar, Canadian dollar, Swiss franc, Danish kroner, Chinese renminbi ).

The most preferred investments are the renminbi, gold and Australian dollar. With China posing questions regarding its growing role in the global economy and its foreign exchange policies which maintain the currency controlled and allowed to fluctuate in a narrow range, gold remains the dominant asset for diversification.

For example, a study carrier out by Ipsos MORI (an important market research organization) revealed that Italian business leaders (91%) and citizens (85%) agree that the reserves of gold play an important role in the economic recovery of the country without selling it but using it as a warrant. In the same way, also UK investors see gold as a trusted source of security for their holdings.

Did you know?

“My Gold Plan” is a successful plan of buying gold. It was implemented in India, Japan and China so far. The aim of this project is to allow customers to save their money in an asset that won’t depreciate on the long term. This plan was launched by Reliance Money Precious Metals (a reliance Capital Company) and World Gold Council. Thus, based on a daily average pricing methodology, the Indians can accumulate different quantities of gold which may be withdrawn as 24 Karat gold coins or as jewelry. This scheme is not completely regulated but the World Gold Council assures people that is 100% backed by physical gold. This idea came up as a result of the increased demand for gold.

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