Nations Lacking Gold Reserves: An In-Depth Analysis

Gold has long been considered a safe-haven asset during economic turmoil. However, not all countries maintain significant gold holdings in their international reserves. According to the World Gold Council’s 2021 data, 13 nations have no gold reserves, while 14 others allocate less than 1% to gold. This article examines several economies with substantial foreign exchange reserves but minimal or no gold holdings.

Examining Major Economies with Minimal Gold Reserves

Let’s explore five notable economies that possess large forex reserves but lack gold holdings.

The Canadian Approach

Canada, a prosperous nation rich in natural resources, boasts a service-sector-dominated economy. Following a 5.2% contraction in 2020, the economy rebounded with 4.7% growth in 2021, as per IMF estimates from January 2022. The $2 trillion economy was projected to expand by 4.1% in 2022 and 2.8% in 2023, though current global events may alter these forecasts. As of December 31, 2021, Canada reported foreign exchange reserves of $106.61 billion, which slightly decreased to $102.89 billion by February 28, 2022.

Interestingly, Canada stands out as the largest economy without gold reserves. This stance stems from a 1980 policy decision to gradually sell its gold to enhance returns for the Exchange Fund Account (EFA).

A 2019 statement from the Bank of Canada explained, “Gold bullion is not as liquid as, for instance, U.S. Treasury securities. Moreover, physical delivery could involve significant secure transport and storage expenses. Consequently, gold doesn’t align well with the asset-matching framework.”

Norway’s Resource-Rich Economy

Norway is renowned for its high GDP per capita and abundant natural resources, including petroleum, hydropower, fish, forests, and minerals. As the world’s third-largest natural gas exporter after Russia and Qatar, Norway supplies approximately 20-25% of the EU’s gas demand. The country’s prosperity is built on its natural resources, skilled workforce, and technological adoption, resulting in an economy valued at around $445.51 billion.

In 2004, Norges Bank sold most of its gold reserves, retaining only seven gold bars for exhibition purposes and 3½ tons of gold coins from the 1940 ‘gold transport’ to England. Norway’s foreign exchange reserves, managed by Norges Bank Central Banking Operations (CBO) and Norges Bank Investment Management (NBIM), stood at $84.72 billion at the end of 2021.

Croatia’s EU Integration

Croatia, which joined the European Union in 2013, is the third “high-income” country without gold reserves. Its $68 billion economy heavily relies on intra-EU trade, with Germany, Italy, and Slovenia as primary trading partners.

Croatia briefly held 13.12 tons of gold in 2001, received from the Bank for International Settlements (BIS) as part of its share in the former Socialist Federal Republic of Yugoslavia’s gold assets. The gold was subsequently sold, with the Governor of CNB stating in 2016 that retaining the gold would have resulted in significantly lower payments to the Croatian budget from the Croatian National Bank.

As of the end of 2021, Croatia’s foreign reserves totaled $28.31 billion, with no gold holdings.

Azerbaijan’s Resource-Dependent Economy

Azerbaijan, an upper middle-income country with a GDP of $58.43 billion, relies heavily on crude oil and natural gas production and exports. The country cooperates closely with OPEC in the “OPEC Plus” format to balance global oil markets.

While Azerbaijan briefly held gold reserves between 2013 and 2016, reaching a peak of 30.17 tons in 2014-2015, it has since eliminated gold from its central bank reserves. However, the State Oil Fund of the Republic of Azerbaijan (SOFAZ) invests up to 10% of its portfolio in gold. At the end of 2021, Azerbaijan’s overall foreign reserves stood at $8.31 billion.

Costa Rica’s Evolving Economy

Costa Rica, an upper middle-income Latin American country, has diversified its economy from traditional agricultural products and tourism to high-tech exports. The United States is Costa Rica’s largest trading partner, accounting for approximately 40% of its exports and imports.

Despite its rich gold deposits and history of commercial mining, Costa Rica has not included gold in its foreign reserves for at least the past decade. As of December 2021, Costa Rica’s foreign reserves amounted to $7.57 billion.

Additional Nations Without Gold Reserves

Other countries that do not hold gold reserves include Nicaragua, Cameroon, Armenia, Gabon, Turkmenistan, Congo, Chad, and Eritrea.

Disclaimer: This analysis is based on World Gold Council Annual Figures for 2021. The information provided should not be considered as financial advice. Any omissions or errors are unintentional. Investors should conduct their own research before making investment decisions.