The Role of Gold in International Reserves: A Comparative Analysis of Georgia and the World

International reserves are a vital economic tool that ensure a country’s financial stability and guarantee the fulfillment of external obligations. In the case of Georgia, as of September 2024, the volume of international reserves amounted to $4.712 billion, which is lower compared to the same period last year. The share of gold in these reserves, which stands at 12.8%, has increased significantly this year, particularly due to the gold purchases made by the National Bank in March 2024. This trend is also notable from a global perspective, as the role of gold in the structure of international reserves varies among countries.

In September 2024, Georgia’s international reserves decreased both annually and monthly. Compared to the same period last year, international reserves fell by $560.8 million, while foreign exchange reserves dropped by $1.186 billion. The decline in foreign exchange reserves was primarily due to the gold purchases made by the National Bank, which led to changes in the structure of reserves. As a result, as of September 2024, 12.8% of international reserves are in gold, representing significant growth compared to previous periods.

The volume of gold reserves gradually increased throughout 2024. In March, it amounted to $332.2 million, while by September it had reached $603.5 million. This growth indicates the efforts of Georgia’s National Bank to increase the share of gold in reserves, ensuring financial stability, particularly during times of economic and geopolitical uncertainty.

The role of gold in international reserves varies across countries and depends on both the economic conditions and financial policies of each nation. For example, the United States and Germany are the countries with the largest gold reserves worldwide. In the US, gold accounts for approximately 78% of reserves, highlighting the importance placed on gold as a tool of stability and reliability. In Germany, the share of gold in international reserves is around 66%, indicating the conservative nature of the country’s monetary policy and its focus on financial stability.

The approach of developing countries is also noteworthy. For example, Russia’s share of gold in reserves has grown significantly in recent years and stands at about 23% as of 2024. This growth reflects Russia’s efforts to protect its economy from uncertainties in the international currency market and the effects of sanctions. Similarly, China has also increased the volume of its gold reserves, although its share in total reserves remains relatively low at around 3%, due to the large volume of its foreign exchange reserves.

The role of gold in reserves also depends on geopolitical situations. For instance, in 2024, Turkey significantly increased its gold reserves to strengthen its economy amidst international uncertainties. The share of gold in Turkey’s reserves is about 30%, emphasizing the country’s reliance on gold as a means of ensuring financial stability.

In Georgia, the share of gold in international reserves is 12.8%, which can be considered a moderate figure when compared to the experience of other countries. The National Bank of Georgia actively uses gold as a tool for financial stability; however, its share is still not as high as in countries like Germany or the United States. This may be due to the size of Georgia’s economy, its monetary policy, and the need for diversification of reserves.

It is also important to note that a large part of Georgia’s foreign exchange reserves is placed in securities ($2.768 billion), while $867.1 million is held in cash. This structure indicates the conservative and diversified nature of the country’s monetary policy, which allows the National Bank of Georgia to ensure financial stability under various circumstances.

The increase in gold reserves is a means of ensuring stability in Georgia’s reserves, which is particularly relevant in times of global economic uncertainty. The experience of other countries shows that increasing gold reserves can be an effective tool for ensuring financial stability and currency reliability. For Georgia, it is crucial to diversify its reserves to protect the country from both global market instability and geopolitical risks.

In the future, Georgia will need a strategy for increasing gold reserves and diversifying foreign exchange reserves, which will help strengthen the country’s financial stability. It is also important for the economy to develop in a way that allows for the growth of international reserves not only in gold but also in other assets, further strengthening Georgia’s financial position on the international stage.