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Taiwan says its gold hoard supports the New Taiwan dollar amid de-dollarization trend
Thu Aug 22 2024
As presidential hopefuls in the U.S. pontificate about Bitcoin (BTC) and gold as strategic reserve assets while the BRICS bloc mulls the creation of a gold-backed currency, Taiwan is putting its metal where its mouth is as the country’s central bank said their gold holdings could support the value of the New Taiwan dollar (TWD).
According to a report from the Taipei Times, Taiwan currently holds 422 tonnes of gold in reserve at the Central Bank of the Republic of China (Taiwan), which the central bank uses to support the value of the national currency.
The official said that 410 tonnes of the total are specifically held as backing for the issuance of TWD, while the remaining reserve is used to mint commemorative gold coins for the inauguration of Taiwan’s newly elected president and vice president, which occurs every four years.
Based on the TWD banknotes currently in circulation, the official said the central bank holds the equivalent amount in liquid assets in the form of gold and foreign exchange. They added that the purpose of the gold stash is to support and guarantee the value of the national currency, as gold “has always played an important role in the international monetary system.”
“Gold reserves serve as a key risk management tool for countries in times of crisis, providing a buffer against unforeseen events such as war and financial instability,” the official said.
Addressing the recent surge in gold prices to a new record high, the central bank said it is neither adding to nor selling its gold reserve.
According to the World Gold Council's rankings released on Aug. 2, Taiwan ranked 12th in global gold reserves in Q1 2024, while the U.S., Germany, and Italy ranked as the top three.
The Taiwanese central bank said that most of the gold it currently holds in reserves was purchased in the 1970s – when the yellow metal was valued at less than $400 per ounce – to balance the trade surplus between Taiwan and the United States.
Due to the decline in value of the TWD, the country's unrealized gain on its gold holdings has reached nearly NT$900 billion ($28.2 billion).
While Taiwan has held its gold reserves steady, countries and central banks worldwide have increased their acquisitions of gold amid a broader move away from the U.S. dollar as a reserve currency.
According to the World Gold Council, in 2023, central banks purchased a total of 1,030 tonnes of gold, following a record 1,082 tonnes in 2022. This was the second consecutive year in which net purchases exceeded 1,000 tonnes. In Q2 of 2024, a total of 183 tons was purchased by central banks, a year-on-year increase of 6%.
China’s central bank reported that its gold holdings at the end of June totaled 2,264 tonnes, an increase of 16.3% since November 2022. The increase came as the People’s Bank of China increased its gold reserves for 18 consecutive months.
India’s gold reserves are also on the rise, with the country’s central bank increasing its holdings by 30% between July 2023 and July 2024 and now holding $57.6 billion worth of the yellow metal. Singapore, the Philippines, and several other nations have also boosted their gold holdings amid the shift away from fiat currencies, including the USD and yuan, as reserves.
Source: https://www.kitco.com/