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Mainstream Gold: World Bank Issues Handbook for Money Managers on Gold Investing

Isaac Nuriani    |
Apr 5, 2024
  • World Bank sees gold “playing critical role in the financial system.”
  • Asset managers, central banks look to hedge against instability with gold.
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Not only is the gold bull still running at a furious pace…but he seems to be picking up speed. 

No sooner did gold finish out March having risen about 10% on the month, it kept charging into April. Through the first week of the new month, gold increased 2.5% more.[1] 

Given the strength evident in gold’s price trend since the end of February, it is understandable if some forget how resilient the metal has been for years now. 

Take 2022 and 2023…years during which the Federal Reserve raised the federal funds rate by more than 500 points.[2] It was an effort that should have sunk rate-sensitive gold. Instead, the metal proved to be so resilient during this period that it emerged from those years as one of the best-performing assets.[3] 

But as impressive as that is, evidence of gold’s consistent price durability goes back much further. From January 2001 – the beginning of the current millennium through the present day – gold has risen more than 700%.[4] 

Analysts attribute much of gold’s demonstrated strength over the last two-plus decades to a significant embrace of the metal by the world’s central banks.[5] 

I mentioned a few moments ago that gold emerged as among the best-performing assets during calendar years 2022 and 2023, during what was – or what should have been – an acutely hostile rate climate for the metal. But gold was supported during these years in no small way by a wave of central bank demand at its highest (2022) and second-highest (2023) levels in history.[6] 

But the 2022-2023 period of record gold demand by central banks may obscure what could be an even more compelling piece of information: the fact that central banks have been net purchasers of gold every year since 2010, the year the Federal Reserve transitioned from its first-ever round of quantitative easing to its second in the midst of a dogged fight against the impacts of the financial crisis.[7]  

For nearly 15 years now, central banks have seen fit to expand their stores of gold, doing so for reasons ranging from its performance as a hedge against crises, its perceived usefulness as a store of value, to its capacity to help some central banks and foreign governments lower their exposure to the dollar.[8] 

And as if the ever-stronger embrace of gold by central banks since 2010 is not enough to suggest the metal may be returning to prominence as a global monetary asset, there’s now this: No less an authority than the World Bank recently published a handbook for asset managers on investing in gold titled, appropriately enough, Gold Investing Handbook for Asset Managers. 

One striking implication of this development is that using gold as a strategic portfolio component apparently has become so foreign to professional money managers that it was deemed necessary to explain to them how it might be utilized accordingly. 

Another is that the World Bank – a Western-led, Washington, D.C.-based organization – is formally ascribing so much import to gold as an investable asset, which suggests there must be a not-insignificant level of demand for this information among developed nations. 

To be sure, the handbook is a guide for asset managers and addresses a number of asset-management-specific areas of concern, including sample portfolio allocations and the operational aspects of gold trading in an institutional setting. 

We’re going to examine the handbook from a different vantage point, however. The guide also makes the “macro” case for gold, detailing the broader justifications for seeing the metal as a secular asset worthy of portfolio consideration in the first place. The discussion is held largely in the context of gold ownership by central banks and national governments, principally because the consumption of gold by those bodies in recent years has been something of an “Exhibit A” illustrating why any large institution might want to own gold.  

And as it turns out, why any individual investor might consider owning gold, as well. 

“Gold Continues to Play a Critical Role in the Financial System” 

From the very first sentence, the World Bank’s Gold Investing Handbook for Asset Managers makes clear it sees gold as a potentially beneficial asset through which to realize financial stability: 

In the modern era, gold continues to play a critical role in the global financial system, serving as a hedge against inflation, a safe haven asset, and a reserve asset for central banks.[9] 

The guide additionally suggests that gold’s relevance as a global monetary asset is a lasting one. 

“The role of gold in the global financial system has evolved over time, with changes in monetary policy, economic conditions, and technological advancements influencing demand and supply dynamics,” the handbook notes. “Despite these changes, gold remains a crucial component of the global financial system and is likely to continue to play an essential role in the future.”[10] 

The handbook goes on to identify some of the particular economic and geopolitical challenges of the last 15 years that it says have proved gold’s validity as a store of value during periods of uncertainty: 

The market disruptions brought about by the 2008 Global Financial Crisis (GFC), the US and China trade war, Brexit, and the COVID-19 pandemic, as well as a prolonged period of negative real interest rates and geopolitical uncertainties caused by financial sanctions imposed on Russia to freeze its foreign reserves, reinforced the strategic importance of gold as a buffer against financial instability.[11]  

Notably, the disruptions detailed in the handbook largely dovetail with those recently cited by Sprott Asset Management as examples of gold’s capacity to serve as a store of value during crises. 

Specifically, Sprott’s analysis found that during seven discrete crisis periods dating back to 2007, gold averaged 12.7%, outperforming other popular and commonly held assets over those same periods. Among the crises highlighted were the global financial crisis, the European debt crisis, the U.S.-China trade war, the pandemic and the Russia-Ukraine/Israel-Hamas conflicts.[12] 

Emerging Markets Are Buying a Lot of Gold – but Developed Markets Still Own the Most 

Another revealing point of discussion in the handbook is the character of the central banks and governments that currently possess the most substantial gold reserves; it’s not just emerging markets that are looking to gold these days. 

It is true that the five biggest buyers of gold in 2023 were China, Poland, Singapore, Libya and the Czech Republic – mostly emerging economies.[13]  

But the holders of the largest gold reserves, overall? Those would be the developed markets: United States, Germany, International Monetary Fund, Italy and France. Those five entities account for more than 50% of the world’s gold reserves.  

And the single largest holder of gold? That’s none other than good ol’ Uncle Sam, with 8,133 metric tons…more than twice as much as the 3,355 metric tons held by runner-up Germany.[14] 

As State Street analysts noted late last year: 

Developed markets…control 66% of the gold held globally by the official sector, and their gold holdings account for 58% of aggregate FX (foreign exchange) reserves among their peers.[15] 

In other words…for all the historical talk among developed economies that their historical success in controlling inflation and fiscal errancy meant they did not need to maintain large reserves of gold, the evidence suggests they aren’t ready to turn their backs on gold altogether.[16] 

Indeed, in recent years, the representative central banks of two of the world’s advanced economies, Germany and the Netherlands, suggested they were relying on their stores of gold to help ensure the stability of their institutions amid the recent global surge in interest rates.[17] 

“The balance sheet of the Dutch central bank is solid because we also have gold reserves,” declared Dutch Central Bank President Klaas Knot in November 2022.[18]  

Separately, Bundesbank (Germany’s central bank) executive board member Joachim Wuermeling said last year that its 3,355 metric tons of gold reserves ensures “the balance sheet of Deutsche Bundesbank is on firm ground, and this certainly makes it easier for us to bear losses over a certain period.”[19] 

The World Bank’s handbook also sees fit to stress for asset managers the inherent economic, political and geopolitical “neutrality” of the asset, and its associated lower risk profile on that basis. 

“Gold has no credit, default, or political risk…conditions that no other traditional safe haven asset can offer,” the handbook notes, adding: 

“Gold’s liquidity surpasses the major financial assets and government debt markets of many developed economies.”[20] 

I don’t know if the World Bank intended for its handbook to essentially serve as a “love letter” to gold…but that nevertheless seems to be what has been produced. 

It’s natural for individual investors to ponder if the potential macro advantages of owning gold enjoyed by central banks and recommended to asset managers also may be enjoyed by those perhaps not quite so well heeled. 

As it turns out, they can. It’s not only central banks and asset managers that have access to gold in the purest, most fundamental way possible – direct ownership of bullion products. Individual investors have it, as well. 

Let’s discuss that in a little more detail as we finish up this week. 

Even Individual Investors Can “De-Dollarize” With Gold 

Among the reasons cited by the World Bank as to why for why central banks and asset managers increasingly look to gold as a core component of their portfolios is its potential to serve as a store of value in periods of economic, financial and geopolitical uncertainty. 

If you think it through, those reasons for considering the ownership of gold are no less relevant to individual investors. After all, while individuals won’t encounter those forms of uncertainty on the same scale as central banks and institutions, they nevertheless remain potential threats in their own way.  

As a matter of fact, even select catalysts of de-dollarization – which we tend to regard as the exclusive concern of central banks and sovereign wealth funds – have potential relevance to individual investors, as well.  

No, individual U.S.-based investors don’t have to realistically worry that their ability to transact in dollars is going to be constrained by the application of sanctions applied by the U.S. government, which is the basis upon which many see the existence of de-dollarization. 

However, de-dollarization also is driven by concerns about U.S. fiscal instability due to the country’s now-annual multi-trillion-dollar deficits and surging national debt.[21] Presently, the gross national debt is quickly approaching $35 trillion, and rising at the almost incomprehensible rate of $1 trillion every 100 days.[22]  

And in the same way this extraordinary fiscal profile may prompt central banks and institutional investors to manage the associated risks with gold, individual investors may do the same. 

For those individual investors who conclude the best way for them to maintain an interest in gold – or silver, for that matter – is to own it in its physical form, they’ll be happy to learn they can, in fact, do so with no difficulty at all. 

Those who want to own gold and/or silver in a way that affords them the maximum amount of flexibility when it comes to deciding where and how to store their assets can purchase their metals for cash, outside of an IRA.  

For investors and savers who want to take advantage of the features offered by a tax-advantaged retirement account, they can do so by purchasing their metals through a gold IRA 

In either case, individual investors can have direct access to physical precious metals in the same general way that central banks, governments and asset managers have it. 

For some time now, I’ve suggested that the ongoing worldwide embrace of gold – particularly among central banks, which are responsible for managing their respective national economies – implies the reemergence of the yellow metal as a highly relevant asset in the global financial system.     

And now, I think it’s fair to say that the development of a gold investing handbook for asset managers under the auspices of the World Bank is more evidence that such a paradigm shift could be underway. If it is, it’s reasonable to consider that the implications for the global economy, including the price of gold, could be significant for all concerned.  






[1] CNBC.com, “Gold COMEX (Jun′24)” (accessed 4/4/24). 
[2] FederalReserve.gov, “Open Market Operations” (accessed 4/4/24). 
[3] StockCharts.com (accessed 4/4/24). 
[4] Ibid. 
[5] Krishan Gopaul, World Gold Council, “Central banks accumulate more gold in January – starting 2024 as they mean to go on?” (March 5, 2024, accessed 4/4/24). 
[6] World Gold Council, “Gold Demand Trends Full Year 2023” (January 31, 2024, accessed 4/4/24). 
[7] World Gold Council, “Gold Demand Trends Full Year 2023”; AmericanDeposits.com, “History of Quantitative Easing in the U.S.” (accessed 4/4/24).   
[8] World Gold Council, “2023 Central Bank Gold Reserves Survey” (May 30, 2023, accessed 4/4/24). 
[9] The World Bank, “Gold Investing Handbook for Asset Managers” (accessed 4/4/24). 
[10] Ibid. 
[11] Ibid. 
[12] Sprott.com, “The Case for Gold in Crises” (accessed 4/4/24). 
[13] World Gold Council, “Gold Demand Trends Full Year 2023.” 
[14] The World Bank, “Gold Investing Handbook.” 
[15] Maxwell Gold, State Street, “What’s Driving Central Banks to Record Gold Purchases — and Will It Last?” (October 4, 2023, accessed 4/4/24). 
[16] Phillip Meng, Atlantic Council, “Why emerging markets are stocking up on gold” (April 26, 2023, accessed 4/4/24). 
[17] Willem Middelkoop, OMFIF.org, “Central banks and the revival of gold” (December 11, 2023, accessed 4/4/24). 
[18] Ibid. 
[19] Ibid. 
[20] The World Bank, “Gold Investing Handbook.”  
[21] Jennifer Sor, Business Insider, “The US needs to get its ballooning debt problems under control to keep the dollar dominant, former IMF official says” (September 11, 2023, accessed 4/4/24); FiscalData.Treasury.gov, “What is the national deficit?” (accessed 4/4/24). 
[22] Michelle Fox, CNBC.com, “The U.S. national debt is rising by $1 trillion about every 100 days” (March 4, 2024, accessed 4/4/24). 
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