As I say, I have no opinion either way. But I note that some of the largest holders of gold, both in absolute terms and as a proportion of their reserves, are countries which are supposed to be economically and financially sophisticated (US, Germany, France, Italy, Switzerland etc), and yet they are not selling!

I wonder whether gold will become more prominent in 2008. Will industrial countries which apparently regard gold as a barbarous relic have the courage of their convictions to take advantage of its increased value to resume the gold sales of the 1990s? Or will (downwardly massaged) inflation increase interest in gold as a reserve asset?

And no, I don’t work for the World Gold Council!

You may also be interested in UNCTAD’s Trade and Development Report 2007. Aside from South-South FTAs which I’m interested in, there is good stuff on various arrangements for regional BOP financing (pp.121-5). You might find something worth reading about the Latin American Reserve Fund, Chiang Mai Initiative, etc. Though it may be overkill, some Latin American and East Asian member states with skimpier reserves may benefit.

It’s more proof that the IMF has a harder time justifying its existence as a lender of last resort nowadays, methinks, with so many regional facilities offering credit on more conciliatory terms. That and whopping reserves, of course.

Remember the IMF is fundamentally an organization for pooling reserves/ lending spare reserves to those temporarily short on reserves, so data on the reserves of its members is in some sense fundamental to the IMF’s purpose.

The reporting of the currency composition of reserves is by contrast voluntary — it isn’t a requirement of membership. But most countries do. The US and others also made subscribing to a higher standard of reserve disclosure (the SDDS, which includes some reporting on currency composition) a requirement for borrowing from the IMF in the 1990s. The concern at that time tho was that countries were hiding how few reserves they really had by not reporting things like forward sales (thailand) and reserves on deposit in their own banking system (korea)and thus effectively committed to backstop the banks.

The set of industrial countries isn’t disclosed formally (to my knowledge) but it certainly includes all of the G-10 and I think all members of the Eurozone as well as Denmark and Norway and Swtizerland. Slovenia was shifted to the industrial country category when it joined the eurozone. It doesn’t take much work to figure out who is included — (look for example at who appears in a similar category in the WEO …)

Russia is not included. Russia is I think among those countries that do report data on the currency composition of their reserves to the IMF (russia discloses this publicly, so why not to the imf?). Indeed, the fall in russian reserve growth in q3 likely explains the fall in reserve growth among reporting emerging economies.

Rebel — re: your first question, the cofer data is the most complete data set for total reserve holdings as well as the best data set on currency composition of those countries that report data to the imf. there are some countries that report the currency composition of their reserves to the imf but do not publicly disclose the data. but the cofer data on currency composition is also capturing the currency composition of a declining share of fx reserves b/c the fastest reserve growth has come from countries that do not report.

the absence of data on gold holdings doesn’t bother me — most countries are not buying huge amounts of gold, so most changes come just from valuation.

what does bother me more is that a lot of governments are accumualting fx and fx exposure in ways that are not showing up in the reserves data in any form — whether b/c they are adding to their non-reserve foreign assets (Saudi aRabia), they are creating a SWF/ adding to their existing fund (China, Norway, Singapore the Gulf), they are taking big derivatives positions (Thailand) or they are shifting reserves to the banking system/ forcing the banks to buy more fx (China).

the total here could be quite large — it is at least $200b, and likely $300b for 07 (and possibly more depending on when China shifts the last $100b to the CIC). And most of this fx accumulation is serving an exchange rate management function — whether b/c of intervention to keep the currency from rising (China) or b/c of the need to avoid increasing domestic spending to avoid fueling inflation with a dollar peg even as commodity revenue surges (the gulf, norway). As a result, the reserves data no longer perfectly tracks the increase in total fx exposure of emerging market governments.

A few clarifying questions about COFER, if I may:

(1) Although it is described as “currency composition of foreign exchange reserves”, is COFER also the best/standard source of information on the total size of global foreign currency reserves, or are there some countries which do not appear in COFER at all (I assume that when you say above “that do not report data to the IMF”, you really mean currency composition only, and their reserves are included in the total), but are included in some other survey?

(2) COFER does not seem to include gold reserves. These amount to the best part of another trillion dollars or so, and have been subject to an even greater valuation increase than the euro lately. Do you consider that gold should be included?

(3) Judging by the trends, I am guessing that Russia is not classified as an industrial country. Is it possible to find out which countries are in which category without a subscription to IFS?

Thanks.

That 36.5% of the reserves reported are now unallocated is also worrying for those concerned with the titular purpose of COFER. My question is, how does the IMF collect this data from non-reporting LDCs? The IMF blurb says this:

COFER data are submitted to the IMF on a voluntary and confidential basis by 114 member countries, comprising all 24 industrial countries and 90 out of the 160 developing countries.

Therefore, (a) do GCCs, China etc. report increases in their reserve holdings but neglect to report their composition or (b) does the IMF simply estimate increases in the reserve holdings of these LDCs which do not report their reserve holdings?

This question is important for while currency composition is likely up in the air with well over a third going unreported, the overall tally might be more useful.