Gold and foreign exchange reserves (GOLD)
What are Foreign Exchange Reserves (GER)?
Gold and foreign currency reserves (GOLD) - International reserves or external financial assets with high liquidity. As a rule, foreign exchange reserves include foreign currencies and goldwhich are used by monetary policymakers to quickly stimulate the economy if necessary, as well as to reduce the balance of payments deficit.
In Russia foreign exchange reserves are held by the Bank and Ministry of Finance of Russia and include monetary gold (bars, coins), SDRs (Special Drawing Rights), foreign currency (mainly US dollar and euro) and IMF reserve position.
When publishing the cost foreign exchange reserves The American dollar is used as the equivalent.
What are the foreign exchange reserves of the Central Bank?
The composition of any country's foreign exchange reserves is limited to four main components.
- Precious metals and stones - monetary gold (i.e., gold bars and coins), platinum, silver, diamonds, palladium;
- Foreign money is the five currencies recognized in international practice as reserve currencies (USD, EURO, CHF, JPY, GBP);
- Special Drawing Rights SDRs - non-cash financial instruments used in settlements only at the interstate level;
- Reserve amount in the IMF - corresponds to the amount of money contributed at the time of joining the International Monetary Fund, and if a member country needs financial resources, when it applies to the IMF, it immediately receives the amount contributed back as financial assistance.
What are the uses of gold reserves?
The main purposes of using gold and foreign exchange reserves are as follows:
- These resources finance the country's balance of payments and trade deficit;
- With the help of gold reserves are made currency intervention in order to stabilize the quotations of the national currency against the currencies of other countries;
- Stocks of gold and currencies are the source of repayment of external government loans;
- The resources of the FER are used to service settlement transactions of the state with other countries;
- A liquidity cushion is formed;
- Import transactions and other things are repaid.
Where are international reserves kept?
International reserves are accumulated in Central banks of the statesThe government has a special depository for gold and precious metals in banks and financial institutions, as well as in the accounts of countries in international financial institutions. For gold and precious metals are built special repositories, controlled by the state.
More than half of Russia's gold reserves are located in the Central Vault of the Central Bank of Russia in Moscow. The total area of the vault is more than 17,000 square meters; 1,500 square meters are used directly for storage. Besides, the Bank of Russia has regional depositories in Saint Petersburg and Yekaterinburg. All in all the system which secures keeping of international reserves of our country amounts to more than 600 settlement and cash offices which allow to keep gold.
Gold is stored mostly in the form of 10-14 kg ingots, but there are also measured ingots with smaller weights. The main vault contains over 6,000 bars and packages of cash bills for emergencies.