Italy enjoys windfall thanks to Gold reserves

Is it a good idea to have gold?

Yes.

Just ask the Italians.

Italy has the third-largest gold reserves in the world. While other European countries that sold most of their gold are struggling to maintain reserves as the dollar wilts, Italy is sitting pretty.

Italy officially holds 2,452 tonnes of gold. It is now worth around $300 billion. That represents roughly 13 percent of the nation’s 2024 GDP, according to calculations by Reuters.

Gold accounted for nearly 75 percent of Italy's official reserves at the end of 2024.

Unlike Britain and Spain, Italy resisted the temptation to sell its gold during financial downturns.

In his 2018 book “Oro,” former Bank of Italy Deputy Governor Salvatore Rossi wrote, “Gold is like the family silverware, it's like grandpa's precious watch, it's the last resort in times of crisis, any crisis that undermines international confidence in the country."

Italy has used its gold reserves during times of crisis. To offset a massive budget deficit caused by capital flight in the 1970s, Italy’s central bank used 41,300 ingots from its gold reserves to back a loan from Germany’s Bundesbank.

According to Reuters, Italy’s wartime experience shaped its modern gold policy. The Nazi’s, aided by the country’s fascist regime, seized 120 tonnes of Italian gold reserves. By the end of World War II, only about 20 tonnes of gold remained in its reserves.

As Italy became an export-driven economy after the war and enjoyed an influx of foreign currency, it used some of that money to buy gold. By 1960, the country owned 1,400 tonnes of the yellow metal.

SDA Bocconi School of Management dean Stefano Caselli told Reuters the Bank of Italy’s decision to hold on to its gold “feels strikingly modern,” with so many central banks currently stockpiling the yellow metal.

On net, central banks officially increased their gold holdings by 1,044.6 tonnes in 2024. It was the 15th consecutive year of expanding gold reserves.

Last year was the third-largest expansion of central bank gold reserves on record, coming in just 6.2 tonnes lower than in 2023 and 91 tonnes lower than the all-time high set in 2022 (1,136 tonnes). 2022 was the highest level of net purchases on record, dating back to 1950, including since the suspension of dollar convertibility into gold in 1971.

To put that into context, central bank gold reserves increased by an average of just 473 tonnes annually between 2010 and 2021.

Some Italian policymakers argue that the central bank should sell some of its gold to address the country’s national debt – now over $3 trillion euros. However, the central bank shows no willingness to sell. Caselli deemed it a good call.

 "At a time when the world is being redrawn, market prices have reached unprecedented multiples and (digital assets such as) stablecoins and cryptocurrency are gaining ground, central banks currently hold the hottest asset.” 

And that is gold.

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