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Why The ECB's Gold Holdings Have Remained Around 15% of Total Assets for 13 Years
In his latest article Axel Merk explains the relevance of the ECB’s stabilized gold holdings. When the euro currency was first launched, the European Central Bank held roughly 15% of its total assets in gold.
Since its launch, the euro has been diluted down significantly, thanks to excessive printing in order to save the region from financial collapse. Interestingly enough, despite all the printing of euros, gold still remains roughly 15% of the ECB’s total assets.
This stable 15% asset allocation in gold does not reflect the ECB buying more of the precious metal than ever before in order to keep up with an escalating money supply. Rather, it reflects gold’s ability to increase in value throughout the money printing period (clearly showing that gold is the ultimate inflation hedge).
Axel Merk states that “The interpretation shows that while money can be printed, wealth cannot be created out of thin air: as money is printed, gold has appreciated versus the euro. So while inflation has not shown up in indicators such as the Consumer Price Index, monetary easing is rightfully reflected in the price of gold.”
Despite gold staying at 15% (roughly) of the ECB’s total assets ( in value), its gold troy ounce holdings have actually declined since 1999.
Merk states that “The ECB marks its gold holdings to market, i.e. uses market prices for gold. The ECB was selling gold from the inception of the euro until the onset of the financial crisis; since then, the ECB’s gold holdings have remained stable.”
Click here to read Axel Merk’s intriguing article on the history of the ECB’s gold holdings.