Sovereign gold reserves management in developing and developed countries: a comparative study

Abstract

This thesis explores the determinants of sovereign gold reserves financial performance in comparison with those of gold reserve levels. The sample comprises 100 countries from 2000 to 2014. A dynamic panel generalized method of moments model is used to estimate the influence of development and other macroeconomic, trade, financial and risk determinants on gold reserves levels and financial performance. Results indicate that most countries display negative sovereign gold reserves financial performance –due to poor transaction timing– and reveal the existence of a sizeable positive sign statistical association between performance, development and governance. Both sovereign gold reserves financial performance and reserve levels appear to be also affected by other macroeconomic, trade, financial and risk determinants, although the signs of the statistical associations identified often differ for performance and gold reserves levels. The losses incurred by central banks in their gold transactions and the fact that this phenomenon seems to be more prevalent in developing countries recommend periodic performance assessments and capacity building among gold reserve managers.