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Central banks represent a monetary authority which has one of the greatest privileges among all other commercial banks: they create the currency of a nation.

Some of the most popular central banks worldwide are the European Central Bank (ECB) and the Federal Reserve System in the United States. Their decisions can change the economic course of a nation, a region or the entire Planet. They act according to many factors, whether economical, social or even political views.

Prior to the 17th century appeared the first commodity money which were made of both gold and silver, and, together with money popped up the idea of a central banking system. History teaches us that the medieval European Knights Templar were the first ones to set the basis for the modern banking system, as their promises to pay were highly respected. Therefore, from medieval times, bank prototypes were known to collect gold for their monetary reserves, and this is how the first global gold standard emerged.

Central banks around the globe, pertaining to countries like China, India, Russia, etc. find different factors to motivate their decisions of turning their reserves into “gold”. Depending on the mentality of their nation or its economic and social history, central banks consider gold reserves to be an important asset because it provides: physical and economic security, diversification, and income.

Although a secure asset, it is very well known that the price of gold can fluctuate. It can go up and down, and central banks must learn how to play this tricky game in order to maintain their currency strong enough. As an old saying goes, one should not keep all his/ her eggs in one basket. That is why it is a very valuable thing that gold has good diversification properties in a currency portfolio. The exchange and interest rates of currencies that are held in reserves also have prices that fluctuate, but they do it in a different way. The value of the glittering metal depends on the supply and demand in the world gold markets, whereas currencies rely on government promises and central banks’ monetary policies.

It is obvious that gold is an element of stability in the currency and in the ultimate value of the currency.

Learn from professionals how to buy gold bullion in times of recession.

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