Gold as a Factor of Change in Central Bank Reserves in Periods of the Financial Markets Turbulence: The Case of Kazakhstan

Dodonov V.
1 May 2022 Sciendo

Journal of Central Banking Theory and Practice
2022 #11 Issue 2 209 - 224 pp.

The article examines the impact of changes in the gold part of the reserves of the National Bank of Kazakhstan on their total volume with an emphasis on the factor of changes in the price of gold. The value of the factor of the price of gold increases during periods of global financial crises when Kazakhstan, as an oil exporting country, is under strong pressure on the current account and the exchange rate of the tenge due to a decline in oil prices. During these periods, the National Bank conducts foreign exchange interventions to support the tenge exchange rate and spends its reserves, which increases the relevance of their safety. The paper tests the hypothesis that in such periods, the rise in the price of gold, due to its function as a safe haven asset, can compensate expenditures on foreign exchange interventions for the central banks and increase the stability of reserves. From this point of view, the article examines three periods of high turbulence in world markets of the 2000s and changes in the National Banks gross reserves, as well as the influence of the gold factor on these changes. It was revealed that during the crisis periods, the rise in the price of gold contributed to the stability of the gross reserves of the National Bank, and the effectiveness of this factor was directly proportional to the gold share in the reserves.

financial crisis , foreign exchange market interventions , gold price , gold reserves , safe heaven asset

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Kazakhstan Institute for Strategic Studies under the President of the Republic of Kazakhstan, Almaty, Kazakhstan

Kazakhstan Institute for Strategic Studies under the President of the Republic of Kazakhstan

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