Italian Gold Reserves: A Treasure in Times of Crisis
Italy's sovereign assets have long been under scrutiny, especially during periods of economic instability. However, with gold prices reaching record highs, Italy now sits on an unexpected treasure: its vast gold reserves.
Italy's commitment to gold stems from a long-held tradition. After rebuilding its looted reserves during World War II, Italy has maintained its gold stock despite multiple economic crises and increasing sovereign debt. Italy has consistently resisted calls to sell gold, viewing it as a financial safeguard.
Reuters estimates that the Italian central bank holds the world's third-largest national gold reserve, trailing only the United States and Germany. Its 2,452 tons of gold are currently worth around $300 billion, roughly equivalent to 13% of Italy's 2024 national output.
A Legacy of the Past: Gold as a Symbol of Stability
Italy's affinity for gold dates back millennia, with the Etruscans demonstrating advanced goldworking skills even before the rise of ancient Rome. Under Julius Caesar, the aureus, a gold coin, became a cornerstone of the Roman Empire's economy. Centuries later, the florin, a gold coin, influenced Europe throughout the Middle Ages, akin to the dominance of the US dollar today.
Italy's modern gold policy was shaped by its wartime experiences. During World War II, Nazi forces, aided by the Italian fascist regime, looted 120 tons of Italy's gold reserves. By the end of the war, the country's gold reserves had dwindled to around 20 tons.
During the post-war "economic miracle," Italy became an export-oriented economy, experiencing a significant increase in foreign currency inflows, particularly US dollars. The Italian central bank converted a portion of these foreign currencies into gold.
By 1960, Italian gold holdings had risen to 1,400 tons, including three-quarters of the looted gold recovered in 1958.
Gold as a Last Resort
The oil crisis of the 1970s triggered greater global uncertainty, resulting in social unrest and frequent government changes in Italy – all risk factors in the eyes of investors.
"Extreme monetary instability prompted Western central banks to buy gold because it is the ultimate symbol of financial soundness," said Stefano Caselli, Dean of SDA Bocconi School of Management.
To fill budget gaps caused by capital flight, in 1976, the Italian government used 41,300 gold bars from its reserves as collateral for a $2 billion loan from the German central bank.
However, unlike countries such as Britain or Spain, Italy has consistently refused to sell gold during periods of financial downturn – even during the 2008 debt crisis, it retained all of its reserves.
"Gold is like the family silver, like a grandfather's precious watch, it is a last resort in times of crisis – any crisis that undermines the international community's confidence in Italy can be supported by it," wrote Salvatore Rossi, former Deputy Governor of the Bank of Italy, in his 2018 book, "Oro" (Gold).
Gold in a Changing World
Today, many Western countries still view gold as a "last resort," and in the context of a reshaping global order, central banks around the world have once again begun increasing their gold holdings.
"The Bank of Italy's historical decisions look very forward-thinking today, because we are returning to a similar situation again," said Caselli.
The Bank of Italy's vaults currently hold approximately 871,713 gold coins, with a total weight of about 4.1 tons. This vault is nicknamed the "sacristy," after the room in a church where sacred objects are stored.
According to data from the World Gold Council, as of the end of last year, gold accounted for nearly 75% of Italy's official reserves, significantly higher than the Eurozone average of 66.5%.
Approximately 1,100 tons of gold are stored in the underground vaults of the Bank of Italy's headquarters (located in Palazzo Koch), a few steps from the Colosseum in Rome; a similar amount of gold is stored in the United States, and a small amount in the United Kingdom and Switzerland.
In addition, Italy remains one of the world's top exporters of gold jewelry, with production concentrated in Alessandria, Arezzo, and Vicenza. Luxury brands such as Bulgari, Buccellati, and Damiani are renowned worldwide.
Gold: The Hottest Asset
Italy's public debt currently exceeds 3 trillion euros (approximately $3.49 trillion USD), and the public debt-to-GDP ratio is projected to reach 137.4% next year. Calls to "sell gold to reduce public debt" have consistently emerged, but have not been adopted so far.
"Even selling half of the gold reserves would not solve Italy's debt problem," said Giacomo Chiorino, Head of Market Analysis at Banca Patrimoni Sella & C.
Another viewpoint suggests that selling gold bars could free up funds to improve public services and benefit citizens rather than leaving the gold idle in vaults.
Despite this, the Bank of Italy has no plans to sell gold. The bank did not comment on the gold policy mentioned in this article.
"In a world where the global landscape is reshaping, market valuations have risen to unprecedented levels, and digital assets such as stablecoins and cryptocurrencies are emerging, central banks hold the hottest asset (gold)," said Caselli of Bocconi. "They are choosing not to sell, and that is the right decision."
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