Italy Strikes Gold: Soaring Reserves Offer Economic Lifeline

Italy's Gold: A Tale of Economic Resilience

Italian sovereign assets have often been a focal point of market crises. However, with gold prices reaching historic highs, the Italian central bank's vast gold reserves represent an unexpected windfall for the nation.

Italy's steadfast commitment to safeguarding its gold reserves, since rebuilding those looted by the Nazis in the 1940s, and its refusal to sell despite repeated crises and surging national debt, reflects a long-term strategic vision.

The Italian central bank holds the world's third-largest national gold reserves, after the United States and Germany, with 2,452 tons of gold valued at approximately $300 billion, roughly equivalent to 13% of Italy's 2024 GDP.

Wartime Experiences Shaping Peacetime Policies

Italy's "preference" for gold dates back millennia. Italy's modern gold policies were shaped by its wartime experiences. Nazi forces, with the assistance of the Italian Fascist regime, looted 120 tons of the country's gold reserves. By the end of World War II, Italy's gold reserves had dwindled to approximately 20 tons.

During the post-war "economic miracle," Italy became an export-oriented economy, with significant inflows of foreign currency. Some of this foreign currency was converted into gold, increasing Italy's gold holdings to 1,400 tons by 1960.

Gold as a "Family Silverware"

The 1970s oil crisis triggered widespread global uncertainty, leading to social unrest and frequent government changes in Italy – factors deemed risks by markets.

"Extreme monetary instability prompted Western central banks to buy gold because it is the ultimate symbol of financial soundness," says Stefano Caselli, Dean of the SDA Bocconi School of Management in Milan.

Unlike the UK or Spain, Italy refused to sell gold during financial downturns, even during the 2008 debt crisis. Salvatore Rossi, former Deputy Governor of the Bank of Italy, views gold as a "last resort in times of crisis."

New Era Choices

Many Western countries still consider gold a "last resort." In the context of a reshaping global order, central banks are once again increasing their gold holdings.

"The Italian central bank's historic decision seems incredibly forward-thinking today, because we are once again returning to a similar situation," says Caselli.

The Italian central bank holds approximately 871,713 gold coins, with a total weight of around 4.1 tons. According to the World Gold Council, gold accounted for nearly 75% of Italy's official reserves as of the end of last year, significantly higher than the Eurozone average of 66.5%.

Despite this, the Italian central bank does not intend to sell gold. In the context of a reshaping global order, record market valuations, and the rise of digital assets, central banks hold the most valuable asset: gold. Their choice not to sell is the right decision.