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Are emerging-market central banks overweight in dollars and underweight in gold?There is a good case to be made that a shift in emerging markets toward accumulating gold would help the international financial system function more smoothly and benefit everyone.No, I am just proposing that emerging markets shift a significant share of the trillions of dollars in foreign-currency reserves that they now hold (China alone has official reserves of $3.3 trillion) into gold. Even shifting, say, up to 10 percent of their reserves into gold would not bring them anywhere near the many rich countries that hold 60-70 percent of their (admittedly smaller) official reserves in gold.I don't want to create the impression that by shifting into gold, emerging markets would somehow benefit at the expense of advanced economies. After all, the status quo is that advanced-economy central banks and Treasurys hold vastly more gold than emerging markets do, and a systematic shift by emerging markets will bid up its price. There has never been a compelling reason for emerging markets to buy into the rich-country case for completely demonetizing gold.
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