The Bundesbank's gold revaluation account (GRA) reflects unrealized gains from gold assets, with its current value standing at €176 billion.
The Bundesbank's gold revaluation account reflects unrealized gains from gold assets, with its current value standing at €176 billion.
Turning to GRAs could reshape the monetary system by strengthening gold's role and potentially leading towards a modern gold standard.At a press conference early 2023, member of the Executive Board of the German central bank Joachim Wuermeling made clear that A gold revaluation account is an accounting item on the liability side of a balance sheet, part of net equity, that records unrealized gains of gold assets. Simplified, when the gold price appreciates a GRA swells, and when the price depreciates it contracts.Example balance sheet of a central bank. Net equity equals the difference between assets and labilities. Capital, reserves, and provisions included in net equity are simply referred to as “capital” in this article.
In theory, GRAs can be used by central banks to absorb general losses. Accounting rules, though, determine only capital buffers can be utilized for this purpose, not GRAs. First of all because GRAs are gains. Furthermore, suppose a central bank operates at a loss and uses its GRA fully to compensate said losses. Then, the next year the price of gold decreases. With its GRA is emptied, the decline in value of gold assets will be recognized as a loss and can wipe out the bank’s capital buffers.
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