Nonmonetary gold is used for two purposes: for industrial use (as an input into the production of goods and services, such as jewelry, watches, and electronic equipment) and for investment (as a store of wealth and a hedge against inflation). BEA’s national economic accounts (NEAs) do not treat transactions in valuables, such as nonmonetary gold, as investments and therefore purchases of nonmonetary gold as a form of investment are not included in personal consumption expenditures, gross private domestic investment, or government spending. Accordingly, NEA exports and imports of nonmonetary gold should not include gold that is held for investment purposes.
In most cases, the primary source data for the NEA estimates of exports and imports are BEA’s International Transactions Accounts (ITAs). However, for nonmonetary gold, the NEA estimates are not based on the ITAs. Only a small share of exports and imports of nonmonetary gold recorded in the ITAs is for industrial use; most transactions are for investment purposes.1 ITA exports and imports of nonmonetary gold are removed and replaced with an adjustment for gold, calculated as the difference between domestic production and industrial use of gold. Chapter 8 of the National Income and Product Account (NIPA) Handbook covers the gold adjustment in detail. The NEA gold adjustment is presented in a reconciliation table between the NEAs and ITAs (NIPA table 4.3C).
1 For more information on how nonmonetary gold trade is recorded on a Census basis and a Balance of Payments basis, please see the FAQ “How are exports and imports of gold recorded in BEA’s International Economic Accounts?”