Central Banks Case Study: Switzerland's Gold Sales

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Switzerland, a long-established major holder of bullion, is described as enjoying a sound and stable economy with a high living standard and a GDP per capita higher than that of most European countries, with the exception of Luxembourg (highest) and Ireland. Until the second half of 2007, Switzerland's gold holdings exceeded 1,200 tonnes.

The World Gold Council has released the second in its series of Central Banks case studies, in which it considers the practice of a select group of countries with respect to the management of their gold reserves, with particular emphasis on the variety of factors that have influenced the reserve management decisions of the institutions involved.

Ancillary considerations include the broader economic and political backdrop of the respective countries that have had an influence on the decisions of central banks and other relevant decision makers.

Switzerland is described as enjoying a sound and stable economy with a high living standard and a GDP per capita higher than that of most European countries, with the exception of Luxembourg (highest) and Ireland. While not a member of the EU, or of the European Economic Area Agreement (EEA), Switzerland maintains a close relationship with the EU, and is currently in a round of negotiations intended further to enhance that relationship through expanding a series of existing bilateral agreements. Switzerland's exports of goods and services accounted for almost 57% of GDP in 2007, and its high level of privacy in the banking system has made it the leading offshore money manager worldwide.

As far as official reserves are concerned, Switzerland is a long-established major holder of bullion and from IMF data (dating back to 1948) until the second half of 2007 Swiss holdings exceeded 1,200 tonnes with a peak of 2,745 tonnes in 1967.

The percentage of combined gold+foreign exchange reserves that is comprised of gold (based on year-end prices) peaked at 82% towards the end of 1980. At the end of the first sales programme, which commenced in May 2000 and finished in March 2005, gold accounted for 24% of total reserves, and despite the onset of the second sales programme (which started in 2007), the increase in the gold price has taken gold's proportion of reserves up to 41% of total Swiss foreign exchange reserves. Distribution of proceeds from the sales of gold bullion goes to both the federal government and the Cantons.

At the end of 2007, Swiss foreign exchange and other reserves, excluding gold, represented "a significant volume", given the size of the country and its status as a healthy developed economy with a solid currency. In terms of foreign exchange reserves excluding gold, then among the EU15 countries plus the United States, only the US, the UK and France have larger absolute holdings than Switzerland, although Switzerland ranks ninth in GDP terms and 12th in population terms.

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