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Robert Lambourne: BIS gold swaps fall slightly in January but remain high

Section: Documentation

By Robert Lambourne
Tuesday, February 9, 2021

The recently reported January statement of account of the Bank for International Settlements --

-- discloses that the bank's use of gold swaps decreased by an estimated 22 tonnes to around 523 tonnes, which is still close to the record high reported at the end of December.

Hence in a month that saw a decline of about $50 in the gold price, from $1,898.60 at December 31, there was a relatively small decrease in the use of gold swaps by the BIS. As Table B below highlights, the BIS seems to trade significant amounts of gold swaps on a regular basis.

... Dispatch continues below ...


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Company Announcement
Monday, February 8, 2021

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... For the remainder of the announcement:

To put this into context, the current volume of gold swaps remains larger than the 504.8 tonnes of gold held by the European Central Bank and about 89 tonnes less than the reported gold reserves of the tenth largest national gold holding, the 612.4 tonnes of the Netherlands.

No explanation for this continuing high level of swaps has been published by the BIS. Indeed, no comment on the bank's use of gold swaps has been offered since 2010. (See below.)

This gold is supplied by bullion banks via the swaps to the BIS. The gold is then deposited in BIS gold sight accounts at major central banks, such as the Federal Reserve.

The BIS' use of gold swaps and derivatives has been extensive so far this year, with the level reported in recent months being the highest since August 2018, as highlighted in Table B below. By contrast, in May 2019 the bank was exposed to only 78 tonnes in swaps.

As can be seen in Table A below, the BIS has used gold swaps extensively since its financial year 2009-10. The January 2021 estimate of the bank's gold swaps (523 tonnes), like the record high seen in December 2020, remains higher than any level of swaps reported by the BIS at its March year-end since March 2010.

Based on a review of the bank's annual reports, it seems that the BIS was not involved in gold swaps for at least 10 years prior to 2010.

Table A

Swaps reported in BIS Annual Reports

March 2010 ... 346 tonnes
March 2011 ... 409 tonnes
March 2012 ... 355 tonnes
March 2013 ... 404 tonnes
March 2014 ... 236 tonnes
March 2015 ..... 47 tonnes
March 2016 ...... 0 tonnes
March 2017 ... 438 tonnes
March 2018 ... 361 tonnes
March 2019 ... 175 tonnes
March 2020 ... 326 tonnes


The BIS rarely comments publicly on its banking activities, but its first use of gold swaps was considered important enough to cause the bank to give some background information to the Financial Times for an article published on July 29, 2010, coinciding with publication of the bank's 2009-10 annual report.

The general manager of the BIS at the time, Jaime Caruana, said the gold swaps were "regular commercial activities" for the bank, and he confirmed that they were all carried out with commercial banks and so did not involve other central banks.

Hence it is likely that the recent level of gold swaps is the highest ever use of them by the BIS for at least 20 years. It also seems likely that the swaps are still all made with commercial banks because the BIS Annual Report has never disclosed a gold swap between the BIS and a major central bank.

The swap transactions potentially create a mismatch at the BIS, which conceivably ends up being long unallocated gold (the gold held in BIS sight accounts at major central banks) and short allocated gold (the gold required to be returned to swap counterparties). This possible mismatch has not been reported by the BIS.

The table below reports the estimated swap levels since August 2018. It can readily be seen that the BIS is actively trading gold swaps and other gold derivatives with some changes from month to month reported in excess of 100 tonnes in this period.


Table B

Swaps estimated by GATA
from monthly statements of account

Month ..... Swaps
& year ... in tonnes

Jan-20...... / 523
Dec-20..... / 545
Nov-20 .... / 520
Oct-20 .... / 519
Sep-20..... / 520
Aug-20..... / 484
Jul-20 ..... / 474
Jun-20 .... / 391
May-20 .... / 412
Apr-20 .... / 328
Mar-20 .... / 326*
Feb-20 .... / 326
Jan-20 .... / 320
Dec-19 .... / 313
Nov-19 .... / 250
Oct-19 .... / 186
Sep-19 .... / 128
Aug-19 .... / 162
Jul-19 ..... / 95
Jun-19 .... / 126
May-19 .... / 78
Apr-19 ..... / 88
Mar-19 .... / 175
Feb-19 .... / 303
Jan-19 .... / 247
Dec-18 .... / 275
Nov-18 .... / 308
Oct-18 .... / 372
Sep-18 .... / 238
Aug-18 .... / 370

* The estimate originally reported by GATA was 332 tonnes, but the BIS Annual Report states 326 tonnes. It is believed that this difference arose because the gold price used to calculate GATA's estimate was lower than the price used by the BIS. GATA uses gold prices quoted by to estimate the level of gold swaps held by the BIS at month-ends.


As noted already, the BIS in recent times has refused to explain the reasons for its activities in the gold market, nor for whom the bank is acting:

Despite this reticence the BIS is almost certainly acting on behalf of central banks in taking out these swaps, as the central banks are the BIS' owners and control its Board of Directors.

This refusal to explain prompts some observers to believe that the BIS acts as an agent for central banks intervening surreptitiously in the gold and currency markets, providing those central banks with access to gold as well as protection from exposure of these interventions.

One possibility is that the swaps provide a mechanism for bullion banks to return gold originally lent to them by central banks when the bullion banks needed to cover shortfalls of gold. Some observers of the gold market have suggested that some gold held by exchange-traded funds and managed by bullion banks is sourced directly from central banks.


Robert Lambourne is a retired business executive in the United Kingdom who consults with GATA about the involvement of the Bank for International Settlements in the gold market.

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