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Robert Lambourne: BIS gold swaps rose 16 tonnes in July

Section: Documentation

By Robert Lambourne
Saturday, August 12, 2023

Active trading in gold swaps by the Bank for International Settlements, the central bank of the central banks, continued in July.

From information in the BIS' June 31 statement of account, published this week, it is estimated that the volume of gold swaps increased to 103 tonnes from the 87 tonnes estimated at June 30, a gain of 16 tonnes.

The July statement of account can be found here:

The BIS' gold swaps had fallen to zero as of December 31, 2022, and had increased to 188 tonnes as of May 31 this year before falling 87 tonnes in June and then rising to 103 tonnes at July 31.

It still seems likely that the BIS has entered these swaps on behalf of the U.S. Federal Reserve. There is no evidence to suggest that any other major central bank is actively trading this much gold, and recently it has been clear that many central banks are accumulating physical gold.

... Dispatch continues below ...


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The basic transaction that the BIS is believed to undertake is to swap dollars for gold transferred from a bullion bank, and then to deposit this gold in a gold sight account at a central bank, presumed to be the Fed but almost certainly being the central bank that is using the BIS to execute the gold swap on its behalf. 

Given the recent volatility in BIS gold swaps, most are probably of short duration. Why a central bank needs the BIS to undertake gold swaps isn't clear, but the swaps are likely connected with short-term trading needs, which could include suppressing the gold price. 

The gold price increased to $1,964 at July 31 from $1,920 at June 30 (per The volatility in the volume of swaps especially in the last 12 months is clear from a review of Table B below. 

The reasons for this active trading have not been officially explained, and thus they may be related to efforts to drive the gold price down in June. Much of GATA's research on gold price suppression indicates that an active policy of price suppression began more than 30 years ago and was meant primarily to suppress interest rates. This article from 2005 is relevant and highlights work in this area by former U.S. Treasury Secretary and Harvard University President Lawrence Summers:

It is also relevant to consider the following remarks made in a speech given by Summers on September 8, 1999, as reported in the book "The Wealth of Progressive Nations: The Collected Lectures of Lawrence Summers." The remarks below are an extract of a section of the speech titled "A New Economic Paradigm."

"Most important of all, the Clinton-Gore administration has established a new paradigm for the management of our nation's budget, with enormous cumulative benefits for our economy and our citizens. It has become a commonplace to remark on how exceptional today's 4.2% unemployment rate is relative to any expectation at the beginning of the decade. It is no less remarkable that today, after 8.5 years of expansion, long-term interest rates are around 2 percentage points lower than they were at its start."

From this it is reasonable to conclude that keeping interest rates "lower" was considered a priority and succeeding was "remarkable." While this is not proof that gold price suppression was undertaken specifically to reduce interest rates, it highlights that reducing interest rates was a priority.

In this context the following report issued by GATA in 2007 concerning an analysis of the gold market by Frank Veneroso is worth reading again as it confirms that GATA's primary assertions about gold price suppression are plausible.

Using the July 30 gold price of $1,964, the 103 tonnes of BIS gold swaps are valued at about $6.5 billion. (Their value at June 30 was around $5.4 billion.) So the recent trading in BIS gold swaps is of high monetary value and shows that gold remains a significant monetary asset still actively traded by central banks.

As ever with the BIS, it remains unlikely that more information about the reasons for the bank to undertake these transactions will ever be provided. This secrecy implies that central bank gold policy involves much deception -- that it is currency market intervention for one or more central banks for which the BIS provides camouflage. 

For example, the recently published BIS 2023 Annual Report does not provide any information on the gold swaps other than confirming that gold swaps covering 77 tonnes were in place as of March 31, 2023. 
The worsening finances of Western nations, especially the United States, may reduce the appeal to the BIS of undertaking gold swaps and possibly even reduce the appeal of swaps to the central bank or banks for which the BIS has been acting. So a report issued by GATA in 2012 is worth revisiting as it highlights the acknowledgment of gold price suppression by a former chairman of the BIS, Jelle Zijlstra, a Dutch politician, economist, and central banker. It seems likely that BIS management understands what the swaps are being used for and why they must be camouflaged:

The continuing conundrum facing the Federal Reserve about raising dollar interest rates again should reduce the appeal to the Fed of having to return swapped gold. Despite its rhetoric about pushing interest rates higher, the Fed needs to avoid more erosion of confidence in the U.S. Treasuries market when the U.S. government’s ever-increasing debt has been so controversial recently. The Treasury Department's July report highlights a cumulative deficit of $1.6 trillion featuring lower cumulative revenue than during the same period a year ago, higher cumulative expenditures, and much higher interest costs pushed up by the higher interest rates set by the Fed:

The cumulative interest charge on the externally held debt of the U.S. government is up by 37% at July 31 compared to the same period in 2022 and indicates the problem caused for U.S. government borrowing by higher interest rates. 

In these circumstances the room for the Fed to raise interest rates much more seems restricted and hence it seems that the BIS and some of its shareholders might be questioning the role of the bank in these swaps and the obligation to make future deliveries of gold, since the Fed may be unable to move interest rates high enough to contain inflation. One factor is the evidence of recently increased prices for oil and a possible trend of even higher prices because of falling U.S. oil production combined with official remarks by Saudi Arabia that it aims to cut production.

The recent suspension of the federal government's debt ceiling makes it easier to defend against a banking crisis by allowing the U.S. government to offer additional bank deposit guarantees. The debt ceiling deal may even make a revaluation of gold easier for the United States to carry out.

As is clear from Table B below, BIS gold swaps were significantly higher in the first half of last year, and the October and December totals were easily the lowest in more than four years.


Table A below highlights the level of gold swaps reported in the annual reports of the BIS back to 2010, when the bank's use of gold swaps appears to have begun. At only one year-end since then, in March 2016, has the swap level been zero.

The BIS' recently published annual report dated March 31, 2023, discloses that the BIS still holds 102 tonnes of its own gold and that few of its activities in derivatives involve central banks. An assumption that the gold held by the BIS remains at 102 tonnes has been used by this analyst to make the estimate of the bank's gold swap level for December. The low level of derivatives reported by the BIS using central banks as counterparties at the year end seems a sensible reason to assume that the swaps are almost certainly done with gold bullion banks rather than central banks. Historically, the first swaps described below were done with bullion banks.


... Historical context ...

The BIS rarely comments publicly on its gold 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 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 carried out with commercial banks and so did not involve central banks. It also seems highly likely that the BIS' remaining 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 created a mismatch at the BIS, which may have ended 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 gold banking activities of the BIS have been a regular part of the services it offers to central banks since the bank's establishment 90 years ago. The first annual report of the BIS explains these activities in some detail:

A June 2008 presentation made by the BIS to potential central bank members at its headquarters in Basel, Switzerland, noted that the bank's services to its members include secret interventions in the gold and foreign exchange markets:

The use of gold swaps to take gold held by commercial banks and then deposit it in gold sight accounts held in the name of the BIS at major central banks doesn’t appear ever to have been as large a part of the BIS’ gold banking business as it has been in recent years, although the recent declines suggest this is changing.

As of March 31, 2010, excluding gold owned by the BIS, there were 1,706 tonnes held in the name of the BIS in gold sight accounts at major central banks, of which 346 tonnes or 20% were sourced from gold swaps from commercial banks.

If the BIS was adopting the level of disclosure made by publicly held companies, such as commercial banks, some explanation of these changes probably would have been required by the accounting regulators. This irony may not be lost on those dealing with regulatory activities at the BIS. Presumably the shrinkage of the BIS' gold banking business shows that even central banks now prefer to hold their own gold or hold it in earmarked form -- that is, as allocated gold.

A review of Table B below highlights recent BIS activity with gold swaps, and despite the recent declines, the recent positions estimated from the BIS monthly statements have regularly been large, especially in early 2022, and the volume of trading has been significant.

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

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

The reasons for this activity have never been fully explained by the BIS and various conjectures have been made as to why the BIS has facilitated it. One conjecture is that the swaps are a mechanism for the return of gold secretly supplied by central banks to cover shortfalls in the gold markets. The use of the BIS to facilitate this trade suggests of a desire to conceal the rationale for the transactions.

As can be seen in Table A below, the BIS has used gold swaps extensively since its financial year 2009-10. No use of swaps is reported in the bank's annual reports for at least 10 years prior to the year ended March 2010.

The February 2021 estimate of the bank's gold swaps (552 tonnes) was higher than any level of swaps reported by the BIS at its March year-end since March 2010. The swaps reported at March 2021 were at the highest year-end level reported, as is clear from Table A.


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
March 2021: 490 tonnes
March 2022: 358 tonnes
March 2023: 77 tonnes


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


Table B - Swaps estimated by GATA from BIS monthly statements of account

Month ….. Swaps
& year … in tonnes

Jul-23 .... /103

Jun-23 .... /87

May-23 .... /188

Apr-23 .... /135

Mar-23 .... /77*

Feb-23 ... /136

Jan-23 ... /103

Dec-22 ... /0

Nov-22 ... /105

Oct-22 ..... /7

Sep-22 ...../57

Aug-22 ..... /75

Jul-22 ..... /56

Jun-22 ..... /202

May-22 ..... /270

Apr-22 ..... /315

Mar-22 .... /358

Feb-22 .... /472

Jan-22 ..... /501

Dec-21.... /414

Nov-21.... /451

Oct-21.... /414

Sep-21 .... /438

Aug-21 .... /464

Jul-21 .... /502

Jun-21 ..../471

May-21 ..../517

Apr-21 .... /472

Mar-21.... /490±

Feb-21 ...../552

Jan-21 .... /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 78 tonnes, but the BIS annual report states 77 tonnes. It is believed that slightly different gold prices account for the difference.

± The estimate originally reported by GATA was 487 tonnes, but the BIS annual report states 490 tonnes, It is believed that slightly different gold prices account for the difference.

** The estimate originally reported by GATA was 332 tonnes, but the BIS annual report states 326 tonnes. It is believed that slightly different gold prices account for the difference.

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 its activities in the gold market, nor for whom the bank is acting:

Despite this reticence the BIS has almost certainly acted on behalf of central banks in taking out these swaps, as they are the BIS’ owners and control its Board of Directors. Historically, the BIS has often acted on behalf of the Federal Reserve.

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 their interventions.

As mentioned above, it is possible that the swaps provide a mechanism for bullion banks to return gold originally lent to them by central banks to cover bullion bank shortfalls of gold. Some commentators have suggested that a portion of the 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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