À propos those BIS gold swaps | FT Alphaville

À propos those BIS gold swaps

In 2010, when the BIS first revealed that it held gold swap agreements worth SDR8.16bn (representing 346 tonnes of gold) the revelation knocked the gold market.

That’s because rather than making money (or yield) from lending out its gold — as the BIS usually did — it had become cost effective for the BIS to lend out currency against gold collateral instead.

It was possibly the most famous example of a “cash for gold” loan in the world — with the BIS acting as the ultimate bullion pawnbroker.

So has anything changed this year?

Looking at the BIS results in 2012, seemingly no. From the annual report:

Included in “Gold” is SDR 12,262.8m (355 tonnes) of gold (2011: SDR 11,940.5m; 409 tonnes) tha the Bank holds in connection with its gold swap contracts. Under such contracts the Bank exchanges currencies for physical gold, and has an obligation to return the gold at the end of the contract.

The gold swap sums seem pretty constant, implying that whoever pawned the gold in the first place has yet not repaid the loan — although the sum has clearly come down since 2011, when 409 tonnes was pawned.

Another gold statistic that’s worth highlighting — one which has been rising steadily year to year — is the amount of gold the BIS is holding on a custody basis,  gold which thus sits off-balance sheet.

Categorised as “gold bars held under earmark” the figure hit SDR11.18bn in 2012, up from SDR8.68bn in 2011 and from seemingly nothing in 2007 with the measure first appearing in the report in 2008. We’ve charted the development of the metric as follows:

This we believe represents the amount of gold which is being held in segregated rather than unallocated pools by the BIS. Indeed, the BIS notes:

The financial instruments listed above are deposited with external custodians, either central banks or commercial institutions.

As to what this implies, we haven’t the foggiest. We just thought it was an interesting trend.

Related links:
It’s the BIS – FT Alphaville
European banks use gold reserves to raise cash – FT