swiss gold

Swiss Gold: Case Study for the Market

August 5th, 2016 by

swiss goldThroughout their history, the Swiss have cultivated a long-standing reputation as an authority in the area of gold—both in their refining skill and in the wisdom of their monetary policy.

Switzerland is not actually among the world’s leading importers or exporters of the metal, neither in terms of gold demand nor gold production. The largest miner headquartered in the country (though of course its operations principally take place overseas), the massive Zurich-based Glencore PLC (GLEN), doesn’t even mine gold.

Trusted Name

credit suisse gold barsYet the phrase “Swiss gold” has become a sacrosanct truism for quality in the global gold trade. What’s more, it isn’t merely a platitude. In addition to refining 70% of the annually mined global gold supply, Switzerland’s “Swiss Made” designation meets stricter standards than what many countries require. (Think: Swiss watches.) Several of the world’s largest gold refiners—PAMP Suisse, Valcambi, Argor-Heraeus—are located in Switzerland. It’s a crucially important hub for the gold trade. In 2011, over 2,600 metric tonnes of raw gold (today $43 billion, but valued at $103 billion in 2011 dollars) passed through Swiss-owned refineries on their way to global exchanges.

This is why Swiss gold products are so trusted in the gold market, especially in places like the London bullion market, and it speaks to the affinity for high quality gold in Switzerland.

Record Amount of Swiss Gold Imports

U.S. gold imports from Switzerland

Normally, the United States doesn’t import a great deal of gold from Switzerland. (Though it doesn’t mine much, Switzerland does hold over 1,000 tonnes in gold reserves, ranking seventh in the world.) Most months, U.S. imports of Swiss gold trend well under 1 tonne per month (0.4 tonnes on average).

However, in May of this year, more than 20 tonnes of gold flowed across the border from Switzerland, an exceptionally high total and new all-time monthly record. Although global Swiss gold exports aren’t considerably high, they have accounted for nearly half of the U.S. gold imports since 2001.

This huge outlier in the data could tell us something about how the post-Brexit gold market will function in Europe.

Gold Philharmonic Coin Sales Jump

As mentioned earlier, the traditional economic policies of the Swiss—and their neighbors the Austrians—are also closely aligned to gold. The fiscally conservative philosophy of Austrian economics notably claims the central European region as its home. Similarly, the Swiss National Bank (SNB) has traditionally maintained sizable gold reserves. Before the introduction of the euro, in fact, 40% of the value of the Swiss franc was backed by gold. The currency is still seen as one of the world’s safe havens, as evidenced by its near-parity with the U.S. dollar.

gold-philharmonicLikewise, the Austrian Mint (Münze Österreich) not only boasts an eight-century legacy but also produces Europe’s most popular gold coin, the Austrian Gold Philharmonic. During 2015, more than 765,000 troy ounces (23.5 tonnes) of these gold bullion coins were sold, the mint’s third-highest annual gold sales on record. The two higher totals came during the relative panic of 2008 and 2009.

GoldSeek points out, “Although the bulk of the Austrian Mint’s gold is gobbled up by Austrians, its sales reports are used as a barometer for overall European and global physical gold demand. Europeans’ appetite for gold has been galvanized by turmoil overseas, more recently including the Brexit and a string of terrorist attacks in France and Germany.”

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

3 thoughts on “Swiss Gold: Case Study for the Market

  1. Kyle

    I’m sorry, but it seems there’s something in this article I must be missing. You seem to be conflating two different countries, Austria and Switzerland. Am I mistaken? Why at the end of a post on Swiss gold standards would you suggest Switzerland is the home of Austrian economics and the Austrian mint? Did I miss a transition somewhere?

  2. Kyle

    Thanks for the update Everett. It was an informative article, so glad to see the clarification there. Cheers!

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