Sweden has billions in gold reserves – E24

Here at home, Norges Bank sold most of it. Why?

The price of gold has recently set new highs, and many central banks are holding reserves to protect themselves against inflation and bad times.

Central banks in developing economies in particular believe the price of gold will rise, according to industry organization the World Gold Council. But the Riksbank also believes that gold ensures their ability to carry out their tasks.

So why did Norges Bank practically sell off its gold holdings in this country? When was this done and where is the money now?

Return and risk diversification

In 2004, Norges Bank chose to sell the last of Norway's gold reserves. Thus, 33.5 tons of gold bullion were sold for $447.4 million. This then corresponds to approximately NOK 3.1 billion.

The exception was seven gold bars for display purposes, in addition to the 3.5 tons of coins that were included in the “Transfer of goldTransfer of goldA secret operation to salvage Norway's gold reserves after the German invasion on 9 April 1940. Most of the gold never returned to Norway, because it was safer to obtain abroad. » To England when the war broke out in 1940.

The background was that gold had historically had a low return, and the precious metal represented only approximately one percent of Norway's income. International reservesInternational reservesMoney, including foreign currency, held by a central bank so that it can influence the exchange rate and repay international debt obligationsAccording to Press release. Norges Bank said the holding contributed “to some extent” to the spread of risk.

Resists fluctuations

But Sweden's central bank thought differently.

At the end of 2023, it owned 125.7 tons of gold. The market value of the stock is estimated at 83.9 billion Swedish krona, according to the bank. Gold represents approx. Figures from the World Gold Council show 14 percent of the country's international reserves (see overview below).

Sweden's gold reserves largely date back to the time when the Riksbank had to make redemptions Banknotes and gold coins.Banknotes and gold coins.It is also called the “gold standard”. Dominant monetary system in the world from the mid-1870s until World War I. This means that the country's monetary unit must contain a certain content of gold, and that the central bank is obligated to exchange banknotes for gold, in addition to purchasing gold in exchange for banknotes. At the same time, he emphasizes that the holding “helps to counteract fluctuations in the total value of gold and currency reserves.”

The reason is that gold does not usually follow the same pattern as the value of a foreign currency. This also contributes to the overall value of the country's gold and currency reserves becoming more stable, the argument goes.

– It was reinvested

At the moment, Norges Bank does not intend to increase its investments in gold.

– There are no plans for that, responds press director Bard-Uwe Melberg in an email to E24.

He adds that the income from selling gold in 2004 was reinvested in the bank's foreign exchange reserves in the same year.

This is Norges Bank's readiness for international currency. They must ensure that the central bank is able to implement its monetary policy and comply with international obligations.

– Income from the sale of gold holdings in 2004 was reinvested in line with foreign exchange reserve management principles, and has had a return in line with the rest of the portfolio since then, Milberg writes.

– Evaluates training regularly

Norway had a total of NOK 863.4 billion in international reserves and other foreign currency claims as of February this year, according to Statistics Norway. In January 2004, when the Bank of Norway sent out a press release about the sale of gold reserves, the market value of international reserves reached $263 billion.

– The bank regularly evaluates the composition of reserves, writes Molberg.

This should ensure that currency reserves are sufficient liquid liquid That is, they are accepted as a means of payment and can be easily sold at a relatively fixed priceTo be able to use it as intended, it has been prepared Management framework who are they.

The Riksbank believes that its gold contributes to making total foreign exchange and gold reserves more stable. Do they have a point?

– We believe that the management principles are well adapted to the purpose of currency reserves, responds the press director.

– Safety reasons

Like Norges Bank, the Riksbank is also keen to provide liquid funds. Therefore, approximately half of Swedish gold is placed in the British Central Bank.

In this way, “a significant portion of the gold can be traded with the Riksbank in a very short time if the need arises,” the Riksbank said. Riksbank website.

Other gold reserves are located in Canada, Sweden, the United States and Switzerland.

We do this for security reasons, because we want to distribute the geographical danger. “If there are turbulent times in the world, we don't want anything to happen to our gold, to be seized or for anything else inappropriate to happen,” said Heidi Elmer, market director at the Riksbank. SVT In 2018.

Then the Riksbank showed off portions of its gold reserves on the occasion of its 350th anniversary.