Since May 2019 the BIS, which represents most central banks, has increased its use of gold swaps and other gold-related derivatives by more than 400 percent…
By Robert Lambourne
Saturday, February 8, 2020
Since May 2019 the Bank for International Settlements, which represents most central banks, has increased its use of gold swaps and other gold-related derivatives by more than 400 percent, from an estimated 78 tonnes to an estimated 320 tonnes
The BIS uses gold swaps and other gold derivatives to gain access to gold held by commercial banks. According to the bank’s January 31 statement of account —
— the bank’s swaps and derivatives, estimated at 320 tonnes, were at their highest level since February 2019.
These recent levels are still reduced compared to several months in the second half of 2018.
There is not enough information in the BIS’ monthly reports to calculate the exact amount of swaps, but based on the bank’s statement for January, its month-end total of gold swaps of about 320 tonnes is up seven tonnes from the 313 tonnes at December 31.
The bank’s gold swaps have risen fairly steadily from the 250 tonnes at November 30, 2019, 186 tonnes at October 31, 128 tonnes at September 30, 162 tonnes at August 31, 95 tonnes at July 31, 126 tonnes at June 30, 78 tonnes at May 31, and 88 tonnes at April 30.
They stood at 175 tonnes last March 31 and 303 tonnes last February 28.
More background on the bank’s medium-term history of using gold swaps is here:
On February 3, 2019, GATA published comments from a former gold industry executive describing the activities of the BIS in gold swaps in earlier decades:
The former executive wrote: “Effectively this process created a supply of ‘paper gold’ — sometimes but not always marked to market — that had a depressing effect on the gold price.”
The BIS refuses to explain its activity in the gold market — its objectives and underlying parties in interest —
— and mainstream financial news organizations refuse to ask about it.
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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