The Swiss National Bank has for the first time lifted the veil of secrecy on where it stores its gold, revealing that Canada holds 10 per cent of it.
Swiss National Bank president Thomas Jordan disclosed on Friday that the institution stores the bulk of its 1,040 tonnes of gold – more than 70 per cent – in Switzerland. The Bank of England has 20 per cent and the remaining 10 per cent is with the Bank of Canada, Mr. Jordan told the bank's annual meeting.
"The SNB has been storing gold exclusively in these countries for over 10 years," he said, noting that the decision to go public about gold stores is to correct "the misinformation and misconceptions with regard to storage locations, which have increasingly surfaced."
Candidate countries for storage of Swiss gold are chosen based on a careful set of criteria, he said.
"First, adequate regional diversification and good market access for the storage of gold must be ensured. Second, the country in which gold is stored must be politically and economically very stable and guarantee the immunity protection of central bank investments," he said in his speech.
Since the Second World War and Cold War, many central banks have routinely deposited some of their gold reserves in foreign countries as a precaution against possible invasion.
But the nationalist Swiss People's Party has gathered enough signatures on a petition for a referendum aimed at preventing the central bank from selling off any gold reserves or storing them in other countries.
The initiative – called "Save Our Swiss Gold" – reflects concerns in Europe over continued financial uncertainty, with some calling for their countries to boost their gold reserves as a form of protection in the event of a crisis.
The People's Party wants the Swiss central bank to hold at least 20 per cent of its assets in gold and to also be prohibited from selling its gold reserves and required to keep all its gold in the country.
"We share the objectives the initiators put forward, such as maintaining currency and price stability and ensuring both the SNB's capacity to act and its independence," Mr. Jordan said.
"However, the measures proposed to this effect are not suitable; in fact, they are even counterproductive."
The central bank would have to buy a lot of bullion to meet the 20-per-cent target and wouldn't be allowed to sell this gold at a later point, even if it had to reduce its balance sheet again in order to maintain price stability, he said.
"In a worst-case scenario, the assets side of the SNB's balance sheet would, over time, be largely comprised of unsellable gold."
Earlier this year, Germany's central bank said it planned to repatriate almost 700 tonnes of gold stored in the United States and France.