Last week, Switzerland’s government pension fund took delivery of its first physical gold under a new program of buying gold bars, which have to be stored in Switzerland. Previously, the fund used “swaps,” which were only window dressing and the gold involved in the swaps could be stored outside the country. More countries are starting to take the position that gold stored at home is safer than gold elsewhere.
Swaps come about when one entity agrees to swap, usually for a short time — even overnight — pick a number, say $20 million in a currency for $20 million in gold. Often the swap is reversed the next day, but the gold receiving entity at month’s end can claim a gold position for public disclosure.
In 2016, the supervisory board raised its commodities exposure from 1% to 2% while divesting from energy-related commodity exposure. The board decided that gold was better suited to add diversification and hedging against either inflation or recession. Now the fund has decided that the gold it purchases has to be stored in Switzerland.
The fund’s assets total some $36 billion. Last week’s delivery was worth $700 million, which means that the fund immediately went to the 2% level. The fund, when using swaps, has also taken smaller positions in silver.