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Twenty-five years ago, 15 central banks signed the Gold Agreement, paving the way for the Swiss National Bank's gold sales. At the time, many arguments were made against gold as an investment. However, most of these assumptions have since been proven incorrect, prompting the need for a reassessment.

This is a remarkable and noteworthy coincidence. This morning, Thomas Jordan announced his final monetary policy decision as Chairman of the SNB Governing Board after more than a quarter century of service. It is also exactly 25 years since 15 European central banks, including the SNB, signed the so-called Gold Agreement at the Bretton Woods Institutions' annual meeting.

The agreement aimed to coordinate central bank gold sales, with the collective decision to sell no more than 2'000 tons over the next five years. Leading the sales program, the SNB sold 1'300 tons of gold between 2000 and 2005, more than half of its original 2'590-ton reserve..

When Gold Was Considered a Relic

The central banks’ goal was to stabilize the gold market, which had come under pressure due to multiple central banks planning sales. In May 1999, the UK announced plans to sell gold, causing its price to fall to a 20-year low. Gold was seen as a relic of the past, with the world appearing peaceful, united, and stable after the end of the Cold War. Additionally, gold was seen as an unattractive investment compared to stocks, which pay dividends, or bonds, which pay coupons, since it does not generate income.

Switzerland was unique at the time in terms of both the volume of its gold sales and its historical context. At the end of the 1990s, Switzerland ranked fifth globally in gold reserves and led in per capita terms. The SNB was required to value gold on its balance sheet at a parity rate of 4,595 francs per kilogram, making the prospect of a revaluation gain during the transition to market-based pricing particularly appealing.

March 1997: A Game-Changing Announcement

Internally, expert groups had been considering the gold question for some time, and political ideas on how the gold could be used were also circulating. However, the official public acknowledgment that the SNB’s gold could be put to better use came during Federal President Arnold Koller’s address to the Federal Assembly in March 1997.

On the advice of then-SNB President Hans Meyer (who did not consult the other two Governing Board members), Koller proposed using the revaluation gains from the SNB's gold to fund the Solidarity Foundation—a move aimed at resolving the heated debate over dormant accounts and Switzerland’s role during World War II.