Turbulent Journey to Distribution
After Swiss voters approved the revised Federal Constitution in April 1999—albeit without enthusiasm, and with no mention of how it cleared the path for gold sales—the SNB’s sales plan was almost ready. In June 1999, the SNB announced its gold sales program, signed the Gold Agreement that fall, and sold 1,300 tons of «surplus» gold between May 2000 and March 2005, though it was unclear what the proceeds (a total of 21,1 billion francs at a price of 16,241 francs per kilogram) would be used for.
Following extensive parliamentary and public debates—most notably the 2002 referendum, in which voters rejected both the one-third distribution solution (supported by most political authorities, the SNB, and civil society) and the Swiss People's Party’s proposal to allocate all proceeds to the Swiss pension system—the SNB distributed the funds according to the now standard formula: one-third to the federal government and two-thirds to the cantons.
Second Gold Sale: Motivated by Rebalancing
Later, between 2007 and 2009, the SNB sold an additional 250 tons of gold. Unlike the first sale, the proceeds were not distributed but reinvested into foreign currency assets. The SNB justified this transaction by arguing that its gold holdings had become too large a portion of its foreign reserves.
In November 2014, Swiss voters overwhelmingly rejected a proposal to require the SNB to hold at least 20 percent of its reserves in gold. The initiative likely failed due to its poorly thought-out «non-sale clause,» which would have severely restricted the SNB’s monetary policy flexibility.
Gold Feels Like a Distant Past
The SNB’s decision to liquidate more than half of its gold reserves feels even more distant today than it actually is. For years, central banks—especially those in emerging markets—have been buying gold. Gold prices continue to reach new highs, with a kilogram now costing more than 70,000 francs. And the notion of a peaceful and cooperative world focused on economic pragmatism is now a distant dream shared by only the most optimistic.
Gold Is an Excellent Investment
Gold has also proven to be a solid long-term investment. The late Professor Peter Bernholz, a renowned expert in monetary history and theory (and likely the only prominent economist to oppose the SNB's gold sales), demonstrated in 2000 that gold has performed better in Swiss francs over the long term than U.S. money market instruments.
His finding that gold outperforms many financial assets has been repeatedly validated. In its 2023 annual report, the SNB noted that gold generated an average annual return of 4.3% in Swiss francs between 2009 and 2023, while its foreign currency investments (bonds and equities) earned only 0.4% over the same period. Even equities alone could barely outperform gold, with a 4.5% return since 2005, when the SNB first began investing in them.
