The Zürich Gold Pool


Few people know that Zürich became the gold center of the world in 1968 when the London Gold Pool collapsed and the London gold market stayed closed for two weeks, while markets in other countries continued trading with increasing gold prices.

The Zürich Gold Pool was founded in 1968 by the largest banks in Switzerland. The establishment was triggered by the temporary closing of the London bullion market which marked the collapse of the London Gold Pool, a system of maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London market. As a reaction to the temporary closure of the London gold market in March 1968 and the resulting instability of the gold markets and the financial systems in general, Swiss banks acted immediately to minimize effects on the Swiss banking system and its currency by establishing a private gold trading organization, the Zürich Gold Pool, which helped in establishing Zürich as a major trading location for gold.

The consequences of the collapse of the London Gold Pool of central banks, such as the closing of the London bullion market, caused significant instability in the trading and valuation of gold. Without a market, the South African gold producers sought alternative trading partners. The accompanied weakness of the British pound ended the world dominance of London as the major exchange of gold bullion. Swiss banks acted immediately to minimize effects on the Swiss banking system and its currency. By informal agreements between Union Bank of Switzerland, Swiss Bank Corporation, and Credit Suisse, these banks established a gold trading arrangement, the Zürich Gold Pool of private banks. The technical functioning of the Pool was based on the collaboration of its three member banks: Union Bank of Switzerland, Credit Suisse, Swiss Bank Corporation.


Each bank provided an initial investment of 5 tonnes of gold, calculated at the minimum price of US$35 per ounce. The pool, especially Union Bank of Switzerland, immediately became the major financial partner of the South African suppliers. Having no indigenous national gold supplies, the Swiss gold market in Zürich developed and maintained a dominance in gold bullion trading by offering specialized account and banking services based on the country’s confidentiality laws for banking. During the first few weeks after the Zurich Gold Pool was established, the partial liquidation of the considerable gold reserves built up by private speculators in the extremely tense period between November 1967 and the creation of the two-tier market in March 1968, fed the Zurich market. Up until the Gold Crisis of 1968, nearly 80% of all newly mined gold passed through London however, by the 70s Zürich was established as the major trading location for gold, trading some 70% of the world’s total production of gold.

Aside from the political climate, the Swiss financial center had several advantages over its competitors. It had a good banking system, the currency was totally free and convertible, private ownership of gold was not subject to any restriction and was completely anonymous, imports and exports were unregulated, interest rates were low, and since 1954 gold transactions had been tax-exempt. Furthermore, each bank had its own gold refining house. The major Swiss banks also had another advantage over their British competitors. The executory regulation of August 1961 of the 1934 Swiss law on banks and savings banks allowed the members of the Zurich Gold Pool, unlike their British counterparts, to record their gold reserves as liquid assets on their balance sheets. From 1968 to 1990 Switzerland became the world’s largest storage centre for new gold, as well as the largest storage of new gold, importing about two-thirds of the world’s new gold supply.

Today, still, a full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. The Swiss have a reputation for excellence in gold refining. That led Switzerland become the hub of gold refining, with nearly 70% of the world’s gold transiting through the country. Mining companies and gold recyclers export to Switzerland, where the gold is purified to the highest levels (.9999 or even .99999). It is then exported in the whole world to jewellers, investors or central banks.


Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the International Monetary Fund (IMF) it had to abandon this backing by gold. The Bank for International Settlements (BIS), the central banks’ banker, is still based in Basel. Almost all of central banks’ gold trades are effected by the BIS in the utmost discretion. The headquarters of the World Gold Council, a marketing group for the gold mining industry, was in Zurich, before moving to London. Geneva, where the most important jewelry auctions take place, has also been the global center for jewelry and watchmaking for many years. In the last ten years several companies specializing in gold storage for businesses and individuals, outside the banking system, have been created in Switzerland. There was, and still is, a lot of private gold stored in Switzerland.

Swiss Gold Reserves 2

In a monetary crisis like today wealth looks for a safe haven and Switzerland is still the place. As you can observe in the chart below of gold imports and exports when there is a global monetary crisis gold flows into Switzerland but is not exported. In calm geopolitical and monetary periods almost all the gold imported to be refined is exported.

SwissGold ImEx

What is the significance of all this today? We had last year an unsuccessful referendum to increase official Swiss gold reserves but with the conservatives back as a majority in parliament we can expect other initiatives in favor of gold. The Swiss franc remains the best of the bad fiat currencies and that is because the Swiss are conservative in managing public finances. Even with negative interest rates foreigners prefer the Swiss franc among all fiat currencies.

China became chairman of the G20 in 2016 and from the beginning they have indicated as a high priority the reset of the international monetary system. They also bought large quantities of gold for their foreign exchange reserves. Gold in some form is part of their strategy in the renewal of the international monetary system. China set up in 2016 a working group led by South Korea and France to develop proposals, including on ways to strengthen the role of the International Monetary Fund’s reserve-currency unit (SDR), which is set to incorporate China’s yuan as a component starting October 2016. China also invited Switzerland at the next G20 meetings in 2016. Swiss Finance Minister Eveline Widmer-Schlumpf received an invitation for Switzerland to join the G20 Finance Track from her Chinese counterpart, Lou Jiwei according to After its initial participation in 2013, Switzerland will again take part in the G20 meetings of finance ministers and central bank governors in 2016.

Could Switzerland’s experience with gold and the importance of gold given by China in forex reserves encouraged China to invite Switzerland? I think so. As with the collapse of the London Gold Pool again private Swiss businesses could play a major role in the next global run on gold. I don’t expect this time to be the major Swiss banks (now two: Credit Suisse, Union Bank of Switzerland) which are at the core of the global financial problem today but rather wealth management professionals and private gold storage companies that have been created in recent years. The attitude towards gold of the Swiss National Bank has been in recent years influenced very much by the anti-gold American ideology. Could it reverse under popular pressure? It sure can. It did it with the Swiss franc peg to the euro in February 2016.

As I hope I showed you, Switzerland has an expertise in every aspect of the gold sector and can take advantage of it as it did in the late 60s when it created the private Zürich Gold Pool just before the collapse of the central banks’ London Gold Pool. I am sure it can do it again in some form if it wants to.

The physical gold market is very opaque and the Swiss are very secretive but there is a lot of gold in Switzerland and demand for gold is increasing globally. An attitude change in academia towards gold can start a run on gold. In a recent article well known economist Kenneth Rogoff even encouraged developing countries’ central banks and in particular China to sell US Treasuries and buy gold to at least 10% of their forex reserves. Also, more and more pension fund managers talk openly and positively of gold and buying it.

“Switzerland is for gold what Bordeaux is to wine” – Gilles Labarthe, Swiss journalist and ethnologist.

“It is said that the Swiss only love money… this is not true. They also love gold.” Anonymous

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