The Saudi Central Bank (SAMA) has been caught secretly buying gold in Switzerland, joining the growing number of nations stocking up on the yellow metal.
Gold market expert and analyst Jan Nieuwenhuijs disclosed this in a Sept. 12 piece published by Idaho-based Money Metals Exchange LLC. He wrote that the SAMA has been secretly purchasing 160 tonnes of gold in Switzerland since early 2022. This, Nieuwenhuijs added, contributes to the current gold bull market.
"Ever since the West immobilized Russia's dollar assets in February 2022, those with diplomatic disagreements with the West are increasingly exchanging their dollars for physical gold," he wrote. "Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, this time around, they might even become a linchpin for its dissolution." (Related: Saudi Arabia lets 50-year U.S. petrodollar partnership expire, portending the END of the petro dollar.)
The market commentator noted that Saudi Arabia is the latest country with cross-border trade statistics showing its shift from being price sensitive to being a country driving gold prices up, after China and Thailand.
According to Nieuwenhuijs, the kingdom has been a constant net importer during the entire rally from late 2022 until the present – boosting the price of the yellow metal. He continued that part of the flow of gold into Riyadh coming from Switzerland goes straight to the SAMA's vaults.
"A source once told me that central banks often buy gold in Switzerland and London and have bullion banks pack and ship the gold to wherever the central banks want. To find out if SAMA shops for gold bars in the Swiss Alps, I have subtracted Saudi consumer demand from its net imports and compared the outcome – gold imported but not sold to consumers – to gross exports from Switzerland to Saudi Arabia. The result shows a strong match since Q2 2022, confirming SAMA has quietly been buying gold in Switzerland.
Riyadh has more gold than what it wants the world to believe
According to Nieuwenhuijs, Riyadh's demand for gold would decline when gold prices surged, but its demand for the yellow metal would strengthen when prices dropped.
The analyst noted that "among industry insiders, SAMA is known for having accelerated secret gold purchases since 2022." This increase started to consistently outpace consumer demand in the second quarter of 2022, right after the onset of the Russia-Ukraine war. "SAMA was, and is, in a hurry to get its hands on physical gold," he continued.
Based on the data Nieuwenhuijs scrutinized, SAMA bought approximately 160 tonnes of gold in recent years. While he acknowledged that the kingdom's trade data only began that year, he emphasized that Riyadh owns much more gold than it wants the world to believe.
"The last time the [SAMA] updated its official gold reserves was in February 2008, when it conveyed to hold 332 tonnes. [This number] was 180 tonnes more than in January 2008. Obviously, SAMA didn't buy 180 tonnes in one month."
The analyst remarked that the number put out by SAMA is purely political, in the same way the People's Bank of China (PBOC) under-reports its gold reserves. "By hiding how much precious metal the [kingdom] truly owns, the House of Saud avoids openly upsetting the United States," he wrote.
But Nieuwenhuijs pointed out that SAMA's gold purchase of 160 tonnes is but a fraction of the PBOC's 1,600 tonnes purchased since the conflict in Ukraine began.
"Both central banks … must be confident in what direction the gold market is headed. The evolution of countries in Asia storing more and more of their trade surpluses in gold – a time-tested neutral and sanction-proof reserve asset – is clear."
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