Is anyone here actually reading the article? Yes, they really made a gain of $15B:
> But instead of refining and transporting the gold, it opted to sell the bars and purchase new bullion in Europe. […] Due to rising gold prices, the move helped the bank to generate a capital gain of 13 billion euros ($15 billion),
This doesn't make sense. If they first sold the bars held in the US, then the gold prices rose, then they bought gold in Europe, how the hell did that amount to a capital gain of $15b? How exactly do prices rising over the course of the process lead to these $15b?
First thought: Maybe they bought the gold first? Or the gold price was at a temporary high when they sold it?
Second thought: The numbers don't seem to check out: 129t are 4,147,456.307 troy ounces (1 troy ounce = 31.1034768 g). The total gains of 15e9 USD would thus correspond to gains of $3,616.68 per troy ounce, which seems excessively high, given that today's gold price is at ~$4,712. Even if they sold everything at the current all-time high of $5,589.38 on January 28 (and that's a big if), they would have had to buy for not more than $1,972.70, a price we last had in fall 2023.
They must have had an exceptional crystal ball!
Unless their cost base was around $1000 per troy ounce or less, as it was before 2010.
Imagine they bought the gold in the US for 1b and sold for 16b. Yes they turned around and purchased 16b of order gold immediately but there's was still a transaction where they sold an asset for more than they bought it.
If you bought your house for $500k 20 years ago, sold it today for a million, then bought it again tomorrow for a million, would you describe that to your friends as having just made $500k? Like yes in the most pedantic technical accounting way it's a gain. In spirit I would call this an unrealized gain
No, you’d remark that your house has appreciated in value over the past 20 years. But you wouldn’t have realized any of that gain until you sold the house - the point being that the realization is the actual taxable event, which is why it matters from the pedantic technical accounting POV. The fact that you turned around and bought another house just means you’re doing something new with your realized gains. Now you have a new cost basis. Maybe that’s what you’re saying with “unrealized gain” though.
Sure in the spirit it's an unrealized gain but wouldn't the tax man consider it a realized $500K capital gain? seemingly this is would be the more appropriate way of categorizing it?
No but I read the article and that was the way it described the gain.
Gold is down 10+% since its recent peak. They likely sold then and repurchased later.
Then they made money thanks to gold prices fluctuating, not thanks to gold prices rising?
And how does a 10% market shift lead to gaining $15b, roughly the value of 100 tons of gold, from the sale and re-purchase of 129 tons of gold?
This math ain't mathing.
It's more that the english ain't parsing, for some at least.
The mining.com quote is classic weasel phrasing, seemingly meaningful yet disturbingly ambiguous:
So, the move helped the bank generate ...Just as, say, one guy helped four others push a car back up on the road.
We've been given, accurately or not .. likely true, figures on how the bank did over a period, we've also been told the gold movements helped with that ... so they almost certainly kicked in at least $1.
Other costs? Deviations in the actual figures from the estimates we're using here? 100 is not a million miles away from 129.
Dumpling $15B on the market should lead to a drop. Anyway, the gold price is not always going up.
The claim is that rising gold prices lead to gains of $15b. As in they started with 129 tons of gold in the US, then they sold that and bought gold in Europe, and in the end, due to rising gold prices, they had 129 tons of gold in Paris plus $15b extra cash. Please explain a hypothetical course of events which makes this plausible.
Keep in mind that 129 tons of gold is worth just a bit more than $15b, so small market fluctuations on the scale of 10% isn't enough by itself.
They purchased 129 tons of gold in Europe. Their asset position did not change: they converted cash to gold of the same value.
They then sold the 129 tons gold in the US vaults for $16 billion. That gold was originally purchased I'm guessing many decades ago for $1 billion. The have a book profit of $15 billion and still have 129 tons of gold.
They captured some of the appreciation in gold value as a realised profit on their books.
Their balance sheet did not change, just their income statement
Very succinctly stated, thank you!
Gold prices probably went up due to turmoil in middle east.
The US gold would have been on the books at the original purchase price, so something like US$35 from 1910 (when a penny had a purchasing power of 38 cents now). Having deemed it more efficient to sell that gold and buy the same amount to replace it, the new gold is on the books at the 2026 purchase price. As the 2026 money price is far higher than the 1910 price, the value on the books shows a dramatic realized capital gain.
No gain would have shown for the gold that was simply moved, even though in this case the buying and selling was simply a more efficient way of doing the equivalent of moving the gold.
Gold that was simply moved wouldn't show the same gain.
That makes more sense, thank you! Though do gold assets on the books really never get adjusted? I guess that's up the central bank to decide but I would find it surprising.
It's the rules of how they must account for the value of the gold they have. Gold is valued at the price paid. Then, it is valued at the price sold. If there is no sale for more than a century, it stays on the books at the price paid. Once a transaction happens, the numbers update. Then, the gain that everyone knows is there is 'realized'. It's like if you mined Bitcoin in the early days. Your gain is only 'realized' when you actually sell it. Until then, it is only theoretical.
Mark-to-market accounting systems are one way to deal with this quirk, but they create their own issues.
What I was trying to get at is that there are other ways to update asset valuations besides daily (market-to-market) and once (price paid) – those are just the extreme ends of a spectrum. What makes sense really depends on the asset class and how long you're holding the positions. As for "It's the rules", I'm aware that there are strict accounting rules for companies and regular banks, but do those really apply to the central bank in the exact same way? (A central bank typically operates on a much longer time scales.)
If the central bank doesn't follow rules, who would trust it? The central bank's entire purpose is to put national trust into individual banks; both assuring investments (accounts) and establishing base (prime) loan rates.
A central bank answers directly to the government, not the judiciary. But it still answers to power, and follows established rules.
I'm not saying it shouldn't follow rules, I said the rules might be different.
A balance sheet becomes pointless if some assets are valued at today's prices, while other assets are valued at their price from 100 years ago.
Mark to market versus mark to book accounting for central bank gold reserves is an endless source of crank adjacent debates.
Did they buy before selling? Otherwise that doesn’t make sense.
The gold price is fluctuating. It doesn't always go up.
Sell at high, buy at low?
You sell in country A and buy the *same quantity* in country B. You were just lucky that the gold you bought a century ago was rocketing to Mars.
I think the confusion is that both statements can be true depending on what you mean by "gain"
Is that what led to gold price falling?
Same amount of gold was sold and bought. So, presumably not.
Actually reading the comments first because the page isn't loading for me.