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What’s the Difference Between Gold Swaps and Gold Loans?

In reality, there isn’t much of a difference between the two, aside from the accounting treatment and parties transacting the swap or loan. Gold loans typically, but not always, take place between a central bank and a bullion bank. Gold swaps are more often transacted between central banks for currency. Gold swaps are forms of repurchase agreements commonly undertaken between central banks or between a central bank and other types of financial institutions. They occur when gold is exchanged for foreign exchange at a specified price with a commitment to repurchase the gold at a fixed price on a specified future date so that the original party remains exposed to the gold market.

“Although the Operational Guidelines give the choice to the authorities as how to record gold swaps (but seek consistency between this treatment and that used by the authorities for repos and reverse repos), typically both parties will treat the transaction as a collateralized loan. That is to say, the party providing the foreign exchange, and receiving the gold, will not typically record the gold on its balance sheet; while the party providing the gold will not typically remove it from its balance sheet. Instead the party receiving gold will usually record a reduction in foreign exchange and a loan receivable. The party receiving foreign exchange will record an increase in loans payable, and an increase in currency and deposits, thereby increasing gross reserve assets. However, as noted in the footnote to paragraph 100 in the Operational Guidelines, in paragraph 434 of BPM5 gold swaps should be regarded as transactions in gold, in which case, they would have no net impact on total reserves but would change each monetary authority’s reserve assets’ composition.”

http://www.imf.org/external/pubs/ft/bop/2001/01-16.pdf

Follow this link for an additional explanation: http://unstats.un.org/unsd/nationalaccount/AEG/papers/m2repurchase.pdf

As evidenced by the above quote, swapped gold hits the market and neither party has to make changes to accounting, despite the fact that the asset in question has been moved into the market. One thing that is certain, gold loans and swaps are made from the same source of gold that is held in reserve by central banks. We believe that gold swaps between banks have just as large an impact on the market as gold loans, and even less is known about them in the marketplace.

Bundesbank's Weber Comments on Central Bank Gold Reserves
2006-10-05 By Simon Kennedy
Oct. 5 (Bloomberg) -- Bundesbank President Axel Weber comments on the central bank's plans for its gold reserves. Weber, who didn't comment on monetary policy, was speaking to reporters in Paris. ``We are not envisaging gold sales for the third year'' of the current agreement with other central banks, Weber said. ``We have been asked to negotiate with other central banks'' about potential swap deals involving gold. He refused to discuss which central banks may be interested.

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