UPSC Prelims 2023 Q86: Switzerland's Gold Trade & Reserves Explained

This question mostly tests whether you know the facts, but two anchors get you there. First, the top of the gold-reserve table is standard knowledge: the USA is first and Germany is second, by a wide margin. If you know that, Statement-II's 'second largest' is false, and only the answer with 'Statement-I correct, Statement-II incorrect' or the one with both statements incorrect can survive. Since no option says both are false, Statement-I must be judged on its own. Second, Switzerland's refineries and bullion trade are well known (Swiss-made gold bars). A country with almost no mines can still be a top exporter if it imports, refines and re-exports. Also notice that the two statements describe different things: trade flows (exports) and central-bank stock (reserves). Large reserves do not cause large exports, so even if both were true, the 'correct explanation' options would be doubtful. Facts to remember: USA about 8,100 t and Germany about 3,350 t are first and second; Switzerland, at about 1,040 t, is seventh; and Switzerland is the world's number one gold exporter by value.

Gold reserves vs gold trade: two different ledgers

• Gold reserves (monetary gold) are the gold a central bank holds as part of its foreign exchange reserves. It is a stock and rarely moves.
• Gold trade (non-monetary gold, HS 7108) is commercial gold such as doré from mines, refined bars and scrap. It is a flow recorded in customs data.

Switzerland is a giant in the second ledger and only mid-table in the first. Ticino and the area around Neuchâtel host some of the world's largest refineries (Valcambi, PAMP, Argor-Heraeus, Metalor). Gold arrives from mining countries and from bullion markets such as London, then leaves as kilobars and coins for India, China, Hong Kong and others. This also makes Switzerland one of India's largest sources of gold imports. Under the India–EFTA TEPA (in force from 1 October 2025), gold is more than 80% of India's imports from EFTA, and India made no change to the effective duty on gold.

Largest official gold holders (approx., IMF/WGC data)

The IMF itself holds about 2,814 tonnes, but it is an institution, not a country. Rankings by tonnes differ from rankings by share of forex reserves. The US, Germany, Italy and France keep about 70% or more of their reserves in gold. Switzerland keeps only about 15%, because the SNB holds huge foreign-currency assets. On a per-person basis, Switzerland's holding is among the highest in the world.

India's RBI holds about 880 tonnes. Part of it is stored abroad with the Bank of England and the BIS, and the rest is in India.

Gold trade was in the headlines in 2022–23. After Russia invaded Ukraine, Western sanctions targeted Russian gold, and Swiss refiners and Swiss gold flows came under scrutiny. Central banks were also buying gold at a record pace. This made the difference between gold trade hubs and gold reserve holders a natural target for a current-affairs question.