Like most other central banks, the Riksbank owns gold. The Riksbank’s gold holding is attributable to the gold’s historical links to the banknotes and coins in circulation. At one period a coin or banknote could be redeemed at any time at the Riksbank in exchange for gold. That link has now gone. The gold is, therefore, mainly regarded as a financial asset like any other. There is no provision to state that the Riksbank must maintain a gold reserve. However, the gold can be used by the Riksbank to carry out its tasks, for instance to finance currency interventions.
The Riksbank has relatively little opportunity to influence the size of the gold holding, at least to reduce it. The Riksbank has concluded an agreement with a number of other central banks, the Central Bank Gold Agreement (CBGA), which places a limit on the amount of gold each central bank may sell each year. The background to the agreement is to limit the central banks’ sales of gold in order to avoid undesirable effects on the gold price.
Like many other central banks, the Riksbank has chosen to reduce its gold holding and so far has made full use of its annual quotas in the CBGA. The reason for this is that, relatively speaking, gold is a risky asset, the price of which fluctuates greatly. At the same time, gold historically has generated a relatively low return. The income from the gold sales is invested in the foreign exchange reserve, which is expected to generate a higher return on the gold and foreign exchange reserve as a whole, together with a lower risk.