Danmarks Nationalbank’s gold

For historical reasons, Danmarks Nationalbank holds around 66.5 tonnes of gold. The value of the gold stock fluctuates with the gold price, but at the end of 2023 the value of the gold was kr. 29.8 billion. The gold stock is part of Danmarks Nationalbank’s foreign exchange reserve, and because of the fixed exchange rate policy we use the gold stock to keep the exchange rate of the krone stable. But gold currently constitutes a very small share of the foreign exchange reserve and it is not traded.

Gold is part of the foreign exchange reserve

One of Danmarks Nationalbank’s key tasks is to keep the Danish krone completely stable against the euro – known as the fixed exchange rate policy. One way of keeping the krone stable is by buying kroner and selling foreign exchange, or vice versa. Therefore, Danmarks Nationalbank has a foreign exchange reserve, and gold constitutes a small part of this reserve. 

The value of the krone in the foreign exchange markets may change in minutes or hours; therefore, the foreign exchange reserve consists primarily of cash deposits in foreign banks and securities that may be sold quickly to fund intervention purchases of Danish kroner. So, the reasons why physical gold bars are included in the foreign exchange reserve – although they would take longer to sell if needed – are historical and legislative rather than practical. 

Facts about Danmarks Nationalbank’s gold

  • Danmarks Nationalbank’s gold weighs 66.5 tonnes. A single gold bar weighs 12.5 kilos on average.
  • At the end of 2023, the value of Danmarks Nationalbank’s gold stock was about kr. 29.8 billion. Because the price of gold may fluctuate, the value of Danmarks Nationalbank’s gold varies.
  • Danmarks Nationalbank’s gold constitutes 0.2 per cent of total central bank stocks of around 35,000 tonnes of gold. It is estimated that central banks hold just under one fifth of all the gold extracted in the world of around 197,600 tonnes.
  • Most of Danmarks Nationalbank’s gold is stored at the Bank of England.

The gold stock is held for historical reasons

Under the classical gold standard in the late 19th and early 20th centu-ries, many countries based their monetary systems on gold. This meant that coins had a certain gold content and that banknotes could be freely exchanged for gold coins at the country’s central bank according to an officially established conversion ratio (a gold coin standard). This system ensured fixed exchange rates between the participating countries. 

During the economic crisis of the early 1930s, the international gold standard system collapsed. Denmark left the gold standard shortly after the UK in 1931, and Danmarks Nationalbank’s obligation to convert its issued banknotes into gold was lifted. Since then, gold has played no role in Denmark’s banknote system.

Gold still played a part in the international exchange rate system established in the 1940s – known as the Bretton Woods system – and the European exchange rate cooperation EMS/ERM established in 1979, making it mandatory for participating countries to deposit parts of their gold stocks in a common depository. 

Statutory gold requirement – and ongoing derogation

When the Danmarks Nationalbank Act was drafted in the early 1930s, it was still expected that Denmark would return to the gold standard. That is why the Danmarks Nationalbank Act states that Danmarks Nationalbank must possess a gold fund as collateral for banknotes issued, and it must cover at least 25 per cent of the total active note circulation. 

Under section 13 of the Act, the Board of Directors may, after having obtained the permission of the Royal Bank Commissioner (the Minister for Industry, Business and Financial Affairs), grant permission to deviate from the requirement for gold coverage of banknotes in circulation. This derogation was first granted in September 1939, and its renewal remains a regular item on the agenda of the quarterly meetings of Danmarks Nationalbank’s Board of Directors.

Most of the gold is securely stored in the UK

The geographical location of the gold stock has varied over time.

In the late 1930s, the gold stock was located in Copenhagen, but during 1939 and early 1940, much of the gold was moved to the Federal Re-serve Bank in New York. This was due to fears that Germany would occupy Denmark and reports that the central banks of the countries occupied by Germany had been robbed of their gold reserves.

In the mid-1980s, most of Danmarks Nationalbank’s gold stock was still located in the USA. When Danmarks Nationalbank began to lend gold in the international gold market in London in 1987, most of the gold stock was moved to the Bank of England over a number of years. 

Since 2002, Danmarks Nationalbank has held about 97 per cent of its gold stock at the Bank of England in London, around 0,5 per cent of its gold stock at the Federal Reserve Bank of New York and the remaining around 2.5 per cent in Copenhagen. 

One of Danmarks Nationalbank’s gold bars is currently on loan for an exhibition at the National Museum of Denmark for visitors to see and touch.

Today, most of Danmarks Nationalbank’s gold is stored in a secure vault at the Bank of England