All that glitters
Switzerland’s hidden refineries process the world’s gold
If you grew up on James Bond films as I did, then you know that bad guys collect gold ingots and they are stored in secret vaults under the streets in Switzerland with the collusion of the gnomes, as the country’s bankers were once called.
Since living here and becoming Swiss, I have learned much about this country’s myths and their sources. There are underground bank vaults – think for a moment, why would any bank put its armored storage at the top of a building, that makes for an unsound building– and I have been in a few. They are fairly unremarkable, looking like any safe-deposit box area in any bank in the world. Maybe the reception and examination areas are a wee bit fancier than in the average US midwestern savings and loan. But there is not that much drama involved, to be honest.
Switzerland’s gold, however, is not in the bank vaults. It’s in the four Swiss refineries, which move 30 to 40% of the world’s gold annually. Argor-Heraeus, Valcambi, and PAMP in the southern canton of Ticino, and Metalor in Neuchâtel in western Switzerland have each found their specialist niche. Metalor produces alloys for the pharmaceutical, medtech, and chemical industries. Valcambi does large-scale refining from mines. PAMP produces series of gold ingots that it sells directly to private clients. Argor-Heraeus earns half of its money with the filigreed production of tiny parts for the watch and jewelry industries, and the other half with producing gold ingots, small ones for private investors and large gold bars for institutional investors. And that has had the furnaces burning overtime since the beginning of 2025.
Gold standard
Since Donald Trump took office in the US and began shaking up global trade and generally wreaking economic havoc in one of the world’s largest economies, interest in gold as a safe haven has rocketed. And for traders and institutional investors holding gold, the physical location and size of the gold bars matters.
The two main trading locations for gold are London and New York. London’s over-the-counter (OTC) market1 sets the benchmark price for gold bullion, as the physical bars are called. This is all overseen by the London Bullion Market Association (LBMA), which also sets the standards for bullion and refiners with its Good Delivery accreditation. The standard gold bar held and traded internationally by central banks and bullion dealers is 12.4 kilograms (400 troy ounces).
The gold trade in New York on the section of the New York Mercantile Exchange known as Comex is dominated by futures and derivatives2 and the standard storage unit for gold is ingots of one kilogram. Why? No one really knows, or remembers. And here’s the hitch: for Comex trades, the gold must be physically present in the US.
What if Donald Trump were to declare a tariff on gold imported to the US? Worries among investors were circulating at the end of 2024, and when the new regime took charge and began declaring tariffs willy-nilly, panic broke out. The prices for gold futures in New York were briefly higher than in London, which got traders all excited to capitalize on those higher prices (called arbitrage).
Fearing tariffs, investors began de-stocking their gold inventory in London and bringing it to New York. But the 400-ounce bars stored under the Bank of England in London had to first be transformed into one-kilo bars. This is where Switzerland comes into play.
Gold rush
Chunky gold ingots began arriving in Mendrisio, a town close to the border with Italy, to be melted down and recast into the one-kilo bars suitable for Comex trading.
Anyone studying trade statistics in Switzerland will have noticed that the country exported an eyebrow-raising 530 tons of gold to the US in the first quarter of 2025. Fuel for the fire of Trump’s infamous “reciprocal” tariffs: the mathematical geniuses doing the calculations in the White House decreed that this trade surplus warranted a 31% rate on Swiss imports to the US in the future.3
Once the first shock of the US tariff proclamations passed and it was clear that gold was not going to be hit, the arbitrage moment passed and the flow reversed. Trading gold in London is, for obscure technical reasons4, much simpler. So since April, a good portion of the gold that went to New York is coming back to Mendrisio to be converted into the 12.4 kilo bars again.
You’d think the refineries would be thrilled, easy money and all that. Sadly, the melting and re-casting process is simple and not very costly, and the rising price of gold has no effect on what the refineries can charge for this service. If anything, the logistical difficulties of physically moving gold around and the queues everywhere from airports to armored trucks to the refineries themselves have been a headache.
But why Switzerland?
For a country that has mined no gold since 1952– and before then, found only marginal amounts–it is a legitimate question. Until the 1970s, when production began to move to Asia, Italy was the world’s undisputed center of jewelry making. It made sense for gold refineries to be close, and it made even more sense for them to be in peaceful, neutral, politically stable Switzerland.
Gold is Switzerland’s largest import and export in terms of value, accounting for 31% of total imports and 27% of exports in 2024. Of course, guaranteeing that all the gold flowing through Switzerland is “clean” is not so simple. Most of the gold processed comes from non-producing countries, such as Great Britain and the United Arab Emirates. Swiss refineries apply voluntary standards to ensure that the gold processed is in line with social and environmental considerations. While the Swiss government endorses the OSCE’s standards on avoiding “blood gold” that finances armed conflicts in its countries of origin, it does not enforce these standards.
Like so many moral questions in Switzerland, resolving this one has to do with business and competition. There are more refineries in the world than there is gold to refine; though Switzerland’s major refineries inspect mines and watch over their supply chains, the authorities don’t really know what gets through and mostly prefer not to look.
Because London is an OTC market, trades are not standardized through a system but rather done directly between the trading parties. The market is sometimes called Loco London. Seriously.
The financially savvy reader will note that these financial instruments are not based on the current price of a real Thing, but are a speculative bet on what might happen to the price of gold.
By comparison, the European Union, which we all know was created to destroy the United States, was threatened with only 25%.
Loco?
Well, that was informative. Thanks.
Very cool. Also if you read the James Bond short story "Octopussy" (which is not vulgar, it's sort-of about an octopus, and nothing to do with the film of the same title), there is a ton of technical detail on gold refining. Also the late, great South African (technically British) adventure writer Wilbur Smith included much on this topic in his earliest novels. Although not so much in his bestseller "Gold," which is more about mining, and was made into a decent film starring Roger Moore, who also starred in "Octopussy"....well, I'm rambling now:)