Gold Coverage of the Swiss Franc: Why 166.9% Sounds Impressive – But M2 and M3 Provide the Crucial Perspective
July 24, 2026
The figure attracts attention: At the end of 2025, the market value of the Swiss National Bank's (SNB) gold reserves corresponded to approximately 166.9 percent of the circulating Swiss cash. Mathematically, every franc issued in the form of banknotes and coins would be more than fully backed by gold.
But this is exactly where the actual discussion begins. Because this calculation exclusively considers cash. However, modern economies today consist predominantly of digital book money. Anyone wishing to assess the stability of a currency should therefore also look at the money supplies M2 and M3.
The calculation relates the current market value of gold reserves to the circulating cash (M0). This is a purely mathematical metric.
It explicitly does not mean that Swiss francs could be exchanged for gold or that Switzerland has returned to a gold standard.
The sharp rise to 166.9 percent is rather the result of two developments. On the one hand, gold reached new highs in 2025. On the other hand, the amount of cash in circulation decreased slightly. Since the SNB kept its gold holdings unchanged at around 1,040 tonnes, the market value of the reserves increased significantly.
From an economic perspective, the greatest weakness of the metric lies in its reference value.
Cash today only accounts for a small part of the total money supply. The far larger share consists of sight deposits, savings deposits, and time deposits created by the banking system.
Therefore, many economists criticize the exclusive comparison with cash.
The money supplies differ considerably.
| Money Supply | Content | Significance |
|---|---|---|
| M0 | Cash and central bank money | Basis of the 166.9% calculation |
| M1 | Cash plus overnight bank deposits | already shows significantly more money in circulation |
| M2 | M1 plus savings and short-term time deposits | represents the money supply much more realistically |
| M3 | M2 plus money market instruments and other liquid deposits | considered the most comprehensive money supply |
If the market value of the gold reserves were compared not with M0, but with M2 or M3, the theoretical gold coverage would drop drastically. What appears to be full coverage would turn into a low single-digit percentage.
For companies, consumers, and financial markets, it is not just cash that plays a role.
Transfers, bank balances, savings, and short-term deposits today determine the largest part of an economy's money supply. This is exactly why central banks primarily monitor the broader money supplies M2 and M3.
They provide much better information about:
Gold coverage based on M3 would therefore reflect economic reality much more accurately than a pure consideration of cash in circulation.
Despite all criticism, the calculation is by no means meaningless.
Cash is the only form of money emitted directly by the central bank. Deposit money, on the other hand, is predominantly created through lending by commercial banks.
The metric therefore answers a clearly defined question:
What is the equivalent value of the central bank's gold reserves in relation to the cash it has issued itself?
Especially in historical comparison, this perspective provides interesting insights.
Switzerland occupies a special position worldwide in this regard.
| Currency Area | Theoretical Gold Coverage of Cash |
|---|---|
| Switzerland | 166.9 % |
| Eurozone | 78.44 % |
| USA | 46.82 % |
| India | 25.59 % |
| Japan | 16.39 % |
| China | 15.36 % |
The exceptionally high ratio primarily illustrates the size of Swiss gold reserves and the strong increase in the price of gold.
Interestingly, central banks worldwide continue to pursue a strategy of gold accumulation.
While the monetary system is becoming increasingly digital, the importance of physical gold reserves is growing at the same time. Many central banks have been continuously expanding their holdings for years. Gold no longer fulfills a monetary policy control function, but it continues to be of high importance as an international reserve of confidence.
Especially in times of geopolitical uncertainty, this aspect gains additional weight.
The theoretical gold coverage of Swiss cash of 166.9 percent is a remarkable figure – however, it exclusively describes the cash in circulation.
Anyone wishing to derive a statement about the stability of the entire currency from this is falling short. Only the consideration of the broader money supplies M2 and particularly M3 shows how large the actual circulating money supply of an economy is.
The high gold ratio is therefore less an evidence of a particularly "gold-backed" franc than an expression of Switzerland's exceptionally large gold reserves. It underscores the strategic importance of gold in the international monetary system – but it is no substitute for a comprehensive analysis of modern money supplies.
Stay farsighted
Yours, Helge Peter Ippensen