Bundesbank has completed a transfer of gold worth 24B from Franceand U.S.
Germany has completed domestic gold storage plan 3 years ahead of schedule
In the 7.7 million plan, 54,000 gold bars were shipped and audited
In 2012 German court called for inspection of Germany’s foreign gold holdings
Decision to repatriate from Paris and New York was ‘to build trust and confidence domestically’
1,236t or 37% of German holdings remain in New York Fed facility
Bundesbankwants to hold gold bullion
U.S. government declines to audit gold reserves doesn’t want world to realise gold’s importance in the globalmonetary system
Editor: Mark O’Byrne
Last Monday, U.S. Treasury Secretary Mnuchin feigned to inspect the U.S. gold reserves in Fort Knox and joked flippantly that he assumed it was there.
A day later the Bundesbank, announced that they had repatriated much of their gold reserves from the U.S. and France.Coincidence or coordination?
In 2013 the Deutsche Bundesbank announced plans to store half of its gold reserves in Germany. At the time, only 31% was stored in the country. The Gold Storage Plan involved bringing gold home from both Paris and New York.
The plan was expected to take seven years. At the time many asked why it would take so long to return just 674t of gold. The Bundesbank has completed the plan three years ahead of schedule.
The German gold repatriation was in response to the critics and or in order to safeguard the German gold reserves and ensure they are owned in a safe, allocated and segregated manner by the Bundesbank.
In the last five years the German central bank has 374t and 300t from Paris and New York, respectively. The Bundesbank opted to keep 432t in the Bank of England vaults.
Whilst the tables above (from the Bundesbank) show the repatriation of gold was ultimately successful, it has promoted much discussion about the security of gold in central banks.
The decision to move the gold back to home soil has also vindicated many who have long argued about the murky gold reserve dealings of the United States.
Why was the gold abroad and why move it?
Many countries choose to hold proportions of their gold on foreign soil for both security and practical reasons.
Practical reasons as it makes sense to have reserves in diversified locations so you have access to markets should you need to trade the reserves.
In 2013 a Bundesbank spokesman saidwe have no intention to sell goldadding that the decision to relocate the foreign held gold is in case of a currency crisis.
This leads on to security reasons. During the Cold War the Bundesbank wanted to keep its gold in the West in case of an invasion from the Soviet Union. It was also a way of supporting the country’s currency knowing there were reserves held securely abroad, should the country need to use them.
Campaigns and concerns in the last decade have made the German population and central bank rethink what the modern security and practical threats are, prompting them to bring some of the gold home.
It was in the wake of the U.S. subprime crisis, the Lehman collapse and then the ensuing eurozone and global debt crisis in 2012, that prompted voices in Germany to call for an audit of the precious metal held abroad.
Campaigners also suspected the gold might have been tampered with or not be fully allocated and non leased. In response to the calls for greater transparency the Bundesbank agreed to hold 50% of the gold in Germany.
When the Bundesbank announced their plans to keep 50% of the gold at home it came just three months after they had defended their reasons for keeping the gold on foreign soil:
‘To function as reserve assets, it would have to be possible for the gold holdings to be exchanged, if necessary, into a commonly used reserve currency without any logistical constraints. That is the reason for storing parts of the gold reserves at partner central banks in other countries.’
Then, in early 2013 the central bank announced:
‘By 2020, the Bundesbank intends to store half of Germany’s gold reserves in its own vaults in Germany. The other half will remain in storage at its partner central banks in New York and London. With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centres abroad within a short space of time.’
It is also worth mentioning that in 2012 the German Court of Auditors ordered an audit of the gold reserves. The court clearly wanted to ensure that the nearly 3,400 tons of gold existed ‘because stocks have never been checked for authenticity and weight‘.
Why were the Germans worried about the safety of their gold?
Few people have raised eyebrows about Germany’s decision to bring gold back from Paris. The Bundesbank gave the following reason for doing so:
‘Given that France, like Germany, also has the euro as its national currency, the Bundesbank is no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise. As capacity has now become available in the Bundesbank’s own vaults in Germany, the gold stocks can now be relocated from Paris to Frankfurt.’
However, no specific reason was given for the US, other than the need to‘build trust and confidence domestically.’
The announcement by the Bundesbank to move 300t of gold from New York sent ripples through the gold community. Many wondered if the plan was expected to take seven years because New York did not have Germany’s gold. Was this where the need to build trust and confidence came from?
More recently, with the election of President Trump, there might have been more cause for concern when it comes to the safety of a country’s gold.
We have a lot of discussions about (U.S. President Donald) Trump, regarding implications on monetary policy, macroeconomics, etc., but we trust the central bank of the U.S.,Bundesbank board member Carl-Ludwig Thiele told a news conference in February of this year. But,Trump has not triggered a discussion about the storage facility in New York.
TheGold Anti-Trust Action Committee (GATA)and Germany’s homegrown ‘Repatriate our Gold’ movement have been the loudest voices when it comes to concerns over the existence of gold and the nature of that gold’s ownership in the US Treasury’s possession.
In 2017 Sputnik News reported on the successful repatriation of Germany’s gold from the US. In the report, a Russian commentator suggested Germany had received the wrong gold.