Germany’s Gold Repatriation Program
Germany Leads Central Bank Gold Repatriation Movement
Germany, others request gold held on deposit in foreign central banks be returned
For decades following World War II, Germany stored more than 2/3 of it gold in foreign central bank vaults in London, Paris and New York. Cold War fears of Soviet tanks over powering NATO drove in part the decision to expatriate a portion of Germany’s gold to New York and London to provide geographic diversification in case of invasion.
Bring the Gold Home!
In early 2013, Germany stunned the gold world by making gold repatriation requests to U.S. Federal Reserve and Banque de France. The German Bundesbank requested that those two banks return a portion of the gold held for safekeeping on deposit in New York and Paris. At the time, Germany cited the potential of a currency crisis, presumably involving the Euro, and the need to have its gold at home in the case of such an eventuality.
Germany’s repatriation request involved a total of 674 tons of their 3,384 tons of gold. The Fed notified Germany that their request would be honored and that the gold would be shipped from the Fed’s vault in New York City – over a period of eight years. Such a time table raised eyebrows as to why Germany’s request could not be handled in a more expeditious manner. Certainly it would be prudent not to send it all back at once given the risks of cargo airplane or ship failure, sabotage, accident or theft; but eight years to return a few hundred tons of gold didn’t make sense.
One year after Germany’s initial gold repatriation request, just 37 tons of gold had been returned to Germany from New York and Paris with 32 tons coming from Paris and just five tons from New York. Two years later in January 2015, the German Bundesbank reported that in 2014, it had received 85 tons from New York and 35 tons from Paris for a total of 120 tons of gold repatriated.
A few months later in March 2015, Germany reported that the pace of gold returning from the Parisian and New York vaults had accelerated and that thirty five and five more tons of gold had been received from Paris and New York, respectively, bringing the total gold repatriated to 157 tons. As of March 2015 1,447 tons of Germany’s gold were still held in New York, 438 tons in London and 307 tons in Paris.
In January of 2016, the Bundesbank announced that in 2015 another 210 tonnes of gold were transferred to Frankfurt with 110 tons coming from Paris and 100 tons from New York. Concurrent with the Bundesbank announcement was an update that by the end of 2015 Frankfort Germany had become Germany’s largest gold storage location with 1,403 tonnes of gold, slightly ahead of the amount of gold still held in New York. Germany has decided to leave its gold in London for geographic and currency (England is not part of the Euro as is Germany) diversity.
By 2020 the German Bundesbank claims they will have half of their gold in Germany, 37% at the New York Federal Reserve and 13% in London at the Bank of England.
Note: Central banks do not hold silver as a reserve asset.
Belgium, the Netherlands and Austria Follow Germany’s Gold Repatriation Lead
In October 2014, partially inspired by Germany’s gold repatriation request, there was a populist Swiss ballot initiative “Save our Swiss Gold” which, among other things, would have required the Swiss National Bank to repatriate any gold it held outside its borders. The ballot initiative failed.
In November 2014, the Netherlands Central Bank announced that it had repatriated a total of 122 tons of its 612 tons of gold that had been held at the New York Fed vault. The announcement was surprising in that there had been no prior news that the Netherlands had made a repatriation request and that they had managed to repatriate such a large amount of its gold in one fell swoop from the New York Fed. In December 2014, Belgium announced that they were considering repatriating some of their 225 tons of gold.
In December 2014, Austria also announced that they were examining a repatriation of some of their 280 tons of gold. In May of 2015, Belgium announced that they had repatriated 110 tons of gold from London. In October 2015, the Belgian central bank announced that its goal was to have half of their gold within Belgium’s borders. In December 2015, the Belgian Central Bank announced that it had brought home another 15 tons of gold from London, bringing it closer to its goal of having half of its gold in Belgium.
No Substitute for Physical Bullion
With global economic and political uncertainty and central banks engaging in multi-trillion dollar stimulus programs and instituting negative interest rates, it seems that while diversification is important, having physical gold bullion under one’s direct control is a prudent move for individuals and central banks.
This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.