Germany Repatriating Gold From NY, Paris ‘In Case of a Currency Crisis’

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Previously by Agustino Fontevecchia: Bernanke Fights Ron Paul in Congress: u2018GoldIsn'tMoney'

     

Germany’s central bank announced Wednesday it will repatriate gold reserves held at the New York Fed and the Banque de France in order to have “the ability to exchange gold for foreign currency […] within a short space of time.” Officials at the Bundesbank indicated they have no intention of selling gold, but acknowledged the move is “preemptive” in case a “currency crisis” hits the European Monetary Union. While they tried to minimize the importance of the move at the Bundesbank, repatriating gold is a clear indication of public loss of confidence on foreign central banks and the integrity of the monetary union. Over the past few years, Venezuela, Libya, and Iran have also repatriated their gold holdings.

“No, we have no intention to sell gold,” a Bundesbank spokesman said on the phone Wednesday, “[the relocation] is in case of a currency crisis.” The argument is mildly paradoxical: the officially stated reasons for the repatriation of part of its gold holdings is to build trust and confidence domestically, and to have the ability to sell gold quickly If needed.

Specifically, the Bundesbank will be bringing to Frankfurt all of its 374 metric tons stored at the Banque de France (11% of its total reserves), and 300 metric tons held in the vault of the New York Fed, reducing its share in the U.S. from 45% to 37%. At market prices, that’s about €27-billion ($36 billion) worth of physical gold bars. According to the Financial Times, it will be the biggest planned gold transport on record.

The German central bank is looking to relocate 50% of its total reserves to Frankfurt by 2020; the EU’s largest economy is the world’s second largest holder of gold reserves, trailing only the U.S. Why 50%, one may ask? “It’s just a benchmark that makes sense,” a spokesman explained.

In a statement, the Bundesbank justified its relocation of gold reserves held in France as a natural consequence of the adoption of the euro, noting that as they hold the same currency, there is no need to keep the bars there if the situation arose where they would need foreign currency quick. Reserves in London are to remain steady at 13% or 445 metric tons. It’s repatriation of U.S. reserves are just part of their plan to keep 50% at home; the Bundesbank will keep more than 1,200 tons in New York.

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