Austria Begins Gold Repatriation; Maybe You Should Too

Austria has started acting on its plan to repatriate a big chunk of its gold reserves.

Last week, the Austrian National Bank announced it brought 15 tons of gold back into the country. According to Reuters, a spokesman said the bank began repatriating the gold from London in October:

After the repatriation, Austria held roughly 65 tons of gold, or about 23% of its reserves, on its territory, the spokesman said. Around three quarters, 209 tons, were in London, he said, and six tons were in Switzerland.”

Austria’s gold reserves total about 280 tons. Officials announced a plan last May to bring a large portion of its holdings back into its own vaults. By 2020 Austria will maintain 50% of its reserves within the country’s borders. It will leave about 30% in London and another 20% will be moved to Switzerland. Before last month’s move, Austria kept the bulk of its gold in London.

According to Reuters, last month’s repatriation is just the opening act in its long-term plan:

After the repatriation, Austria held roughly 65 tons of gold, or about 23% of its reserves, on its territory, the spokesman said. Around three quarters, 209 tons, were in London, he said, and six tons were in Switzerland.”

Austria’s repatriation is part of a broader trend. A number of other European countries are bringing their gold home, including Germany, the Netherlands, and Belgium.

Germany began aggressively ramping up its repatriation program in 2014. The German central bank brought home 120 tons of gold last year. Eighty-five tons came from the New York Federal Reserve, home to nearly half of Germany’s gold at the time. Like Austria, Germany plans to bring at least half of its reserves back within her borders by 2020.

It’s not just nations looking to control their own gold. Last summer, the Texas legislature passed a bill creating a state gold depository. The Lone Star State plans to bring home $1 billion in gold currently held in New York City.

The gold repatriation movement in Europe is happening as China continues to aggressively build up its own gold reserves. The Chinese accelerated their gold buying spree last month, bringing in an estimated 21 tons in November, the largest amount in five months.

Meanwhile, Russia and Kazakhstan are also buying up gold.

One of the primary reasons to bring gold home is fear of a currency crisis. Some analysts see the repatriation trend in Europe as a lack of long-term faith in the euro and the dollar. Should the need arise these countries will have gold on hand to back their own currencies, as Matthew Lynn pointed out in MarketWatch earlier this year:

There are not many circumstances in which holding a big stash of gold on your own territory matters very much. But one of them is the sudden, chaotic reorganization of your currency. If a country were to introduce a new currency overnight then if it could be backed by some gold right from the start that would give it some instant credibility in the markets. Repatriating gold only makes sense as a way of preparing for that to happen.”

In the case of China, it opens the door for its government to ultimately unpeg the yuan from the dollar.

Private investors should take a cue from the actions of these central banks. They are bringing their gold home. Obviously, they see the value in buying gold and holding within their own vaults as a safe-haven strategy.

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