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Dutch Gold Is Another Vote Against US Financial System

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This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist.

While financial commentators continue to bash gold as an asset that produces nothing and should be left to the pages of history, the real story of the gold market is found at the macro economic and fundamental level. Central banks the world over have been net buyers of physical gold since 2011. On top of this, many sovereign nations have been requesting and taking delivery of their gold holdings from the New York Federal Reserve and London, where a majority of central banks’ gold holdings are stored.

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Major news hit today on this front. The Netherlands has become the most recent Western European nation to take delivery of their physical holdings from the NY Fed. The Dutch central bank located in Amsterdam has increased its domestic holdings of physical bullion from 11% of total gold reserves to 31%. The official domestic Dutch gold horde has increased from about 67 tons to nearly 190. While this number is small in comparison to the reserves held by countries like China, Russia, and (allegedly) the US, the act of removing physical bullion from an international depository and returning it to the country of origin represents yet another vote of no confidence in the US financial system.

While financiers and those with a particular economic view point abhor gold, lay people the world over want their nations gold close. In fact, that’s precisely what the Dutch central bank said about its gold repatriation – it is supposed to have “a positive effect on public confidence.” That’s because trusting the Fed and the US financial system to safeguard a nation’s physical bullion holdings is like leaving the fox in charge of the hen house. Read the full story from the Wall Street Journal:

The Dutch central bank said Friday it is repatriating some of its gold reserves from the U.S., making it the latest central bank in Europe to address public concerns about the safety of its gold.

De Nederlandsche Bank, or DNB, said it is moving some of its reserves of 612 metric tons back to the Netherlands in an effort to spread its gold stock in ‘a more balanced way.’ The measure could have ‘a positive effect on public confidence,’ it said.

The goal is to keep 31% of its reserves at the central bank’s vaults in Amsterdam, compared with 11% previously. As a result, the central bank’s gold reserves held at the New York Federal Reserve will fall to 31% from 51%. Dutch gold held at central banks in Canada and the U.K. will remain unchanged at 20% and 18%, respectively.”

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