Germany Finishes Gold Repatriation Project Three Years Early
Germany has finished bringing home $31 billion of gold.
In early 2013, the Bundesbank announced a plan to repatriate massive amounts of its physical gold reserves back into Germany. The goal was to have half of its gold back within the country’s borders by 2020.
This week, the central bank announced it moved the final 100 tons from Paris earlier this year. It completed the move three years ahead of schedule.
At nearly 3,400 tons, Germany’s gold reserves currently rank as the second-largest in the world.
According to CNN, the Bundesbank said it used “verification measures” throughout the transfer process to ensure no gold was stolen or compromised.
“No irregularities came to light with regard to the authenticity, fineness or weight of the bars,” the central bank said in a written statement.
The Bundesbank said it made the decision to move the gold home “to build trust and confidence domestically.” Pundits say the end of the Cold War also spurred the move. With the fear of a Soviet invasion gone, government officials no longer felt the need to keep its gold dispersed around the world to keep it from falling into Russian hands.
But why now? Why bother with the hassle and expense of moving tons of gold when it is arguably safely stored in the US, and other European vaults?
According to Handelsblatt Global, a scare in 2012 led to the decision to bring the gold home. The sovereign debt crisis in the eurozone that year led many analysts to question the safety of the country’s reserves. In fact, financial controllers said they weren’t even sure all of Germany’s overseas gold holdings existed. The Federal Audit Office demanded the central bank make regular spot checks to ensure its gold reserves abroad were “physically counted and their authenticity and weight” confirmed.
Some have speculated Germany wants the gold close at hand should it be needed to back a new deutsche mark in the event of a breakup of the EU and the collapse of the euro. As Handelsblatt Global explains, gold serves as a shield against a currency crisis.
The Bundesbank states for the record that its storage plan is based 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 centers abroad within a short space of time.’ This means that in case of a severe currency crisis, it can sell or pawn the gold remaining abroad in the US and the United Kingdom for hard currency.”
Germany began aggressively ramping up its repatriation program in 2014. The German central bank brought home 120 tons of gold that year. In 2015, Germany’s Bundesbank transferred more than 210 tons of gold back into the country from vaults in Paris and New York. According to the Financial Times, with the 2015 transfers, Frankfurt became the largest storage location for the country’s reserves after New York. The repatriation continued in 2016, with more than 100 additional tons of gold coming back into the country.
Germany isn’t the only country repatriating its gold. In 2015, Australia announced a plan to bring half of its reserves home. The Netherlands and Belgium have also launched repatriation programs. Even the state of Texas has put a plan in place to bring its gold within state borders.
Gold repatriation underscores the importance of holding physical gold where you can easily access it. Gold-backed exchange-traded funds (ETFs) and “paper gold” have their place. But true security and stability comes from physical possession of precious metals. That’s exactly why Germany and other countries are bringing their gold home, safe within their own vaults.
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