Bringing Gold Back to Germany
The comments above & below is an edited and abridged synopsis of an article by Mona Fromm
In 2012 financial controllers were unsure whether the gold reserves of Germany’s Bundesbank actually existed. The Federal Audit Office demanded the central bank make regular checks so that gold reserves abroad could be counted, and their authenticity and weight confirmed. Germany has the world’s second-largest gold reserve.
The Bundesbank has transferred 300 tons of gold, previously stored at the US Federal Reserve, to Frankfurt over the last few years. It is removing its entire complement of gold from France by year end; altogether the Bundesbank will have nearly 680 tons from abroad back in German vaults.
That means 50% of Germany’s gold will still be stored abroad. It’s a deliberate decision. While the intention was once to safeguard the precious metal from Soviet access during the Cold War, today it serves as a national shield against possible currency crises.
The Bundesbank says that its storage plan is based on two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies within a short space of time. In the case of a severe currency crisis, it can sell the gold stored abroad for hard currency. Since France is part of the Eurozone, storage there has no strategic value.
Stored in the Bundesbank’s headquarters, and guarded by the German federal police, are close to 270,000 gold bars. In the past, the Bundesbank has sold around 0.1% of its reserves annually. According to the Bundesbank, other sales are out of the question.
“In a major crisis or a breakdown of the monetary system, the demand for gold, and therefore its price, would shoot up. The Bundesbank’s gold would then be worth so much that it could save the euro solely based upon the confidence the markets place in it,” says economist Jörg Guido Hülsmann from the University of Angers. The Bundesbank says gold is “worth the most when it doesn’t have to be turned into cash.”