France Has Repatriated All Its Monetary Gold
The comments below are an edited and abridged synopsis of an article by Jan Nieuwenhuijs
Banque de France (BdF), France’s central bank, covertly repatriated 221 tonnes of gold between 2013 and 2016. Since then, all of its monetary gold is stored in La Souterraine in Paris. Repatriating all of its gold is related to France’s aim to revamp Paris as a gold trading centre.
Foreign central banks that store gold in Paris are offered services such as trading, lending and swapping gold. Insiders say that in recent years central banks have swapped US dollars for gold at BdF. Occasionally, the gold swap rate was higher than the US dollar interest rate. Holding gold—for as long as the swap is agreed—incurs no counterparty risk.
Some analysts surmise that turning Paris into a new gold trading center is primarily due to Brexit. The Brexit vote in June 2016 has strengthened BdF’s ambitions to develop a local gold market, but these ambitions were born long before the UK decided to leave the European Union.
Banque de France started upgrading its metal in 2009, and “in 2012, the Banque de France began to extend its range of gold services to reserve managers.” It’s possible, though, that BdF doubled down on its ambitions by repatriating its metal from London shortly after the Brexit vote.
In any case, BdF saw huge potential for gold right after 2008. The author’s assessment is that BdF expects gold’s role in the financial system will increase. Why else upgrade all the French gold, overhaul the vault, set up a new IT system, and develop a full set of trading services for foreign central banks in Paris?
Up for discussion: Introduction to the gold repatriation trend; when France repatriated its gold; and reviving Paris as a gold trading centre.