Germans Admit to Gold Repatriation Plan

January 16th, 2013 by

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Bundesbank today confirmed rumors that it would seek to repatriate 674 metric tons of German gold from Paris and New York over an eight year period, in order to hold 50% of national gold reserves at home.

Citizens groups and politicians in Berlin have agitated for repatriation of German gold, which was stored overseas during the Cold War to protect it in case of Soviet invasion. The Federal Audit Court last year took Bundesbank to task because German foreign gold reserves have never been physically verified, and recommended repatriation. When the Germans asked the U.S. Federal Reserve for access to their stored gold, they were denied due to “security reasons.”

This set off a firestorm of speculation that the U.S. had sold or leased out the gold.  (The Bundesbank eventually negotiated a return of 5 tons a year to be inspected and resmelted in Frankfurt.) The current news of taking eight years to bring home a mere 300 tons of the 1,500 tons of German gold stored in the Federal Reserve Bank of New York is doing nothing to stamp out the rumors.

Today’s announcement is that 13% of German gold will remain in London, and the gold in the US will drop 300 tons from 45% of total gold holdings today to 37% by 2020.  The policy of keeping gold overseas is that London and New York are major currency centers, and should the Bundesbank need to buy sterling or dollars, it is easier to have the gold on-site as collateral. Since France and Germany are now both on the Euro, there is no need to keep German gold in Paris, so all 374 tons will be brought home to Frankfort.