There have been several reports that the central bank of the Netherlands, the DNB, is now exploring options for moving its gold out of the country. Interestingly enough, this not only stands in contrast to the country’s repatriation of much of its gold back from New York last year, but presents a great deal of problems on top of that.
The trend of “gold repatriation” was a big theme during 2015, especially as central banks have become net purchasers of bullion. (During the 1990s and early 2000s, they were mainly selling gold. The Bank of England infamously dumped a sizable portion of its gold holdings back when the metal was trading around $400 per ounce!)
In addition to the Netherlands, gold repatriation was pursued by Germany, France, and several other smaller nations. Most of the European powers have a great deal of gold reserves, so they split much of the storage between vaults in the United States and the United Kingdom. This is why so much foreign-owned gold is held by the Federal Reserve Bank of New York, and why London is essentially the gold vault capital of the world.
Germany has begun receiving back its gold held abroad, and will repatriate more of the yellow metal from overseas over the next 7 years. Similarly, the Swiss (who are small enough in population to operate a truly direct democracy) have considered repatriating all of the Swiss National Bank’s gold reserves.
Considering a Move
The decision about whether or not to move gold out of the Netherlands has arisen because of renovations taking place at the central bank’s headquarters in Frederiksplein. This poses a security risk for keeping the precious metal stored there. However, sending the gold back out of the country seems to reverse the decision the DNB made last year to gain greater control over its gold!
Only 31% of the gold reserves of the Netherlands (roughly 189 tonnes) are held in the country’s capital, Amsterdam. (Another city known as The Hague is the seat of the Dutch government, however.) The rest of the Dutch gold is held in New York (31%); Ottawa, Canada (20%); and London (18%).
In total, The Netherlands’ gold reserves amount to 612.5 tonnes of gold, worth approximately $7.7 billion. It represents 54.6% of the central bank’s total foreign reserves.
The DNB may be taking extra precautions after a mishap at the IMF last year led the international body to overstate the Dutch gold reserves. The Netherlands altruistically corrected the IMF’s error. It just goes to show that a great deal of misdirection and confusion goes on when it comes to national gold reserves.
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