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The full guide to Nazi gold and currency war

This morning’s papers and news-shows are full of the story that in 1939 the Bank of England facilitated the sale of Nazi looted gold, not just once but at least twice during that year. Both times without approval of the British government, despite an attempt to freeze Czech assets.

The story of Nazi gold is both fascinating and tragic. We take a look at ‘the greatest robbery of all time’ and draw parallels with the modern day gold migration.

What is Nazi gold?

Nazi gold is a phrase that refers to the bullion looted by the Nazis in the run up to and during the Second World War.

Gold clearly plays a strong role in history and features as both a political and economic weapon during the Wars of the 20th Century.

Thanks to the Treaty of Versailles and the hyperinflation in the interwar period, Germany had learnt the hard way that a stable monetary system, backed by gold was crucial if a country were to return to former economic glory. But this also meant that the Nazis were well aware of the devastation caused by a lack of sound money.

As is well documented, upon invasion Nazis would loot a country’s gold reserves, along with other valuable assets, and promptly work to devalue the sovereign currency. This pillage of the financial system is not well known but it served effectively as a weapon in their campaign to take-down whole nations. The Nazis consolidated their power by holding gold whilst their victims were consigned to weak paper currencies.

How much gold bullion did they steal?

In the aftermath of the war huge hoards of gold were found within Germany, the largest of which was 8,000 tons.

However it has been near impossible to estimate how much was stolen given the nature of the thefts. 50% of looted gold is estimated to have been sold on the international market.

The Holocaust Educational Charity reports that ‘post-war approximately $260 million of looted monetary and non-monetary gold was discovered in Germany. Much had already left the country.’

Who did they steal gold from?

Very often someone talking about Nazi gold will refer to the gold stolen from central banks across Europe. Estimates of how much gold was taken range from upwards of $400 million.

This wasn’t just a bank-job however, the regime lifted the gold out of the pockets and mouths of citizens in their quest to get every coin, jewellery piece and filling that they could get their hands on. Over $140million worth of gold is estimated to have been melted down from such violations.

Where did they steal it from?

Name a country invaded by Hitler’s army and you have a country who lost its gold.

In the run up to the war, between 1937 and 1939, the Nazis stole the gold reserves of Austria, Czechoslovakia and Danzig. During the war the Nazis took financial control of several countries some of whom saw their gold reserves depleted and swiftly hoiked back to the Reichsbank’s bullion vaults.

How did they get away with it?

Brute force was the general tactic, but when it came to managing and selling their gold loot the Nazis needed the ‘cooperation’ of other institutions.

Those implicated in the latest headline story are of course the Bank of International Settlements and the Bank of England.

The Bank of England’s documents, and diary of Norman Montagu (Governor at the time), imply that the central bank was carrying out instructions from its customer, the BIS.

Still to this day the British central bank and the BIS have roles in the gold market that are shrouded in secrecy and are often called into question.

Switzerland, a neutral force in during the Second World War, is also implicated in this tale. Wikipedia estimates that 100 tons of Nazi gold were laundered through Switzerland, with just 4 tons ever being recovered post-war.

Prior to the war the Swiss National Bank had been the largest gold distribution centre in Europe. The neutral Swiss accepted gold from the Nazis (as they had from all other nations), who were in need of somewhere to place their stash of gold and other assets so as to sell on the international market, but the issue of taking payment in gold stolen from the victims of such a brutal regime continues to haunt the country.

As historians have explained in the past, given Switzerland’s political and geographic position, the small country had little choice but to communicate and trade with the Germans. Winston Churchill wrote, ‘What does it matter whether she has been able to give us the commercial advantages we desire or has given too many to the Germans to keep herself alive? She has been a democratic state, standing for freedom in self-defence among her mountains, and in thought, in spite of race, largely on our side.’

Portugal, also politically neutral during this time, was the second largest trader of gold with the Nazis in exchange for armament supplies. This was as a result of a discovery that Nazi payments in hard currency were in fact counterfeit. Following this discovery the Portuguese leader insisted on all payments in pure gold.

Who still wants their gold back?

In 1946 the Tripartite Gold Commission was established to recover the gold stolen by Nazis from claimant countries. They were as follows: Albania, Austria, Belgium, Czechoslovakia, Greece, Italy, Luxembourg, Netherlands, Poland and Yugoslavia.

Wikipedia states that despite recovering lots of gold and ‘receiving claims for it’ there was not enough to fully compensate all victims. Only 65% of claims were estimated to have been settled. Gold bars were not assayed to establish provenance and therefore were not returned to the original owners.

In the final report of the TGC, a note reads:

In a remarkably short period of time, a considerable quantity of looted gold was taken into custody by the Allied authorities or identified as having been deposited in third countries. By July 1948, a total of 9,849,169 ounces of gold in bars, coins or pieces had been deposited with the Federal Reserve Bank of New York or the Bank of England or was still held at the Foreign Exchange Depository in Frankfurt by the U.S. military authorities. The grand total in the gold rose further, to 10,816,223.863 ounces by December 1974, and in 1996 another two bars of gold, weighing net 797.539 ounces of fine gold were added…making the total for the gold pool of 10,817,021.402 ounces. However, the share of gold coins received by Albania on 29 October 1996 proved to contain a minute quantity of counterfeit, albeit gold, coins. The final total for the gold pool had therefore to be adjusted to 10,817,021.139 ounces, equivalent to 336,446.0667 kilograms (32.1507465 ounces = 1 kilogram). The gold pool was declared closed by the three Governments on 13 July 1998.

Understandably grievances still remain to this day as countries fight to get their gold back and victims fight for compensation.

In 1997 Deutsche Bank donated over $3 million to Holocaust victim support after admitting that gold reserves sold in 1995 may have been Nazi looted gold.

The current economic crisis has also raised many questions about what happened to the Nazi Gold.

In 2010 Greece’s deputy Prime Minister, Theodoros Pangalos, said in a BBC interview that the Germans still owed his country for the gold stolen during the war. This continues to be a bitter dispute given the bailouts received by the country, indirectly from Germany which will have to be repaid.

In the 1946 Bigelow Report the Vatican are acknowledged to have received around CHF 350 million worth of Nazi gold. A lawsuit was brought against the Vatican by Holocaust survivors who said that the Vatican had offered shelter to the Ustaše during the Second World War who had looted gold from Serbian and Jewish homes. The case was dismissed in 1997.

In early 1997, the Swiss banking system (Swiss banks, SNB etc.) was forced to pay CHF 270 million to the Holocaust Fund. The country had been forced to acknowledge that they had been wrong in their role as the only link between warring countries during the war.

Could the Bank of England do this again?

The Bank of England have launched a series of initiatives in the last week so as to make themselves appear more transparent. These efforts follow several questions over how honest the central bank is when it comes to gold reserves held for other countries. Given its proximity to the London Market it is not surprising that the tales of rehypothecated gold continue to circle the central bank.

Germany, who announced its gold repatriation plans early this year decided not to bring back any gold from London. Is this a sign of trust in the integrity of the Bank of England and London Gold Market or something which has its roots buried about sixty years deep?

Adding to our beliefs that the central bank is a power unto itself when it comes to gold sales activities, 1939 Governor Norman Montagu appears to be as vague over involvement in the gold market, as our own bank and Governors seem to be today.

Take the example of Sir John Simon, the British Government’s Chancellor in 1939, who asked Montagu about the presence of Czech gold. Montagu was deliberately vague in his reply, ‘but pointed out that the Bank held gold from time to time for the BIS and had no knowledge whether it was their own property or that of their customers. Hence, they could not say whether the gold was held for the National Bank of Czechoslovakia.’

Today there have been many questions asked of the Bank of England as to the amount of gold stored in the vaults. Just this week @KoosJansen, amongst others, has asked the Bank for further clarity on the ‘over 400,000 gold bars’ held in the vaults. But they are unable to help. One reader received a response from the Bank that said that the ‘the figure is deliberately non-specific’.

 Gold as an economic power-tool

As we alluded to at the beginning, the Nazis were wide awake to the damage that could be inflicted on a nation when the supply of money was both un-backed and increased at will. Stealing the country’s gold just made it even quicker to destroy confidence in the domestic currency.

The suffering caused by blitzkrieg and new forms of combat in the Second World War are well documented. However, few focus enough on the destabilizing of a currency as a crucial weapon of war. That same weapon is being used today.

We frequently use the term ‘currency wars,’ a phrase originally coined by Brazilian Finance Minister Guido Mantega, to describe the on-going manoeuvring and printing by central bankers today. Within today’s currency wars the usual trump card is there to be played – gold bullion.

In today’s post-crisis financial system we see the Chinese, along with the other BRICS nations, accumulating gold as fast as they reasonably can. This is not only happening at central bank level, but right down to citizens. The great gold grab is on as the growing economies seek to escape the trap of the inflationary dollar based system.

Nazi gold stories such as that which broke today garner so much attention because we all know that gold is the most precious of assets. The Nazis stole gold as a means to consolidate power and wealth, as countless nations, armies and civilisations had done so before.

The movement of gold from West to East today is part of a similar power struggle. Whilst we draw no comparisons with Nazi Germany, China is making the same strategic moves within the currency wars of today. Smart move.

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About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles