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5 things repatriating gold bullion says about the country

Despite the fall in the gold price this week, those thinking to buy gold bullion have been buoyed by talk of Germany auditing and repatriating their gold reserves held abroad. Below, Jan Skoyles looks at what this mean and says about the country.

This week few will have missed reports that Germany is getting closer to bringing its gold bullion reserves home. Following questions asked in Parliament earlier this year regarding the 3,396 tonnes of gold bullion, federal auditors have now instructed the Bundesbank to regularly inspect the gold bullion reserves held in the US Federal Reserve, Bank of England and Banque de France.

Der Speigel also report that the Bundesbank is planning to ship 150 tonnes of the gold reserves from the New York Federal Reserve back onto home soil, over the next three years. It is also only now becoming clear that the Bundesbank reduced 1,100 tonnes of gold holdings with the Bank of England to 500 tonnes between 2000 and 2001.

The mainstream media coverage of Germany’s actions regarding their gold reserves seems to have an underlying accusatory tone to it. It’s almost as if by the Bundesbank openly admitting it is looking out for its own finances, for its own country and its citizens, it is being unpatriotic to the global cause of pretending that a highly leveraged, fiat money, banker-centric, government-spending driven economy is exactly how things work best.

Germany isn’t the first country to ask questions about its gold, let alone repatriate it. Switzerland is also raising plenty of questions and Venezuela finished repatriating their gold earlier this year. So what does repatriating the country’s gold say about the sovereignty?

1.       Changing geo-political landscape

There are two geopolitical reasons for a country taking custody of another’s gold; the first is for ease of transport for payment purposes, the second is to protect the gold from geopolitical risk.

The ease of transport for payment purposes can be argued to still be a relevant reason, particularly given moves by China, India, Russia and Iran to make gold payments for oil and wheat. However, the chances of the US, UK and France demanding payments in gold in the near future as they desperately try to prop up their own currencies is unlikely, particularly as Germany is a successful export nation to these countries. This was one of the reasons for Venezuela’s movement of gold into Brazilian and Chinese custody – they’re trading partners with useful exports and are more likely to accept gold.

Germany’s gold was primarily kept in the US on account of the physical threat from Russia. This seemed reasonable at the time; the US was the bigger and lesser of two evils. The big guy in the playground can be an ally, for a time.

Much of Germany’s gold held in the US has never made it to Germany; it started life as German gold reserves in a US vault somewhere. This was on account of the European country running trade surpluses between the 1950s and the end of the Bretton Woods. German gold reserves between 1950 and 1971 went from zero to 3,600 metric tonnes, in the same period US reserves fell by 11,000 tonnes.

But the threat no longer remains, so why hasn’t the gold been moved back to Germany?

2.       Do not trust the custodian country to keep track of it when lending it out

Back in the mid-1920s, the head of the German Central Bank, Herr Hjalmar Schacht, went to New York to see Germany’s gold. However the NY Fed officials were unable to find the palette of Germany’s gold bullion. The Chairman of the Federal Reserve, Benjamin Strong was mortified, but to put him at ease Herr Schacht turned to him and said ‘Never mind, I believe you when you when you say the gold is there. Even if it weren’t you are good for its replacement.’

Both GATA and Bring Back Our Gold argue that central banks have either loaned or “sold short” the majority of the country’s gold. As GATA found out between 2008 and 2009 the Fed has gold-swap arrangements with foreign banks but keeps them secret.  This practice of loaning out gold is not uncommon; it’s the worst kept secret ever. However as Zerohedge point out this can lead to the eventual problem that no-one’s sure whose gold is whose anymore having been a sort of pass-the-parcel for many years. There is now a debate as to whether Germany, or anyone else storing gold in a central bank abroad, owns allocated gold or is merely a ‘creditor’ on a metal statement.

The fact that there has not been an audit of Germany’s gold for some time, not since 1979 in the New York Fed, gives some validity to GATA and others’ concerns. Added to this the refusal by the Federal Reserve to conduct an independent audit of the gold reserves in Fort Knox, as campaigned for by Dr Ron Paul, and worries build as to whether the custodian is ‘good for’ the gold.

3.       Do not trust the custodian country to protect the value of their own currency

As we said in the first point, much of the gold was originally stored abroad for safe keeping, particularly in regard to storing with the US Federal Reserve. However as two round of QE have shown and the third just beginning, the US aren’t even willing to protect their own assets in the long-term, so are they likely to look after those of another country’s when they realise the rest of the world doesn’t want to use their currency anymore.

Every few months there is a discussion regarding what China are planning on doing with the gold they both mine and import every year, with many believing they are hoarding the metal as an insurance against the billions of US Treasury bonds, notes and bills they hold. Many believe they will issue some kind of gold-backed currency in the short-term and dump its one trillion dollars’ worth of US Treasury securities. Whilst, at the moment the US seem to take their monopoly currency for granted, should the Chinese or anyone else behave in such a manner, the US will need to respond – most likely with gold, which on its own it does not have enough of.

The continual devaluation of the US Dollar is, of course, a good thing for the gold price and therefore, even more reason for countries to get it back onto home soil.

4.       Foresee the need to protect the future of your own monetary system

Germany is the one country in the Eurozone which appears to be reminding everyone of how important it is to return to some resemblance of sound money. In the last few months we have listened to Jens Weidmann, President of the Bundesbank, compare the ECB’s plans to the ‘Faustian Pact’. However, thanks to the undemocratic nature of the Eurozone, few seem to be listening. Like many of the disagreements in the past, the ECB finds a way to work around them or gently persuade member countries to support new measures – such as Draghi’s OMT plans.

Germany, like other countries in the EU, has a responsibility to protect its citizens’ wealth and standard of living. At the moment this is being threatened as the successful export country props up other fiscally different countries to its own. Gold, as we have long said, is a protector of wealth. The euro, many have said was designed to act ‘like a gold-standard’ unfortunately you can’t dress up a fiat currency to glister, as it seems the Germans have realised.

5.       It’s yours, you want it where you can see it

As we work hard to show here at The Real Asset Company, when you buy allocated gold bullion, you own gold, only you can instruct what should happen to it. The Bundesbank, and Venezuela before it, has done nothing wrong. This is despite mainstream coverage which wants to imply that the Bundesbank’s decision to move 600 tonnes of gold from the Bank of England between 2000 and 2001 was a ‘shock’ and ‘mystery’.


As we have outlined above, no one really knows how this financial crisis will unfold. Whilst financial crises have, unfortunately, become too frequent, in the last forty years, never has one been this contagious, far-reaching or beyond the understanding of the policy-makers. Why shouldn’t the Germans get their gold back under control? They own it and most likely, they’ll need it.

Do you think Germany should take her gold home? Tell us what you think in the comments column below.

Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.

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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

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  • goldman

    yes, Germany should have it’s gold in its possession…. Never trust a third party.

  • fazsha

    I don’t think Germany will bring its gold home any more than it stood up to the EU; when push came to shove, the plutocrats decide to do what the other plutocrats want. In this case, if there were a problem with Germany’s gold, the political pressure put on Germany behind the scenes would be so enormous that it would take not just a single politician of steel will, but an entire battalion, to overcome it. I don’t see that kind of conviction in the German political ranks. Even Axel Weber bowed to political pressure and resigned, even though he was next in line to be ECB President. No, Germany will fold like an accordion.

  • Rackley

    I believe German gold as well as most US gold is gone, leased (stolen) by the Central banks primarily the US Federal Reserve. Why else would Bernanke clearly state before Congress that an audit “would not be in the interest of the American public”. Their repeated refusal of inspection tells us what we should already know.

    • Bob

      i suggest that we all do actually already know

  • Walter

    Why not?

  • IwanovKapotjeplov

    Yes, Germany should bring back its gold. And so should the Netherlands. Like Germany, they also have a lot of gold that is located in the US.

  • RG

    Interesting correlation: Did the return of 400 tons of Germany’s gold from England have anything to do with then Prime Minister Gordon Brown’s sale of 395 tons of gold during the same period? Perhaps there was no gold available to send to Germany without disrupting the gold “market”? Interesting correlation in the time and amount of gold transferred to Germany and the time and amount England sold into the market.

    • Ben Kraijnbrink

      Gold is money! Fiat money is becoming obsolete and gold in Europe will eventually enable its countries to create gold backed money.

      • therooster

        Good idea, but don’t expect it to happen from a top-down point of view. It should be monetized by the market, bottom-up.

  • Chris

    Just as with personally-owned precious metals, the ONLY way a nation can know they have the gold…is if they HAVE the GOLD: in their personal custody. For a country to trust another country with significant wealth is equivalent to trusting someone else to handle your finances.

  • Dave

    50 tons of gold a year is a joke. It is a ruse meant to mollify or fool the people clamoring for the return of Germany’s gold. “You want your gold back home? OK, we hear you. How about 1/80th per year for three years. Now go away and be quiet.” It just give them time to buy 50 tons a year to store in Germany.

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  • turtle

    Yes… but good luck!

  • dave

    If you don’t hold it, you don’t own it………

  • Zeroexperience

    I wish Germany good luck with getting it back! 50 tons a year sounds small but it’s physical, every ton out of the Fed counts.
    What I dont understand: why don’t they lease/sell out the gold in NY, and with the money buy physical gold in Zurich and get it delivered?

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  • Graham

    The Gold-window closed nearly 40 years ago. I wonder how much “balance” of trade has been using gold since then. If any was it most certainly was only paper gold transfers after 1971. Why would the countries wait 40 years to decide that the game has changed. Just maybe the “tungsten gold” has replaced the real stuff in vaults. They dare not allow it to be visually audited or the scam will be exposed.

  • Ragnar

    Whoever gets their gold out first wins.

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  • Patrick Barron

    Germany is correct in taking possession of its gold. This is nothing more than rational self-interest. Germany should scrap the euro, reinstate the DM, and back the new DM with its gold. This will start a cascade of like actions all over the world, ending the tyranny of fiat money and putting the world back on a sound monetary system. This is the first step to dismantling the unsustainable social welfare state and would be a giant step to restoring liberty everywhere.

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  • Ian4c

    To protect their wealth Germany must get back all their gold……. But it may not be there!

  • therooster

    Gold is money, debt free money ! Now that it trades in real-time (floats) ,
    the rising value gives incentive to “de-hoard” it. Gresham’s Law is
    less applicable with each passing month. Add this reality to the new
    found ability to digitize the gold weight and use fully backed digital
    currency ( again, by weight) and you have the perfect combination of
    debt-free store of value married to instant global liquidity. Gold
    currency’s past liquidity challenges were not about bullion. They were
    about the FIXED peg placed on the trade value. The FIXED peg had to be
    abolished to set gold free as a user friendly, highly liquid and honest
    form of money.

    In the final analysis, when you reverse engineer real-time
    gold-as-money, it’s easy to see the FED’s footprints all over it,
    especially Bretton Woods. The USD’s ultimate role is NOT that of a
    currency, ironically. It’s a currency within the debt-currency paradigm,
    yes … but within the new real-time gold-as-money paradigm , it has a
    very useful role as a real-time measure. The big picture is larger than
    going from debt based currency to asset based currency, as many think.
    It’s actually a process that goes from FIXED gold-as-money to real-time
    gold-as-money with the pure fiat paradigm stuck in-between as part of
    the transition and “necessary evil” on our road back to providence.

  • beezers

    Yes, I think every country should repatriate their own gold. The costs of that kind of venture would definitely stimulate the global economy. Hmmm… I wonder if I should be investing in stocks of companies that deal with insuring and transporting gold overseas.

  • chilller

    The weasels in the US will no doubt try to give Germany dollars once it’s discovered there is no gold to be had. Like the neighbor who borrows your lawn mower, the US will be highly insulted when asked to return YOUR mower. And Germany will be highly insulted when offered a pair of scissors in lue of the mower. If the second largest holder of gold reserves wants their gold back, so will many other countries following Germany’s lead. The jig is up and my hat is off to the German government who will hopefully not give in to the lip service the US guberment is about to spew. Using the US guberments 3 tools of manipulation, intimidation and provocation, the US will pretend to be the nice guy and when this fails, the bully will take over. Stand fast Germany! The world is watching and hoping you get your mower back…don’t settle for less!

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