Golden Retriever

Germany Brings Back the Bullion

It's heavier than I thought.
  • Why it matters

    Why it matters

    The decision by Germany and some other European countries to pull much of their gold out of the United States could be seen as a loss of faith in the Federal Reserve Bank.

  • Facts


    • Germany has the world’s second largest gold reserves, at 3,384 tons.
    • Two thirds of the reserves are held overseas, with almost half in New York.
    • The German Central Bank is currently repatriating much of its overseas reserves.
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Gold. It’s one thing Germany isn’t short of. But the country’s mammoth supplies of bullion, built up during years of post-war growth, have recently presented it with a problem: what to do with them.

Germany’s central bank, the Bundesbank, owns 3,384 tons of gold, the second largest reserves in the world behind the United States. The pile is currently worth about $130 billion.

Two-thirds of the bars have historically been held in foreign countries, mostly at the Federal Reserve Bank in New York, but also in London and Paris. The United States has traditionally offered a secure home for gold reserves, and splitting deposits up lowers the risk of theft.

But in the past couple of years, some critics have suggested that Germany’s gold may no longer be safe abroad. Their fears, which many dismiss as borderline conspiracy theories, were heightened after a court in 2012 ordered the Bundesbank to carry out regular inspections of its New York reserves to ensure it was the same gold that was originally deposited.

Since 2013, some 85 tons of gold were removed from New York in 2014 and 35 tons from Paris.

The Bundesbank denied that its gold was unsafe in U.S. hands, helping to avoid a diplomatic spat. But it nonetheless announced a repatriation program in January 2013. It vowed to increase the share of gold held at its Frankfurt headquarters from a third to a half within a decade. Having more gold at home gives added financial flexibility, the bank argued.

After a slow start in 2013, the Bundesbank has since stepped up the pace of its withdrawal. Some 85 tons were removed from New York in 2014 and 35 tons from Paris. This means that a total of 157 tons, or close to a quarter of the total earmarked for repatriation, is now back on home soil.

“We are well on schedule,” says Carl-Ludwig Thiele, a member of the Bundesbank executive board.

Yet it seems the bank could be dragging its feet. Its efforts were eclipsed when the Dutch announced in November that they had secretly transferred 122 tons of gold from New York to Amsterdam in less than 11 months. This meant that half of its gold is now back home. In contrast, the Bundesbank plans to take until 2020 to achieve the same feat.

Data from the Federal Reserve Bank shows that from January to November 2014 about 166 tons of gold were removed, including the 122 tons by the Dutch. This indicates that almost half of the 85 tons the Bundesbank removed were not transferred until December.

“There have never been diplomatic difficulties. The cooperation with the Fed in New York is open and based on trust.”

Bundesbank statement

The German bank cited “security reasons” for not providing information about how the transport was spread out over the year. It also said that “logistical challenges” were to blame for the paltry five tons of gold that was moved in 2013. According to the Fed’s data, the transfer occurred in June of that year.

But conspiracies are circulating on U.S. websites such as Zero Hedge that the Bundesbank was forced to temporarily halt its program in the summer of 2013 because of diplomatic pressure, with the U.S. apparently worried about the increasing loss of faith in its gold-keeping facilities.

Deutsche Bank analysts appeared to give this argument some credence when they wrote in November that it was diplomacy and not logistics that prevented the central bank from taking more gold out of New York in 2013.

Mr. Thiele has repeatedly stressed that the Bundesbank has a free hand in the movement of its foreign-held gold. But according to a report written in 2012, the German Court of Audit warned the central bank of “considerable political implications” if doubt is cast on the reliability of the U.S. depository.

The Bundesbank said: “There have never been diplomatic difficulties. The cooperation with the Fed in New York is open and based on trust.”


Norbert Häring is a Handelsblatt editor specializing in monetary policy nad exchange rates. To contact the author:

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