Germany is set to retrieve its gold reserves held abroad, in a move critics fear could trigger a contagion of mistrust among the world’s central banks.
The country’s Bundesbank is set to repatriate a large hoard from its holding in New York and all of its bullion from Paris, the German newspaper Handelsblatt has reported.
Germany’s Bundesbank owns nearly 3,400 tonnes of gold – only the US has a bigger reserve.
Safe keeping: Germany is reportedly set to repatriate tonnes of gold
Until now Germany has been happy to store part of its reserves in vaults at foreign central banks – an estimated 45 per cent at the Federal Reserve Bank of New York, 11 per cent the Banque de France and 13 per cent at the Bank of England. Just 31 per cent is held at its headquarters in Frankfurt.
Much of the gold stashed abroad as been there since the Cold War, when it was moved for safety amid fears of a Soviet invasion.
But now the bank is reportedly planning to overhaul this distribution, leaving just small amounts in the US and UK for trading and liquidity in dollars and sterling and bringing the rest back to Germany, worth an estimated $200 billion.
Bundesbank board member Carl-Ludwig Thiele claimed last year that there is no longer a need to hold gold abroad, now Germany is at peace.
However critics fear Germany’s move could prompt other central banks to repatriate their gold, undermining the role of the US and UK as key custodians of the commodity.
Walls of wealth: Gold reserves at the Federal Reserve building in New York
The timing of the decision – amid continued uncertainty in global markets and ongoing turbulence in the eurozone – is also likely to prompt accusations that Germany is preparing for the eventuality of an escalation of the global financial crisis.
The move comes just months after the German Federal Court of Auditors called on the Bundesbank to carry out a physical inspection of the gold reserves it stores at foreign banks.
At the time it was thought the precious metal holdings had never been fully checked.
The central bank was taken aback and maintained it did not see the need for more scrutiny in overseeing the reserves, saying ‘there is no doubt about the integrity of the foreign storage sites’.
However, the debate on the gold reserves continued to simmer, with some conspiracy theorists questioning their existence and a few politicians calling for some of the reserves to be retrieved.
Germany has around eight times more gold than the UK, after Gordon Brown sold more than half of the UK’s reserves between 1999 and 2002 when prices were at a 20-year low.
Analysts say gold could still hit $2000/oz this year, meaning the UK could have sold its gold for £16billion, as opposed to £2billion.
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