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Germany Seeks Return of Gold Held in U.S. and France

Release Date: 
Thursday, January 17, 2013

Gold prices rose after Germany announced that it planned to bring gold held in France and the U.S. returned to the German central bank.  Gold was $8.10 higher at 7:31 a.m. Pacific Time on the New York Spot Market, trading at $1,689.10 per ounce.  Spot silver was $0.20 higher at $31.79 per ounce.  (Click here for the most current spot prices.)

Germany’s Bundesbank, the world’s second largest holder of gold reserves, will repatriate 674 tons of gold from vaults in France and the U.S. by 2020 to restore public confidence in the safety of Germany’s reserves.  The German central bank currently holds approximately 300 tons of gold in at the Federal Reserve vaults in New York and 374 million tons in Paris’s Banque de France.

"To hold gold as a central bank creates confidence," said Bundesbank board member Carl-Ludwig Thiele.  “With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time,” the bank said.

“The move to reconsider gold storage and repatriate their gold is a clear indicator that the Bundesbank [is] thinking about Germany’s economic future, away from the euro, and how gold may play a role in it,” said Jan Skoyles, head of research for The Real Asset Company.  “The fact that they are planning to gradually repatriate their gold from the New York Federal Reserve not only raises questions about their trust in the Fed to manage their gold holdings but, importantly, their faith in the U.S.’s management of the U.S. dollar and its future as a reserve currency,” she said.

“The general inference is that if there was a real debt crisis in the U.S., then they (German authorities) would feel a little more confident about having their assets at home," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"The reason the Bundesbank is doing this, repatriating the gold back home, is to instill confidence in the German consumer as to the solidity of the Bundesbank," said Societe Generale senior currency strategist Sebastien Galy.  "Right now it is just a sign that the system is breaking down, that confidence is lower across the board and the entire financial system has basically become a domestic financial system, where you have the euro zone, a dollar zone and the yen zone," he added.

The phased relocation of the gold, currently worth about $36 billion, will begin this year.  Under the plan, half of Germany’s total reserves will be located in Frankfurt by the end of the decade, the Bundesbank said.

(Sources:  “PRECIOUS-Platinum, palladium prices hit multi-month highs,” Reuters, January 17, 2013; “Bundesbank to Repatriate 674 Tons of Gold to Germany by 2020,” Bloomberg, January 16, 2013; “Germany's Bundesbank brings gold reserves home,” Reuters, January 16, 2013; “Germany Wants Its Gold Back—Should You Worry?,” CNBC, January 15, 2013; “Platinum tops gold; Germany wants its gold back ,” Marketwatch, January 15, 2013)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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