Fact: Germany is not the first nation (or the last) to repatriate its gold from abroad. The list of countries to bring (some or all) of their gold holdings home includes (among others): Venezuela, Iran, and Libya. Those countries had ample reason to distrust the safety of their gold in offshore locations — given the “antics” that their leadership was (and is in some cases) up to. The fact that the Bundesbank is leaving 80 (EIGHTY) percent (!) of its U.S.-domiciled gold with the Fed, at the Fed, in New York, should suffice to forever silence those who claim this is a “gesture of distrust in the US” or the Fed by the German central bank. We are sure it won’t.
Fact: The German central bank had good reason to keep at least a portion of its vast bullion reserves (second-largest after the U.S.’) as “far away to the West as possible” during the tense Cold War era. For much of that turbulent period, the country stored 98% of its gold with other trusted custodians. Now, that era is long gone. Why shouldn’t some (or most) of the gold held by the German central bank rest within the borders of the fatherland?
Fact: The announced move of some 54,000 twelve-and-a-half kilo gold bars from the French and American vaults is a long-term (target: 2020) project, not some desperate flight away from potential disaster. In the Bundesbank’s own words: “a phased relocation” is what will take place here. Thus, by 2020, The German gold reserves should end up looking something like this, in terms of locations:
- Frankfurt (31%, currently) 50% by Dec. 31, 2020
- New York (45%, currently) 37% by Dec. 31, 2020
- London 13% no change
- Paris (11%, currently) 0% by Dec. 31, 2020 (Hmmm; maybe it’s the French they do not trust?)
Fact: Kitco News’ intrepid reporter Debbie Carlson quoted Commerzbank’s commodities analyst Carsten Fritsch (apparently a German as well) as saying that “Between the political pressure and that it’s been 20 years since the Cold War ended, the sentiment in Germany is that holding so much gold outside of German was no longer needed. He also said there would be no market impact since they’re not buying or selling. “I don’t think it’s that big a deal… it’s happening over seven years. There’s no rush.”
The political pressure that Carsten Fritsch was referring to, was in part the action by a German activist group called “Gold Action,” which lobbied hard (thank you, Ron Paul) for the audit and the repatriation of the country’s gold, and included at least one member of Germany’s parliament. Now, if there were no rush to…jump to certain (obviously erroneous) conclusions in the gold market space as well, every time a story about gold makes it to the headlines. Nah, that’s wishful thinking….roughly of the same kind that expects the Bundesbank gold relocation to make an iota of difference to bullion prices, anytime soon.
Next time you stumble upon the “game-changing story of the day/week/year/decade” bring your own shovel. Wait; we already know the next earth-shattering headline to be soon making the rounds: “US Mint runs out of 2013 silver coins.” Reminder: “There’s more where those came from.” Promise. You only have to wait ten more days. Meanwhile, and before you overpay for “unobtanium” you’d be wise to consider the fact that UBS views the coins’ sales level as more “a function of seasonality than anything else.”