Deutsche Bundesbank disclosed its plan to retrieve almost one fifth of its gold reserves deposited at the New York Federal Bank and the Banque de France in Paris, and to return them back to Germany amid debates over the transparency of its global gold holdings.
A report from the Wall Street Journal cited that the German Central Bank’s move was part of its new reserve-management strategy to increase the amount of its gold deposited in Frankfurt by 50 percent of its total reserve by 2012, higher than the 31 percent by the end of 2012.
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According to Deutsche Bundesbank, it will remove 300 metric tons of gold from the New York Federal Reserve Bank beginning this year. The figure represents 8 percent of its total gold reserves deposited in the United States. Deutsche Bundesbank will send home all of its 374 tons of gold deposited at the Banque de France in Paris. According to the German central bank, the gold that would be repatriated has a current market value of €27 billion or $36.05 billion.
Carl-Ludwig Thiele, board member of Deutsche Bundesbank, emphasized on Wednesday that the transfer of its gold reserves does not mean the central bank of Germany is anticipating another financial crisis. He also said that Bundesbank primary intention is to build trust in Germany and to keep the euro stable. It does not aim to become an active player in the gold market.
Thiel said, “We don’t see the risk [of a crisis], but we see the gold. The gold serves the purpose of being flexible in case of a crisis.”
Last October, the Federal Court of Auditors in Germany instructed Bundesbank to tighten its auditing procedures for its gold reserves. The court reported to legislators in the country that Bundesbank’s gold reserved were “never been verified physically.” The court ordered the central bank to secure access to the deposit sites and ordered the repatriation of 150 tons over the next three years, to assess the weight and quality of the gold bars. Deutsche Bank said its decision to repatriate its gold reserves was autonomous despite the directive of the court. The total gold
Some politician in Germany also called for the repatriation of the country gold reserves and initiated a campaign known as the “Gold Action.” The politician expressed concerns that Germany’s control over its foreign reserves is threatened by the euro debt crisis, and there is a possibility that Germany would be forced to sell its gold to cover the cost of the crisis.
Germany’s total gold deposits were never been fully audited. Bundesbank’s total gold reserves are almost 3,400 tons. The book value is approximately €137 billion by the end of 2012, which represents 14 percent of Germany’s total foreign reserves.
Michael Lewis, an analyst at Deutsche Bank, notes that official gold repatriation is not new, of course; in 2011, Hugo Chavez surprised observers with his intention to bring home 90 percent of Venezuela’s foreign-housed reserves. At that time, the market discussion centred on whether the bullion was genuinely where it was supposed to be. After a shipment took place, such fears died down.