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Why is the Bundesbank
Repatriating their Gold?




Germany plans to keep 50 % of their gold at home, secure inside a Frankfurt vault.

They are withdrawing all of their gold held in Paris, 300 tonnes of the 1,200 tonnes held in New York, but will leave the 445 tonnes of gold held in London untouched.

Why is this happening? Why are they withdrawing at all and why aren't they withdrawing all of it?

Let's see the reasons for repatriation...



The Official Plan and Admitted Reasons


According to this press notice by the Bundesbank, Germany wants to store half of its gold reserves in its own vaults in Germany - more exactly in Frankfurt.

The press notice is telling us that with the new storage plan, the Bundesbank is focusing on building trust and confidence domestically and the improving the ability to exchange gold for foreign currencies at gold trading centers within a short period of time.

On December 31st, 2012, Germany had 31 % of their gold held in Frankfurt, 45 % in New York, 13 % in London, 11 % in Paris.

By December 31st, 2020, the situation will look like this: 50 % in Frankfurt, 37 % in New York, 13 % in London, 0 % in Paris.

Further you can read about additional reasons, motives for the move...



The Cold War is Over


London, Paris and New York have been the places where Germany built up their gold reserves post World War II. For fear of a Soviet invasion, the Bundesbank was keeping their bars abroad.

The cold war is over and the "fear of invasion" is not longer a factor.



Gold as a Hedge Against Imminent Currency Crisis


The euro crisis is intensifying and some are speculating that "something may happen to the euro" after the German elections - which will be held in autumn, 2013.

It's interesting to notice the timing of the events: amidst the euro crisis and prior to the German elections, the Bundesbank decides to withdraw a large part of their gold held abroad.



Concerns Regarding the Status of the Gold Bars


Some started questioning the existence of Germany's foreign gold bars and the Bundesbank following several outrageous international cases of overstated and inexistent gold reserves.

This gave reason to Germany to start auditing their gold held abroad and repatriate a significant amount of it.



Why Not Repatriate All the Gold?


Even though they will repatriate all of their Paris-held 374 tonnes and 300 tonnes from New York, they will still have 445 tonnes remaining in London and 1,200 tonnes in New York.

50 % of the gold will be held in Germany, the rest in London and New York.

One explanation would be this...

Gold held at vaults like the Federal Reserve's simplify gold trading. If a country sells gold to another country, then the gold doesn't have to be moved physically - the bars will simply swap owners. Each bar has codes engraved on it and changing the ownership is a rather simple process.

Germany's response for why they're repatriating all of their gold from the Banque de France vault was that because Germany and France have both adopted the same currency (the euro), it makes no more sense to hold their gold at the Paris vault.

But why do they withdraw all of their gold from Paris and hold significantly more in London?

Perhaps because London is a larger financial center and trading the gold in future might be easier from there.



It's Not the Costs of Storage


Previously in 2000-2001, when Germany returned gold in excess of 900 tonnes from the Bank of England, the German side said it was due to high costs of storage.

But the Banque de France and the Federal Reserve don't ask any sort of payment for storing it.

Obviously in 2012, the German decision to withdraw wasn't because of the storage costs.





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