Germany's Bundesbank plans to bring home some of its gold reserves stored in the United States' and French central banks, bowing to government pressure to unwind a Cold War-era ploy that secured the national treasure.
Germany amassed gold reserves in the post-war era thanks to rapid economic expansion that saw growing exports to the United States, where its dollar claims were turned into gold under the Bretton Woods agreement that Germany joined in 1952.
As the Cold War set in, Germany kept its gold reserves put, keeping them out of reach of the Soviet empire.
But government officials have grown uneasy about the storage set-up and have called for the Bundesbank to inspect the bars.
The Bundesbank now wants to change the arrangement too, even though it has said it does not see a need to count the bars or check their gold content itself and considers written assurances from the other central banks as sufficient.
With the end of the Cold War it was no longer necessary to keep Germany's gold reserves “as far to the west and as far from the Iron Curtain as possible”, Bundesbank board member Carl-Ludwig Thiele told reporters on Wednesday.
The German Federal Court of Auditors, which oversees the government's financial management, called last October for an official inspection of the gold reserves stored at foreign central banks, because they have never been fully checked.
“To hold gold as a central bank creates confidence,” Thiele said.
“If I hold gold in my own vaults, I have to check it myself,” he said, adding that “a complete shift is not appropriate.”
Beginning this year, the Bundesbank plans to transfer 300 tonnes of gold from the Federal Reserve in New York and all of its gold stored at the Banque de France in Paris, 374 tonnes, to Frankfurt.
By 2020, it wants to hold half of the nearly 3,400 tonnes of gold valued at almost 138 billion euros - only the United States holds more - in Frankfurt, where it stores about a third of its reserves. The rest is kept at the Federal Reserve, the Banque de France and the Bank of England.
The Bundesbank gained more space in its vaults after the transition to the euro from the deutschmark.
It did not want to disclose how much the gold transfers would cost and how the gold would be transported.
Before German reunification in 1990, 98 percent of Germany's gold was stored abroad.
The Bundesbank then started to bring its gold home and in 2000 transferred 931 tonnes from the Bank of England to Germany. It will continue to hold about 13 percent of its gold reserves in London, even after 2020.
With the introduction of the euro, the Bundesbank sees no need to hold any reserves at the Banque de France as it will no longer need them for exchange for foreign currency.
“This is above all a historical anomaly which is now being corrected,” said David Marsh, chairman of think tank OMFIF, which issued a report earlier this month in which it foresaw growing importance for gold due to uncertainty stemming from the rise of China's renminbi as an alternative to the dollar. - Reuters