Germany brings its gold hoard home

Jens Weidmann, president of the Bundesbank, speaks at a news conference in front of drapes printed with gold-bar images at the Bundesbank offices. (File photo, July 11, 2014.)

Frankfurt / DPA

Germany is slowly bringing home its gold, lodged outside the country in vaults in New York, Paris and London during the years of the Cold War. Germany’s central bank possesses the second-biggest hoard of gold bars in the world, and conspiracy theories have multiplied over the years, based around the fact that only a tiny number of people have ever seen this immense treasure.
Some 700 tons of it are to be shifted to Frankfurt – by ultra-secret undisclosed means of transport – over the years up to 2020. Then more than half the country’s gold – totalling 3,381 tons and currently worth 107 billion euros – will be stored in Germany’s own vaults. After decades of secrecy, the Bundesbank – the central bank – has for the past three years adopted a more open policy.
The first event for the public in the summer of 2014 saw visitors permitted to handle and pick up a gold ingot weighing 12.5 kilograms, but in a high-security vault where nobody could run out the door with it.
The move followed a deliberately provocative question posed by a German politician as to the true whereabouts of the reserves, largely squirrelled away during the “Wirtschaftswunder” (economic miracle) of the 1950s and 1960s, after World War II had bankrupted the Germans.
Germany has no gold mines, so the gold originates in the stock of the precious metal that has been sloshing round the world for centuries or the supply that keeps on coming out of mines in South Africa and elsewhere. Last October, the newly communicative Bundesbank began listing every single one of its stamped gold ingots on a list requiring more than 2,300 pages to print.
Some 201 tons “came home” last year, although the route is a closely kept secret. If anyone knew when the presumed aircraft landed or which roads bullion vehicles used, that would be an immense temptation to modern highway robbers. Even the cost of the transport is confidential.
Currently holding some 1,403 tons, the Bundesbank vaults in Frankfurt contain the largest fraction of the German gold, ahead of the German reserves kept at the US Federal Reserve in New York, the Bank of England in London and the Banque de France in Paris. There are 112,112 bars or ingots in the Frankfurt vaults, and the Bundesbank shows no intention of selling any of them – by contrast with Bank of England which engaged in substantial sales 1999-2002.
West Germany used to park its gold abroad for national security reasons, the argument being that Frankfurt was only 110 kilometres from the Iron Curtain and its capture in a swift advance by Soviet tank forces would effectively give the Kremlin control of a major world currency.
Now that Germany shares a common currency, the euro, with France, another argument in favour of keeping some German gold in Paris – that it could be converted to francs in a grave financial crisis – no longer holds either. But Bundesbank board member Carl-Ludwig Thiele continues to see a gold stock that can be instantly converted to cash as potentially useful. As a commodity, gold held in a trusted warehouse can be signed over to new owners without physical ownership being required.
“Gold is part of our reserves. Reserves are held for emergencies. We can’t foresee any emergency right now, but cannot rule one out for all time,” Thiele said. “And if Germany ever found itself compelled to acquire something from other countries and pay for it, then our gold stocks abroad could in such an emergency be used as security or sold,” Thiele said.

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