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Belgium Central Bank Looking At Repatriating Gold

By Neils Chrsitensen of Kitco News
Monday December 8, 2014 2:30 PM

(Kitco News) - The National Bank of Belgium is the latest central bank to show interest in repatriating its gold reserves.

In an interview with Belgium broadcaster VTM Nieuws Sunday, Luc Coene, governor of Belgium’s central bank, confirmed that the bank is looking at how they can bring their gold reserves back into the country.

Image courtesy of Banque nationale de Belgique : Luc Coene, governor of the National Bank of Belgium

According to IMF data compiled by the World Gold Council, Belgium holds 227.4 metric tons of gold, representing 34.2% of its official foreign reserves. According to reports, most of the gold is held outside of the country with the Bank of England, the Bank of Canada and the Bank for International Settlements.

Jeff Nichols, managing director of American Precious Metals Advisors and
senior economic advisor at Rosland Capital, said he is not expecting the news to have much impact on the gold price, but it could still seen as mildly positive for the market as central banks review their asset management.

He added that there is a shift in attitudes about how gold reserves should be managed and where it should be stored.

“This is a sign of things to come to define gold’s role in central banks’ monetary policy,” he said.

Axel Merk, president and chief investment officer of Merk Investments, said that global instability is on the rise, so is it not surprising governments and central banks want more control over their reserves.

However, he added that repatriating gold is not as simple as it sounds and in the global marketplace moving gold reserves is more than just transfer the metal from one location to the next. He said that neither central bankers or politicians know how to hand physical gold.

“It's not trivial to store gold safely - and places such as London have shown they have the experience to do so,” he said. “This shouldn't stop anyone from repatriating gold, but means that there's a learning curve.”

The topic of gold repatriation has heated up in recent weeks after Swiss citizens voted down a referendum, on Nov. 30, that would have seen the central bank increase its gold reserves by 20%, hold all its gold within the country and not be able to sell any of its gold reserves.

Just before the Swiss referendum, the Dutch central bank announced in mid-November that it had it repatriated 122.5 metric tons of gold, worth about $5 billion, back to Amsterdam from the U.S. On Nov. 25, France jumped on the gold bandwagon after political leader Marine Le Pen wrote an open letter to Christian Noyer, governor of the Bank of France, requesting that the country’s gold holdings be repatriated back to France.

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Last year Germany made headlines after it announced that the central bank would repatriate all of its gold held in Paris and about 300 metric tons of gold from New York, however, since then Germany has quietly backed away from the initiative after only transferring about 5 tons of gold from New York within the first 18 months.

With financial markets relatively calm, Bernard Dahdah, precious metals analyst at Natixis, said that he is also not surprised that more central banks are looking at transferring their gold reserves back to the country. He added that now might be the best time for this conversation.

“To talk about gold repatriation during the financial crisis back in 2010 would have created a moment of panic in markets,” he said.

Because the initiative is politically driven, Dahdah said that he is not expecting to see the central bank transfer its gold held in London, which is considered the hub of the global gold market.

Dahdah said that it also makes sense to hold gold in London because it is easier to lease out gold. He explained 10 million metric tons of gold with a lease rate of 50 basis points would generate about $1 million in revenues. Although not a significant sum for central banks that have a balance worth billions, it is still better than nothing.

He added that Natixis is expecting to see higher lease rates in the long-term as more physical gold is bought by Asian consumers, reducing the amount available in the global gold market.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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