(Kitco News) – Even as European nations debate the appropriate response to the Trump administration’s massive trade tariffs against the EU, Germany’s government is discussing a very heavy but equally delicate problem: the possibility of getting 1,200 metric tonnes of its gold reserves out of the United States.
The country has long debated the wisdom of storing so much of its bullion – the second-largest sovereign gold reserve in the world – in the vaults of the number-one gold-holding nation. But the reelection of Donald Trump, and the aggressive and unpredictable international trade policies he has championed, are adding additional anxiety to the issue.
For decades, Berlin has stored a large amount of their total gold reserves in an underground vault at the U.S. Federal Reserve Bank of New York in Manhattan. And while the integrity of the central bank remains intact, the international credibility of the current U.S. administration is in tatters.
As reported in Germany’s Bild and the UK’s Telegraph, senior figures from Germany’s Christian Democratic Union (CDU) party, which will lead the country’s newly elected government, are discussing repatriating the $124 billion in bullion over concerns that the United States is no longer a reliable partner.
“Of course, the question has arisen again,” said former CDU minister Marco Wanderwitz to Bild. Wanderwitz previously lobbied to personally inspect the New York gold reserves in 2012, but his request was denied. He has called for a policy that would enable German officials to regularly inspect the gold, or to return it to Germany.
Markus Ferber, a member of the European Parliament for the CDU, told Bild that he also insists on German officials being allowed to personally inspect the country’s U.S.-based bullion.
“I demand regular checks of Germany’s gold reserves,” he said. “Official representatives of the Bundesbank must personally count the bars and document their results.”
Both Ferber and Wanderwitz were already speaking to Bild about the issue of access to the reserves before President Trump imposed sweeping tariffs on the European Union last Wednesday. But with Trump now treating trade deficits as financial crimes or balances due, while also browbeating the Federal Reserve to do his bidding, the billions in gold seem more distant and less secure than ever before.
Michael Jäger, a member of the Taxpayers Association of Europe, was quoted as saying it would be best to “bring all German gold reserves to Frankfurt or at least to Europe as quickly as possible.”
Half of Germany’s sovereign gold is held in Frankfurt, while around 30% is with the Fed in the U.S. A further 13% is stored with the Bank of England in London, with the remainder in France.
When asked by Bild reporters about the possibility of repatriating the gold in the United States, Germany’s central bank insisted that they had complete confidence in the security of their bullion.
“We have a trustworthy and reliable partner in the Fed in New York for the storage of our gold holdings,” Bundesbank President Joachim Nagel said at a press conference in February, and repeated amidst the trade tariff fallout on Friday. “It does not keep me awake at night. I have complete confidence in our colleagues at the American central bank.”
But security and access are not the same thing, to say nothing of transfer. It’s the difference between checking your bank balance and emptying your account.
Currently, Germany has the world’s second-largest gold reserves at about 3,350 tonnes, behind only the US and its 8,100 tonnes.
Beginning in 2013, the German central bank began a successful operation to repatriate a large amount of its overseas gold, which resulted in 300 tonnes from New York and about 374 tonnes from Paris being transferred to Frankfurt by 2020.
The New York Federal Reserve remains the world’s largest gold custodian, holding about 6,300 tonnes of gold on behalf of more than 30 foreign central banks.
