Editor's note: Catch the Latest Happenings with Kitco Video News! (Kitco News) - Germany’s Bundesbank announcement Wednesday to bring back some of its gold reserves stored outside its borders will have no market impact, gold analysts said. The move won’t change views on whether gold allocation and possession is important. Those who believe it is important say the Bundesbank’s very actions are telling, while those who disagree point out that the Germans are still leaving half their gold away from home and that the move will be done over seven years. By 2020, Frankfurt will hold 50% of its gold reserves, up from 37% currently. It will move all of its gold from Parisian vaults, which is 11% of its holdings. It will reduce its New York holdings to 37% from the current 45% and its London holdings will remain unchanged at 13%. In tonnage terms, the Bundesbank will transfer 374 metric tons from France and 300 tons from New York over the course of seven years. Their total reserves are 3,400 tons, the second-largest after the U.S. The push to move the gold comes from government pressure to reverse a Cold War-plan that kept most of German’s gold far from the former Soviet empire. Commerzbank said last year there was a dispute about gold storage between the Bundesbank and the Bundesrechnungshof – the country’s Federal Court of Audit – the latter calling for a more precise examination. When Bundesbank officials went to New York last year to see their reserves they were not allowed to see the gold. According to news reports, the Bundesbank said it does not need a bar count or check their gold content itself, considering written assurances from the other central banks enough. In a press release, the Bundesbank said there were two reasons behind the move: “to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time.” Also, they said they are closing up shop in Paris because both German and France use the euro so they are “no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise.” No Market Impact Several analysts said considering that the gold is simply moving from one vault to another means the gold will stay off the market. “As far as I can see, I don’t see any reason why it should impact trade,” said Afshin Nabavi, head of trading at trading house MKS Finance in Geneva. Carsten Fritsch, Commerzbank commodities analyst, said between the political pressure and that it’s been 20 years since the Cold War ended, the sentiment in Germany is that holding so much gold outside of German was no longer needed. He also said there would be no market impact since they’re not buying or selling. “I don’t think it’s that big a deal… it’s happening over seven years. There’s no rush.” Fritsch said. Steve Scacalossi, vice president and director, global precious metals at TD Securities, also said that the metal is allocated, meaning it can’t be lent out so it will not affect gold lease rates. The allocated gold hasn’t been available in the local markets and it won’t affect physical premiums. “The only thing it may do is add more attention to the recent petition for the U.S. government to make full disclosure of the gold holdings at Fort Knox - a request that is likely to be ignored,” he said. A German group called Gold Action pushed for the repatriation of the country’s gold, and included at least one member of Germany’s parliament. Other signatories included well-known names that have pushed for repatriation, including the Gold Anti-Trust Action Committee. GATA claims the plan is “so incomplete and slow as to increase, not diminish, doubt that all gold is really available,” they said on their website. Others did not see the slow pace as something nefarious and pointed out that the Bundesbank is still leaving half of its reserves outside its borders. According to a Reuters story, before German reunification in 1990, 98% of Germany’s gold was held elsewhere. In 2000, it transferred 931 tons from the Bank of England to home. Follow me on Twitter! If you want to keep up with metals news and features, then follow me on Twitter. It's free, too. My account is @dcarlsonkitco . By Debbie Carlson of Kitco News dcarlson@kitco.com |
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FOCUS: Bundesbank Gold Repatriation To Have No Market Impact; Will Happen Slowly 16 January 2013, 12:22 p.m. |