First, here is the Bundesbank offiicial statement.
By 2020, the Bundesbank intends to store half of Germany’s gold reserves
in its own vaults in Germany. The other half will remain in storage at
its partner central banks in New York and London. With this new storage
plan, the Bundesbank is focusing on the two primary functions of the
gold reserves: to build trust and confidence domestically, and the
ability to exchange gold for foreign currencies at gold trading centres
abroad within a short space of time.
The following table shows the current and the envisaged future
allocation of Germany’s gold reserves across the various storage
locations:
| 31 December 2012 | 31 December 2020 | |
|---|---|---|
| Frankfurt am Main | 31 % | 50 % |
| New York | 45 % | 37 % |
| London | 13 % | 13 % |
| Paris | 11 % | 0 % |
To this end, the Bundesbank is planning a phased relocation of 300
tonnes of gold from New York to Frankfurt as well as an additional 374
tonnes from Paris to Frankfurt by 2020.
The withdrawal of the reserves from the storage location in Paris
reflects the change in the framework conditions since the introduction
of the euro. Given that France, like Germany, also has the euro as its
national currency, the Bundesbank is no longer dependent on Paris as a
financial centre in which to exchange gold for an international reserve
currency should the need arise. As capacity has now become available in
the Bundesbank’s own vaults in Germany, the gold stocks can now be
relocated from Paris to Frankfurt.
....... while here are some comments, thoughts and otherwise on what this move could mean and its possible implications (source: CNBC.com)
News that Berlin wants to bring some of that gold back home is
causing a stir, with Bill Gross, the managing director at bond giant
PIMCO tweeting: "Report claims Germany moving gold from NY/Paris back to
Frankfurt. Central banks don't trust each other?"
Ric Spooner, chief market analyst at CMC Markets in Sydney told CNBC Asia's "Squawk Box", "Whether or not their action really does reflect a lack of trust in the Fed (U.S. Federal Reserve) is a moot point, but it is certainly likely to be taken that way by some sectors of the market. The general inference is that if there was a real debt crisis in the U.S., then they (German authorities) would feel a little more confident about having their assets at home."
The U.S. fiscal woes are firmly in focus with Washington expected to reach its debt limit by the end of February. Finding long-term debt sustainability without hampering an economic recovery remains a challenge for policymakers, Fed chief Ben Bernanke said earlier this week.
"The reason the Bundesbank is doing this, repatriating the gold back home, is to instill confidence in the German consumer as to the solidity of the Bundesbank," Societe Generale's senior currency strategist Sebastien Galy told CNBC.
"Right now it is just a sign that the system is breaking down, that confidence is lower across the board and the entire financial system has basically become a domestic financial system, where you have the euro zone, a dollar zone and the yen zone," he added.
Dominic Schnider, global head of commodity research at UBS Wealth Management told CNBC, "Holding gold in key financial centers (New Tork, London or Paris) makes sense and can give access to foreign currencies like the U.S. dollar. On the other hand, we have seen how easy money printing is. Thus, we don't need gold anymore as collateral."
He added: "Nevertheless, holding some gold at home is not a bad idea in an age of ballooning central bank balance sheets. As a reference, Hong Kong also shipped its gold back home from London some years ago."
Analysts, however, did not expect any immediate reaction in gold or currency markets to any gold repatriation from the Bundesbank.
"For the gold market, it doesn't make any difference to the overall supply and demand situation. The Bundesbank is the owner of the gold regardless of where it's located," Spooner said.
For some analysts the question was not so much whether Germany would move its gold reserves, but whether it would sell the gold once it was back home.
"What Germany intends to do with its gold once it's repatriated would be interesting," said Nick Trevethan, senior commodities strategist at ANZ Research in Singapore. "We know that Venezuela sold some of its gold," he added, referring to a decision by Venezuela's government in 2011 to repatriate foreign bullion reserves from bank vaults in the West.
But despite all the theories about mutual central bank distrust and lack of faith in fiat currencies, or currencies that are not back by gold reserves, the Bundesbank's move - if push does come to a shove - may have a much more prosaic explanation: stock-taking. In October, Germany withdrew two-thirds of its gold holdings from the Bank of England, according to media reports and in the same month a German federal court said the Bundesbank could conduct annual audits and physically inspect its gold reserves worldwide. "Maybe it is triggered by a need to physically audit," David Kotok, chief investment officer at Cumberland Advisors said. "It is unusual so it triggers speculation about the motive. It may also be benign and markets just accept it."
There's some substance in this. Germany's international broadcaster Deutsche Welle reported on its website on Tuesday that the Bundesbank is reacting to a recent report by the Federal Audit Office which has criticized the lender for failing to thoroughly check the amount and authenticity of the bullion stored abroad,.
I would not be surprised if this does not became a trend and countries/central banks/large multi-nationals further consolidate and secure access to all resources, not just gold.
Ric Spooner, chief market analyst at CMC Markets in Sydney told CNBC Asia's "Squawk Box", "Whether or not their action really does reflect a lack of trust in the Fed (U.S. Federal Reserve) is a moot point, but it is certainly likely to be taken that way by some sectors of the market. The general inference is that if there was a real debt crisis in the U.S., then they (German authorities) would feel a little more confident about having their assets at home."
The U.S. fiscal woes are firmly in focus with Washington expected to reach its debt limit by the end of February. Finding long-term debt sustainability without hampering an economic recovery remains a challenge for policymakers, Fed chief Ben Bernanke said earlier this week.
"The reason the Bundesbank is doing this, repatriating the gold back home, is to instill confidence in the German consumer as to the solidity of the Bundesbank," Societe Generale's senior currency strategist Sebastien Galy told CNBC.
"Right now it is just a sign that the system is breaking down, that confidence is lower across the board and the entire financial system has basically become a domestic financial system, where you have the euro zone, a dollar zone and the yen zone," he added.
Dominic Schnider, global head of commodity research at UBS Wealth Management told CNBC, "Holding gold in key financial centers (New Tork, London or Paris) makes sense and can give access to foreign currencies like the U.S. dollar. On the other hand, we have seen how easy money printing is. Thus, we don't need gold anymore as collateral."
He added: "Nevertheless, holding some gold at home is not a bad idea in an age of ballooning central bank balance sheets. As a reference, Hong Kong also shipped its gold back home from London some years ago."
Analysts, however, did not expect any immediate reaction in gold or currency markets to any gold repatriation from the Bundesbank.
"For the gold market, it doesn't make any difference to the overall supply and demand situation. The Bundesbank is the owner of the gold regardless of where it's located," Spooner said.
For some analysts the question was not so much whether Germany would move its gold reserves, but whether it would sell the gold once it was back home.
"What Germany intends to do with its gold once it's repatriated would be interesting," said Nick Trevethan, senior commodities strategist at ANZ Research in Singapore. "We know that Venezuela sold some of its gold," he added, referring to a decision by Venezuela's government in 2011 to repatriate foreign bullion reserves from bank vaults in the West.
But despite all the theories about mutual central bank distrust and lack of faith in fiat currencies, or currencies that are not back by gold reserves, the Bundesbank's move - if push does come to a shove - may have a much more prosaic explanation: stock-taking. In October, Germany withdrew two-thirds of its gold holdings from the Bank of England, according to media reports and in the same month a German federal court said the Bundesbank could conduct annual audits and physically inspect its gold reserves worldwide. "Maybe it is triggered by a need to physically audit," David Kotok, chief investment officer at Cumberland Advisors said. "It is unusual so it triggers speculation about the motive. It may also be benign and markets just accept it."
There's some substance in this. Germany's international broadcaster Deutsche Welle reported on its website on Tuesday that the Bundesbank is reacting to a recent report by the Federal Audit Office which has criticized the lender for failing to thoroughly check the amount and authenticity of the bullion stored abroad,.
I would not be surprised if this does not became a trend and countries/central banks/large multi-nationals further consolidate and secure access to all resources, not just gold.
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