Bundesbank Wants To Get Back German Gold

Story of the week, some say THE STORY, began with this 14 Jan 2013 headline in the German daily Handelsblatt, “Bundesbank will deutsches Gold zurückholen“ which google translates to “Bundesbank Wants To Get Back German Gold” (apologies to our German readers, please feel free to send us the exact translation).

 

Bundesbank Wants To Get Back German Gold

Citing privy sources, Handelsblatt let out that the Bundesbank had developed a “new concept” of where to store the gold reserves of Germany. In a short video clip (click below to see but note commentary is in German), the current locations of the German gold reserves (totalling 3,396 tonnes), in order of quantities held, were identified (at the 40s mark in the video) as New York (45%),  Frankfurt (31%), London (13%) and Paris (11%). 

If the above Embed Code from Handelsblatt fails to play, please click on this Video Link from:  http://bcove.me/3qqgkrrq

This report triggered off a frenzy in western media, including fears of a TOTAL pull-back of all German gold reserves from the US FED. See our quick report on this.

Initial fears of a total recall proved unfounded. The actual Bundesbank statement (English Version) appeared on its website on 16 Jan 2013, is produced here in full, for our more knowledgeable readers to dissect, interprete and comment:

Deutsche Bundesbank’s new storage plan for Germany’s gold reserves

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.

Click here for more details of the Bundesbank’s Gold Holdings as at 31 Dec 2011.

The statement are official reasons cited by the Bundesbank. However, this 30 oct 2012 report by the well-respected German Der Spiegel sheds interesting background insights into domestic thinking about the country’s abundant gold reserves, globally ranked 2nd, behind only the US.

For a better sampling of western media reaction to the Bundesbank’s impending move, see:

Over in the US

Joel Bowman’s piece on 19 Jan 13
http://dailyreckoning.com/bubas-gold/

TF Metals Report on 16 Jan 13
http://www.tfmetalsreport.com/blog/4442/german-gold-hijinx

Gold Anti-Trust Action Committee gives its initial take on 14 Jan 13
http://www.gata.org/node/12119

It Begins: Bundesbank To Commence Repatriating Gold From New York Fed
http://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

Over in the UK – we collected the following headlines via our FT Share Clip (free sign-up may be needed to read the articles) at http://clippings.ft.com/lists/bkh9r

Bundesbank weighs bullion against public pressure

The meaning of Germany’s gold decision – by Mohamed El-Erian, CEO of PIMCO

Germany creates pile of golden opportunities – a tongue in cheek heist warning

Perhaps, the biggest surprise was that gold price barely reacted to THE STORY everyone expected it to be, as noted by Joel Bowman on 19 Jan 13:

Gold rose a bit after the news, but not much. It’s up about $20 for the week, still comfortably within medium-term trading range.

Really, gold? We expected more… This is big news, after all.

Why no reaction from gold bugs? Please COMMENT below.

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