Anyone who follows the gold and silver headlines knows by now that the German Bundesbank announced that it wishes to repatriate some of their gold holdings. In a nutshell approximately half of Germany’s gold is being stored in New York. The central bank of Germany (Bundesbank) has announced that it wishes to move 674 tonnes of their gold back home and has agreed to terms to have that gold moved back home by the year 2020. The deal will include the complete withdrawal of 374 tons of German gold stored at the Banque de France in Paris (about 11 percent of the total) and 300 tonnes from the gold being stored in New York. Carl-Ludwig Thiele, a member of the Bundesbank justly informed the media that for security reasons they will not disclose how the transfer would take place. This is a fair position to take given the extraordinary amount of gold that will be moved.
Now, because the Germans have agreed to and set a time frame of 7 years for the movement of the gold back to their own housing facilities, the usual conspiracy theorists that I will refer to herein have used this news to try to justify their cry that Germany’s gold is not there. That is, the US doesn’t have it. These sites claim that the Federal Reserve has leased out the gold which is why the transport of all this gold is going to take until 2012.
The theory launched by the perma-bull/conspiracy sites is centered on the purely speculative idea that the FED and other central banks partaking in this “scheme” are going to have to buy the gold that is being repatriated or risk failure. In the case of another conspiracy theorist, the potential for other nations to jump in front of Germany and ask for immediate delivery is now probable also leading to a run in gold. In their eyes, they feel that 7 years was agreed to so that they can “come up with the gold” or risk having to go onto the open market to purchase it leading to a massive run on gold and a spike in price. The truth is, gold barely moved on this news, as it shouldn’t have given that this is not a gold price moving event.
The usual suspects are at it…
King World News today interviewed Stephen Leeb who told KWN that the reason Germany is only getting small portions of their gold sent to them over the years is because the gold is not at the Fed. They also brought in Keith Barron to spread unfounded insinuations that Germany’s entire gold hoard at the Federal Reserve may already be gone.
Harvey Organ’s blog for example is speculating that Germany knows full well that there gold is gone and that they are giving time to the USA to mine gold and send it off to Germany. Of course he sensationalizes the news by telling his readers that because Germany is agreeing to repatriate a portion of its gold over 7 years, there is nothing to stop another nation from claiming all of their gold immediately. This nothing but unsubstantiated fear mongering. Harvey does a great job grabbing all the sensational headlines trying to formulate an argument to support the theory that this is a watershed event.
ZeroHedge has jumped on board also speculating “Germany first then the Netherlands”, nothing new for a site whose reputation was built on sensationalizing news and spinning it to suit their own beliefs.
GATA is suggesting that because it is taking 7 years to move a small portion of Germany’s gold there just has to be something fishy going on. Let us be clear, the Bundesbank doesn’t need 7 years to repatriate some of its gold. It has agreed to do the transfer over a 7 year period.
Turd Ferguson has joined in by questioning whether or not the gold is there.
Jim Sinclair and James Turk have also weighed in on the issue spreading the same rhetoric as the aforementioned sites.
Another sensationalized headline appears at Marketwatch.com claiming “Germany Wants Its Gold Back” They reported:
“The move to reconsider gold storage and repatriate their gold is a clear indicator that the Bundesbank are thinking about Germany’s economic future, away from the euro, and how gold may play a role in it,” said Jan Skoyles, head of research for The Real Asset Company, in emailed comments. Read Skoyles’ analysis of reasons why Germany plans on repatriating its gold.
“The fact that they are planning to gradually repatriate their gold from the New York Federal Reserve not only raises questions about their trust in the Fed to manage their gold holdings but, importantly, their faith in the U.S.’s management of the U.S. dollar and its future as a reserve currency,”
Where the Marketwatch article errs (intentionally or not) is in presenting the picture that Germany is gradually repatriating their gold making it seem that they are taking all of it back, making no mention that they still plan to store a considerable amount abroad, in fact, 50% of it.
What people need to understand is that this isn’t the first time Germany repatriated some of their gold. They did so 10 years ago when they pulled 13% of their gold holdings out of London who, unlike Paris and New York, charges the Bundesbank for storage. As reported in the Telegraph, “The gold was purportedly withdrawn because London was charging €500,000 a year in storage costs. The Bundesbank said part of 930 tonnes brought back was melted down for checks, and "not one gram was missing".
So let us turn to the official Bundesbank statement: (emphasis added is mine)
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.
In reality, despite the big controversy by the gold conspiracy theorists about this news, Germany will continue to store 50% of its gold abroad after 2020. 37% of its gold in New York, down from 45%, an 8% difference and 13% in London while removing all of its gold from French storage. Unless you are trying to support a meme or conspiracy theory, who really cares why it has agreed to make this move over a 7 year period? Germany was dammed if they chose a 7 year period or an immediate delivery. Here’s why;
- The fact they announced they will make this move over a period of 7 years has now been used by the aforementioned conspiracy theorists as a basis to spread their speculative meme that the gold isn’t there, something they’ve been arguing for years.
- Alternatively, if Germany claimed immediate repatriation, it is fair to suggest (given their history) that these same outlets would have started sensationalizing that an imminent currency failure was imminent which would be (in their eyes) the only reason for an immediate transfer.
You can’t win with these guys! That’s the bottom line. They would have found a way to spin this story to fit their meme. It happens every time.
What should be noted is that Germany isn’t reclaiming all of its gold. People reading the above noted articles might come to that conclusion given the writing styles therein. The reality is that even after they complete the transfer at the end of 2020, half of its gold will remain abroad with approximately about 37 percent remaining in New York. The Bundesbank does not plan to move any gold out of the Bank of England, where it will continue to store 13 percent of the total.
All in all, The Bundesbank will repatriate 674 metric tons of gold from vaults in Paris and New York by 2020 to restore public confidence in the safety of Germany’s reserves nothing more, nothing less, and the fact that they have decided to make this transfer over a 7 year period has nothing to with the fact that the gold isn’t there or because they don’t trust foreign central banks. (In fairness, the argument can be made that the Germans have never trusted anyone). The reality is that is absolutely no evidence, I repeat ZERO, that implies that any of their gold is missing or unavailable despite what you may read elsewhere, especially on sites that prey on fear, sensationalism and on “pumping” the said metal. These fairy tales and unfounded speculative claims that imply that most of the Western world’s gold has been leased out and is probably in the private hands in India or China are completely UNFOUNDED.
I’ve already pointed out the two reasons Germany wants more of its gold back (also listed in their official press release). It’s not because they don’t trust the central banks currently storing their gold as has been unjustly speculated by some in the media and in the Twitter world. With respect I think that trying to draw assumptions that the move has everything to do with a lack of trust central banks may have in each other is irresponsible journalism.
I admit that it is a perfectly fair position for the Germans to continually evaluate and put in place scenarios for a life without the Euro. Anyone reading me for the past 2 years knows my stance on the Euro and that it is a dying a slow death and whether it survives depends on many things. It is also completely fair for Germany to take the position that it’s their gold (their asset) and they should be able to store it wherever they wish which in their eyes is on home soil.
History tells us that Germany’s gold was primarily kept in the US on account of the physical threat from Russia. this threat no longer exists. In fact, much of the reasons why Germany stored its gold abroad don’t exist anymore. I see no issue with Germany wanting some of their gold back. It’s their asset and their property after all. I don’t see why the conspiracy sites have drawn the sensational line in the sand calling this a “watershed moment”.
Anyone making claims that the Federal Reserve doesn’t have the gold and trying to argue that this has to be why they agreed to a 7 year transfer window is making those claims for one reason only and that is to keep the gold price suppression meme moving forward and to sensationalize the news to get their readers to think that this is going to cause an explosion in the gold price. This is irresponsible. It's about generating sexy headlines that will attract readers and keep the conspiracy alive. Nothing more.
Unfortunately, in this world of ours where technology rules and people trip over each other to get the scoop on any news item by throwing out 140 character blurbs via Twitter on any news event there is one very important step missing; DUE DILIGENCE or the complete lack of it.
On that point I note that not one of the aforementioned agencies even remotely mentioned that German auditors have already audited the gold and confirmed it was all there. The New York Times, citing Bundesbank member Carl-Ludwig Thiele reported the following:
Mr. Thiele denied there was any mistrust. “We have no doubts about the integrity of other central banks,” he said. “We’re not aware of any irregularities.”
The government auditing agency, the Bundesrechnungshof, called on Bundesbank officials in a report to Parliament to conduct an inventory of the thousands of bars of German gold that are stacked in foreign vaults.
Mr. Thiele said that he and other Bundesbank officials personally visited the German gold abroad and that he was satisfied that it was all there.
Bank officials went one step further…
At a packed news conference, Bundesbank officials attended by armed security guards demonstrated on Wednesday how they tested the bars for quality and authenticity. No two bars have exactly the same weight and purity, so each must be assessed separately.
These statements imply that their audit is complete. As such, any claims that the gold isn’t there is simply unfounded rhetoric.
I was raised and educated to follow facts, not speculation. Shame on anyone trying to spread the “gold isn’t there meme” while completely turning a blind eye to the statements quoted in the NY Times. Am I the only one who finds it curious that Mr. Thiele’s statements have been entirely omitted in any of the aforementioned conspiracy reports of this news?
I can go on and on about the usual suspects and how they merely regurgitate each other’s rhetoric to spread the same conspiracy but by now, educated readers know who those sites are and will be able to spot that they are all at this very moment regurgitating the same shock and awe catch phrases that are now so common on the gold conspiracy world.
Remember, it is the gold conspiracy theorists that claim that the world is on the road towards a de facto new gold standard and possibly a new gold-backed currency from the IMF. The central banks aren’t making these statements. Preparation is merely wise, not dispositive of whether or not the event will ever occur. Germany was smart, along with Italy, as being the only countries not to sell any gold when the gold price was depressed and as a result have some of the world’s largest gold reserves. Just like any gold bug will tell you to store your own gold in case you need immediate access to it, the same applies to governments like Germany who want to have immediate access to their gold. Whether it takes 7 years to move or 7 days is irrelevant because under either scenario the usual suspects would have still created a conspiracy about it as they will with any news item involving gold and silver.