It seems that Germany started something of a trend back in 2013 when it announced that it would repatriate a portion of its gold that is held by foreign countries. While Germany backed off its initial plans, the Netherlands soon followed suit by repatriating its gold.
Now Austria is getting into the game. About 80% of Austria’s gold is held by the Bank of England. The Austrian National Bank is seeking to repatriate a good portion of this gold.
If the plan goes through without any trouble, then the Austrian central bank will send about 20% of its gold reserves to Switzerland for safe keeping, while holding on to approximately 50% in Austria. The Bank of England’s share of Austria’s gold will be reduced to 30%.
In total, about 140 tons of gold will be transferred out of England over the next 5 years. It is reported that gold bars will be flown out of England in batches of five tons each, which will obviously be under heavy security.
Austrian officials are saying that this move to repatriate gold is not related to a possible British exit from the European Union, which has recently been speculated about to a greater degree.
Perhaps the most interesting part of this story is the reason for this move of the Austrian National Bank to take back a large portion of its gold. Auditors have warned of a “heightened concentration risk”, and we can certainly speculate on what this could mean.
here is the Gold?
When Germany first announced its plans to repatriate some of its gold reserves, the rumors started flying. These aren’t rumors commonly heard on network television, but anyone with Internet access can see them easily enough.
Germany wanted to repatriate gold held by the U.S. central bank. Some people, particularly those in the gold community, question just how much gold is actually being held by the U.S. Does the Fed really possess all of the gold it claims to have in reserves, including gold that is supposed to be held for foreign central banks?
Then, German officials all of a sudden backed off their plan to repatriate gold. They basically said that they felt confident that it was in good hands. But this just further fueled the rumors about whether there is actually any significant gold stored at the Federal Reserve Bank in New York.
The problem is that there are no independent audits done on these gold holdings. It doesn’t do anyone any good to walk up to a piece of glass and look into another room that has gold in it. Unless you actually do some kind of counting and testing of the gold, it won’t tell you much.
The Fed could show Germany its gold safe and sound in the vaults. It could then show another country its gold safe and sound in the vaults. But how do you know it isn’t the same gold unless there is some kind of an audit?
For a legitimate audit of the gold holdings, you would really have to count all of the gold that is supposedly held in reserve by the U.S., including the gold held for foreigners, and then sample a portion of it. Without that, we really can’t know if it’s there or if just a small fraction of it’s there.
In the case of England, it made one of the biggest boneheaded financial moves of all time …
Between 1999 and 2002, about half of the UK’s gold reserves were sold off at an average of about $275 per ounce. We know what happened with the price of gold after that.
This created what was perhaps the best gold buying opportunity ever for investors. This marked the end of the bear market in gold and the beginning of a new bull market.
This brilliant plan to sell the gold reserves was hatched by Gordon Brown, who was then the UK Chancellor of the Exchequer. For this piece of wisdom, he later became the Prime Minister.
With moves like this, why should anyone trust a foreign central bank to care for their gold?
There’s always speculation that the Fed and other central banks have secretly sold gold or leased it out. This is all possible, but we don’t really know because of the lack of transparency.
It will be interesting to see if the Austrian central bank succeeds in getting a good portion of its gold back. If these plans do not come to fruition, then it is cause for more speculation. We will really have to start wondering if there are any significant gold holdings left, either in the U.K. or in the U.S.
