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Back to February 2017

After spending several decades underground in New York, a portion of German gold has finally been returned home to Frankfurt.

It has been reported that Germany have managed to bring home around 300 metric tonnes of gold. They stored this gold in underground vaults in New York City. The gold has remained there since the years of the Cold War, which dates back to 1947. 

In today’s blog, we are going to attempt to explore why the gold was kept in New York and why for all those years? We also ask, why is it being retrieved now?

Where did you come from? Why did you go?

The gold that was taken to New York was allegedly earned by West Germany from trade surpluses in the 1950’s and 1960’s.

When the Cold War broke out following political and military tensions between the Eastern Bloc (Soviet Union) and the Western Bloc (NATO allies), Germany made an executive decision to keep some of its gold in New York and other foreign countries, namely Paris and London.

It has been suggested that this was down to the fear of attack by the Soviet Union.  It was argued that it would have been a risk to leave all of their gold in Germany, as the likelihood of the Soviet Union stealing it from Germany, was greater than if the gold was kept elsewhere. It was sensible to distribute their precious asset. In December of 2016, there were approximately 1,236 tonnes of German gold being stored in New York. This equated to around 36.6% of Germany’s total gold.  

An additional reason for placing German gold in London, New York and Paris, could have been to ensure that the yellow metal was closer to the larger capitals, where gold was often traded.

Back on Home Soil

Germany have reportedly been planning the return of their gold from New York since 2013. They have also repatriated 105 tonnes of gold from Paris in 2016, arguing that since France also use the euro, there was little sense in keeping the precious metal in Paris. Germany claims to have a further 91 tonnes of gold to be returned from France and back to Frankfurt. Plans to bring this gold back are due to take place during 2017.

Between 1998 and 2001, the German Bank (Bundesbank) also brought home 850 tonnes of gold from London. The Bank of England held around 432 tonnes of Germany’s Gold, which is around 12.8% of Germany’s total gold. When all the gold transfers have been completed, it is estimated that Frankfurt will hold half of Germany’s 3,378 tonnes of gold.

Completing the return of gold from New York to Frankfurt could have something to do with Trump’s Presidency; however, German officials have denied this rumour and stated that Donald Trump’s presidency has not changed the urgency to get their gold home. It has been a long process, and just happens to be completed now. They also stated that they have a trusting relationship with the Fed and will continue to have faith in it.

The Finer Details

Germany has not specified exactly how the transportation of the precious metal between countries took place. However, it has been suggested that Germany aimed to bring back its gold by 2020, but has recently propelled that date forwards to 2017.

It is interesting that Germany has brought their gold home ahead of the European elections, as well as bringing their gold home at the start of Trump’s presidency. Germany have brought home the gold at a time of general political and economic upheaval (Brexit and Greek debt crisis to name but a few).

I am not sure about you, but to me, the timing of this could be interpreted as something more. The current global tensions could well have been part of the driving force for returning their gold home sooner? Does Germany know something that we do not?

Maybe I am being cynical. Maybe, Germany decided to bring the date forwards in excitement of having their gold back home after all this time? Maybe they just couldn’t wait a moment longer......

As always, I turn the discussion over to you! 

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.

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