In the past century nations form across the globe stored their gold at the Federal Reserve Bank of New York (FRBNY) for numerous reasons; (i) during World War II Germany was confiscating as much gold as they could from nations they occupied, surrounding nations anticipated by shipping their gold to the US; (ii) after World War II there was the threat of the USSR to seize sovereign gold reserves in the Cold War; (iii) under the Bretton Woods System (1944 -1971) it was agreed the US dollar was the world reserve currency, backed by gold. Here for it was convenient to store gold in New York for trade settlement, additionally dollars which were converted into gold were credited to FRBNY foreign gold accounts; (iiii) after the Bretton Woods system, when gold was officially removed from the monetary system, gold was often sold or leased by central banks, facilitated from their FRBNY accounts.
In the aftermath of the financial meltdown in 2008 central banks again realized the importance of gold as an anchor in the monetary system; European central banks stopped selling gold; Asian and South-American central banks increased official purchases, and central banks from all continents began to worry if storing gold abroad was wise when the global financial crisis evolved.
To illustrate this trend please read the next quote from Edmund Moy, former Director of the United States Mint (Fort Knox), published June 13, 2014:
Finally, more countries are repatriating their gold. For them, an audit is not enough. They would like their gold back. Azerbaijan, Ecuador, Iran, Libya, Mexico, Romania and Venezuela is a short list of countries that have requests into their custodians to transfer some or all their gold back to their countries.
Requests are also submitted at the FRBNY to kindly return the gold held in foreign accounts. There are rumors the US has sold a portion of this gold to underpin the US dollar hegemony in recent decades. The repatriation of 122.5 tonnes Dutch gold from New York, that recently was made public, could be explained along these lines. In any case, the Dutch are losing trust in the US as their custodian, I can see no other reason for them to repatriate. Wether this lack of trust is well-founded time will tell.
After the Dutch repatriation stunt was official, a theory-bomb exploded in the blogosphere about why, how and when the Dutch central bank (DNB) repatriated 122.5 tonnes from New York, while the German central bank (De Bundesbank, or BuBa) has been trying to repatriate 300 tonnes from New York since 2012 – but officially got back a mere 5 tonnes in 2013.
Bloomberg published an article on June 23, 2014, that tricked many to believe BuBa had stopped repatriating gold from the US. However, as I wrote on September 7, 2014, the article was misleading, BuBa never ceased its repatriation schedule.
One theory the Dutch are more successful in repatriating gold from the US, is because DNB is more willing to get it back than BuBa. There has been some public pressure in The Netherlands about repatriating gold, but it has been very little in my opinion; the initiative to repatriate came from DNB. In Germany the repatriation was pushed by the public campaign Repatriate Our Gold. Peter Boehringer, one of the founders of Repatriate Our Gold, told me BuBa was forced to start repatriating in 2012 by the campaign, but is actually slowing down the process, for whatever political reason. Keep in mind gold is a very political commodity. BuBa’s unwillingness is confirmed by their argument that repatriating takes a lot of time, they’ve acted as if it’s not possible to transport hundreds of tonnes across the Atlantic in a few months.
Nevertheless, I’ve written on September 7 the German repatriation was accelerating from the 5 tonnes they got back in 2013, to 59.5 tonnes in July 2014. Every month the FRBNY discloses how much Earmarked gold (the total of all foreign accounts) they store in Manhattan. As I wasn’t aware of any other country repatriating, I figured the 54.5 tonnes drop in Earmarked gold from January to July 2014 had to be gold heading for Germany.
The latest data suggests 77 tonnes have left the FRBNY vaults from January to September.
From another angle:
Of course the big question is, when did DNB start repatriating? This information would provide more insight in how much the Germans got back year to date, if any.
Because the Dutch repatriation partially took place in my back yard, DNB headquarters is a few blocks form where I live, it led me to do some field work. What came out must be seen as speculation based on little official information from DNB, but more from second hand sources at DNB.
I’ve been told a DNB delegation visited the FRBNY in 2013 to audit the Dutch gold, they found nothing was missing. This summer the preparations started for repatriating 122.5 tonnes, after which in October and November the gold was swiftly transported in multiple batches by airplane to The Netherlands. Eventually it was delivered in Amsterdam by armored trucks.
This would imply all FRBNY withdrawals before October could be from Germany, or any other country for that matter, and the Dutch withdrawals would only show up in October and November FRBNY data. So we’ll have to wait a few weeks before we know for sure.
UPDATE December 29, 2014: The Netherlands could not have repatriated 122.5 tonnes in October and November, data from the FRBNY has just revealed.
Connecting The Dots
I found some more clues from DNB that tell me it they began to think about repatriating somewhere in 2012.
Early 2012: Dutch TV show Nieuwsuur covered Dutch official gold reserves – which were predominantly stored at the FRBNY. I edited a segment from this video and added subtitles, watch the video below. We can see Jim Rickards, Willem Middelkoop and Ewout Irrgang (Dutch politician) expressing their opinions to repatriate Dutch gold from the US. Governor of DNB, Klaas Knot, stated there was no reason for that. However, listen to Knot at 0:19:
We are regularly confronted with extraterritorial workings of laws from the US, mostly these laws are not happily received in Europe.
A few things are remarkable;
(i) Knot states: “mostly these laws are not happily received in Europe”. Suggesting there was a European awareness, in January 2012, of the threat the US could confiscate foreign gold reserves held at the FRBNY.
(ii) Rickards notes:
Countries such as The Netherlands, they should get their gold back, store it securely and than they are in a position to play in a new monetary system.
(iii) Watch the sidewalk in front of DNB’s main entrance at 0:09 (and on the picture below).
Mid 2012: BuBa announced its first schedule to repatriate 150 tonnes from New York.
Late 2012: DNB reinforced its headquarters. A new security barrier was constructed around the building. DNB confirmed to me this was done to prevent any cars or trucks from crashing the building. Let’s have a look at some pictures of before and after the reinforcement.
This is DNB on the map, the red line corresponds with the sidewalk shown on the picture above:
First DNB before, in 2010. Pictures from Google street view.
And now DNB after, in 2014. Pictures from Google street view and from myself taken on November 24, 2014.
I think DNB strengthened its fortress in late 2012 because it knew it was going to repatriate and store a lot more gold in the near future. In hindsight Knot was lying in the interview when he was asked if he fully trusted the US as the custodian for the Dutch gold. Of course he couldn’t be honest in public, but the fact he said “…mostly these laws are not happily received in Europe”, and shortly hereafter Germany started repatriating and he began to reinforce his compound, tells me something was brewing.
Jeroen Dijsselbloem said in December 2012:
DNB’s history exposes that in situations where financial assets fall sharply in value, the public and the markets remain confident in gold.
But there’s more. Dutch youth TV show Het Klokhuis visited DNB in March 2014:
For selling official gold reserves there are stringent rules agreed with other countries, to manage the value of gold.
DNB tends to be very honest towards children.
Quoting DNB from their own Youtube channel:
Gold, A Magical Metal