Tag Archives: Gold run

Why Austria Is Likely To Repatriate Its Gold From London

Yesterday, December 12, we learned the next European county in line – after Germany, Switzerland, The Netherlands and Belgium – to openly talk about repatriating its gold reserves is Austria. This came to me as no surprise.

From derStandard.at we could read:

The National Bank Thinks About The Gold Concept

The gold reserves of the Oesterreichische Nationalbank (OeNB) and their deposits in the UK and in Switzerland are a recurring theme in political discussions. Especially the Freedom to demand the relocation to Austria, along the example of the Deutsche Bundesbank in mind, who want to move half their gold by 2020 to Germany.

In Austria, the Court of Auditors has adopted the gold concept in its recent OeNB examination. In its draft report it provides the OeNB diverse recommendations. One of the key points: Given the “risk of a high concentration at the Bank of England”, the examiner advise to “rapidly evaluate all possibilities of a better dispersion of the storage locations”. Not only the parties should be diversified, but also the “actual spread of storing among locations”.

Gold Relocation Possible

The central bank has not ruled out such a relocation. The existing gold storage concept would be reviewed, potentially it will bring parts of the stored gold in the UK to Austria, OeNB experts have stated. Any changes will be decided upon security and economic criteria, according to the OeNB.

A brief orientation on the current gold concept: Austria has 280 tonnes of official gold reserves, only a small part of (17 %) is kept in Vienna. 80 % of the reserves are located in London, the most trading partner in gold, 3% percent is stored in Switzerland.

Note, the above was translated by Google and me, although I don’t speak German, the language is quite similar to Dutch: I can’t guarantee the translation is 100 % accurate

The exact tonnage of Austria’s official gold reserves at each location was first disclosed in November 2012:

The Austrian central bank keeps most of its 280 metric tons of gold reserves in the United Kingdom, Vice Governor Wolfgang Duchatczek was quoted as saying in the finance committee of the country’s parliament today, according to Bloomberg.

Answering lawmakers’ questions, Duchatczek said 80%, or 224.4 metric tons of the metal was stored in the U.K., 17% or 48.7 metric tons in Austria and 3% in Switzerland, according to a summary of a closed-door committee meeting provided by the parliament.

The reserve has been unchanged since 2007, Duchatczek was quoted as saying. The central bank has earned 300 million euros ($385 million) over the last ten years by lending the gold, he said.

Then May this year we learned Austria was getting nervous about the gold they store at the Bank Of England (BOE), when they sent auditors to London to have a look. From Goldreporter.de, May 2014:

Austria is planning to send auditors to the Bank of England in order to verify the existence of Austria’s gold reserves stored in British vaults.

The Austrian accountability office will sent a delegation to London in order to check on Austria’s gold reserves stored in vaults at the Bank of England. This is reported by Austrian magazine Trend. The measure is seen as a consequence of growing public pressure. There is a rising disbelief among Austrians about the existence of the gold.

“I acknowledge the request. Any grocery store is obliged to do inventory once a year. It is the only way of getting rid of these unreasonable allegations”, Ewald Nowotny, Governor of the National Bank of Austria tells Trend.

Since May a lot has happened; Russia’s central bank increased its gold reserves significantly, China keeps importing huge quantities of gold, the Swiss population has expressed their concern on their gold reserves, The Netherlands has repatriated 122.5 tonnes from the New York Fed and Belgium openly stated it’s investigating to repatriate, which a central banker would never say if it wasn’t to act accordingly in my opinion. All this is happening in a global environment of QE. Would these developments make the Austrians, that were already a little jumpy on this topic, even more or less nervous?

There is another clue Austria has been long preparing to repatriate – no, it’s not because Menger and Mises were born there. While doing research for my post Eurosystem Increasing Allocated Official Gold ReservesI noticed the there was one country in specific that was allocating its reserves, from what I saw in data from the Bundesbank.

Eurosystem Total Official Gold Reserves (10,787 tonnes)

Eurosystem Official Gold Reserves Allocation, October 2014

As you can see in the chart above Austria has a fraction of its official gold reserves unallocated. In the next chart we can see the ratio between allocated versus unallocated gold developing from January 2013.

Austria official gold reserves allocated vs unallocated ratio

It looks like Austria is taking it step by step, just like The Netherlands did. First there was some discussion in politics about the official gold reserves and then actions are being taken behind the scenes, in the case of Austria they started to allocate their gold. The fact concrete actions already have been taken since July 2013, tells me there is a significant probability more will follow; such as repatriating gold from London.

Given the ‘risk of a high concentration at the Bank of England’, the examiner advise to ‘rapidly evaluate all possibilities of a better dispersion of the storage locations’… The central bank has not ruled out such a relocation. The existing gold storage concept would be reviewed, potentially it will bring parts of the stored gold in the UK to Austria, OeNB experts have stated.

Bear in mind The Netherlands not even talked about repatriating openly while preparing it. Who knows how many countries are preparing or discussing repatriating behind closed doors at this moment.