Who Knew? German Central Bank Has Been Selling Gold For More Than A Decade

Authored by Louis Cammarosano via Smaulgld.com,

Deutsche Bundesbank gold reserves shrink 45 tons over the past ten years.

• German Central Bank holdings fall From 3,420.6 tons at the end of Q2 2007 to 3375.6 tons, a drop of 1,446,783 ounces.


• German gold reserves have decreased 1.3% over ten years.

Bring the Gold Home & Sell Some

Deutsche Bundesbank, the central bank of Germany, has gained a high profile for its insistence on repatriating a good portion of its gold from vaults at the New York Fed, the Bank of England of London and the Bank of France in Paris. We have been covering the German gold repatriation story since they made their request in 2013 here, here, here and here.

The German repatriation requests aimed to rebalance the Deutsche Bundesbank’s gold holdings from nearly 70% held abroad to 50% held within Germany’s borders. The German Central Bank announced earlier this year that it has nearly completed its plan to repatriate its gold.

Jens Weidman, President of the Deutsche Bundesbank once famously said:

“Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish.”

In this video from the Deutsche Bundesbank, German nationals, Deutsche Bundesbank representatives and Herr Weidman explain the importance of gold to Germany.

Given the Deutsche Bundesbank’s statements and the accelerated German gold repatriation schedule, we are surprised to see that the Deutsche Bundesbank has been a steady seller of its gold over the past ten years.

German Gold Reserves 2007 – 2017

The Duetsche Bundesbank gold reserves fell 45 tons from June 30 2007 to May 31, 2017.

The Central Bank of Germany holds the second largest gold reserves of any central bank.

Currently, with the People’s Bank of China halting its gold purchases since October 2016, only the Central Banks of Russia, Kazakhstan and recently Turkey are steady buyers of gold.

Germans: 'Yes, Gold IS Money'

Whereas a few years ago countries repatriating their gold seemed to be ‘the hype of the month’, once the dust started to settle, we didn’t hear much about gold repatriations anymore.

At least, until last week, when Germany announced it has been able to accelerate the gold repatriations. Indeed, the country has now repatriated all the gold it wanted to get back from New York and now has to bring just 91 additional tonnes ‘back home’ from Paris.

Source: Bundesbank.de

Once those final 91 tonnes will be back in  Frankfurt, Germany will cut all ties with the custodian in Paris and its gold will remain in the Frankfurt, London and New York vaults, and approximately 50% of the entire inventory of the country will be held inside the country.

What’s really interesting is how hard Germany wanted to emphasize it has received ‘real’ gold and it looks like the Bundesbank wanted to nip some comments in the bud. In fact, the German Central Bank has now promised to release a list of gold bars on Thursday to confirm which bars have been ‘sent home’ by the New York Fed, where the US-based bars were held.

You’d almost start to think the Bundesbank is trying ‘too hard’ to convince the population it really received the yellow metal from New York. If this would indeed be a normal transaction (after all, it should be. ‘You have our gold, please give it back to us!’), why would the Bundesbank be so dramatic about receiving it. The president effectively showcased bars of gold, and showed pictures of the German vault in New York, as you can see on the next image.

Source: Reuters

You’d almost start to think they were surprised to be effectively able to get the gold back! And you’d almost start to think gold is valuable, contrary to the ‘gold isn’t money’ rhetoric after the global financial crisis.

If gold had no monetary value – which is what the central banks really wanted you to believe – why are the Germans making such a fuss about it?

Perhaps because gold IS money, and perhaps because gold remains an insurance policy not only against inflation, as we argued in the past few weeks, but also against political uncertainty. And whilst the appointment of Donald Trump as president of the United States was initially seen as a great decision for the American economy, a lot of the plans the president wanted to execute remain uncertain, and more importantly, unclear.

One of the proposals was to allow companies to repatriate the cash they are holding in overseas subsidiaries back to the USA. The tax income associated with such a repatriation would bolster the US government income, but it would also ‘incentivize’ American companies to invest (a large part of) it in the domestic economy.

That’s a great plan and will undoubtedly have a positive impact on the employment rate and the domestic growth numbers, but investors were probably kinda hoping to see a real ‘plan’ by now.

Source: CME Group

As the Federal Reserve seems to be planning to hike the interest rate again in March (as you can see on the previous chart, the market is pricing in a very small chance to see another rate hike), it’s really interesting to see the market doesn’t believe a single word of this. With a probability of less than 18% to see a rate hike happen, investors seem to be pretty certain it will take a while before we will effectively see a rate hike.

Source: CME Group

Indeed, even for the May meeting date, the market is still estimating a 56% chance the Federal Reserve won’t hike the interest rate, and it’s only after July 2017 the market gives a rate hike a 75% probability to happen.

These are for sure very interesting times, and gold seems to be very strong these days as the tension in world politics remain at an elevated level. And during distressing times, people always fall back on gold as a safe heaven. And so does the Bundesbank.

>>> Read our Guide to Gold and find out how you could use gold as an insurance policy

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