EU Moving Gold Reserves Out of USA

Europe is getting nervous about any tendencies in the US government that might be tempted to lay hands on gold assets stored in vaults in that country.

Germany and Italy are now getting convinced that it is time for them to bring home those of their gold reserves that are currently in ‘safe keeping’ in the US. In these times, where trust in international institutions and trust between long time allied nations seem to evaporate overnight, European nations are eager to produce plans to repatriate bullion stockpiles. Some have safely been sitting in vaults in the US for decades, but the erratic and even bullying ways of the Trump administration convey a whole new dimension of risk.

Germany

For Berlin, it is clear by now that Trump is showing no regard for anything or anyone, including international relations. As any responsible government, their focus is now on protecting German assets. Back in the 1990’es, conspiration theories claimed that the gold was not in place in ‘Fort Knox’, it was moved or even it had vanished, etc. When finally an inspection was made, the rumors were killed and some 100 million euro worth was cashed in. However, this time it is about real risk and serious opinion builders like Der spiegel.de/wirtschaft/f… is arguing for immediate action.

Anyone who still doubted that the US, under Donald Trump, had transformed from a long-time partner into a systemic enemy should have had a revelation with the kidnapping of Venezuelan President Nicolás Maduro. Maduro himself is no loss; his country deserved better. Trump, however, has once again demonstrated that he couldn’t care less about international law. And why should he? The man is an autocratic imperialist who ruthlessly wields the military and economic power of the United States and seeks the destruction of the European Union to more easily advance his interests.

The reactions in Europe are predictably timid. The fear of losing US support in the Ukraine war is too great; the leverage to exert pressure on Trump, as the Chinese have with their rare earths, is too weak. Therefore, Europe and Germany should at least focus on preparing for Trump’s next attacks.

After characterizing the US president as mafia-like, the news media worries that this next step might well be about Greenland. This would be an attack on EU and the end of NATO, in principle. It is time for Germany to prepare.

Europeans would be powerless against this as well. But Germany, in particular, should act swiftly where it still has room to maneuver: It should repatriate its gold reserves stored in New York before Trump confiscates them to blackmail Berlin politically and economically, for example, regarding the Greenland issue. Anyone who considers this scenario far-fetched hasn’t watched the news in a long time.

Of Germany’s total gold reserves, 36.6% are stored at the Federal Reserve Bank of New York; 1,236 tons currently worth around 150 billion euros. The reserve of in total 410 billion euros is managed by the Bundesbank (German Federal Bank) and most of the rest is kept in Frankfurt am Main. During the Cold War, Germany decided to keep some reserves in New York, London, and Paris in order to keep them safe in case of a Russian invasion.

Lately, it has been considered a populist campaign issue to demand repatriation of the gold reserves, latest in 2012 when the Federal Court of Auditors criticized the Bundesbank for having failed to audit its gold reserves for years. Conspiracy theorists who doubted the existence of the reserves, and tabloid press demanded the repatriation of the holdings. As a result, some 300 tons of gold was shipped home from New York, which laid the case cold for the time.

It’s shameful enough that under Chancellor Angela Merkel, Germany squandered its best years, including its financially best years, and willingly surrendered itself to American, Russian, and Chinese interests. The result is near-powerlessness in the flexing of muscles by the nuclear empires. Berlin should focus on damage control and think ahead before Trump strikes. Because no one can rule out the possibility anymore.

Graph by statista.com/chart/1912…

Germany is the second largest holder of gold reserves, after US itself, and Italy is third. France is a close fourth followed by Russia and China.

France

Main vault room of the Banque de France in Paris, date unknown. Source: facebook.com/BanquedeFr…

Most of the gold reserves of France are in Paris already. In 1963 and until 1966, President de Gaulle ran the secret operation ‘Vide-Gousset’ to repatriate 3,313 tons of gold reserves from the vaults of the Federal Reserve in New York and the Bank of England in London. De Gaulle feared America’s deficit in its balance of payments would rupture Bretton Woods and lead to a devaluation of the dollar against gold. He also did not trust the Americans with his gold reserves. It took 44 boat trips and 129 flights to bring home the gold to the Banque de France in Paris.

One of the gullerpenger.no/publika…, ‘How France Secretly Repatriated All Its Gold Before Nixon's Dollar Devaluation’ concludes:

France’s decision turned out extremely well. As was foreseen by the French, the price of gold in dollars increased sharply, from $35 to $800 dollars an ounce, from 1968 until 1980—the dollar lost 96% of its value against gold. Countries that held on to their dollars were less fortunate.

More recently, after the Great Financial Crisis, the Banque de France repatriated 211 tonnes, upgraded all its bars to current wholesale standards, overhauled its vaults, revived Paris as a trading hub for institutional investors, and history repeats itself as we are in a gold bull market presently.

Italy

During the intense negotiations about the 2026 budget, known as ‘La Manovra’, Giorgia Meloni and her Fratelli d’Italia party introduced a paragraph in the budget law that sought to wrestle the national gold reserves away from Bankitalia, the national bank. In a typical populist way, she announced that the reserves belong to the people, not to ‘foreign interests’, claiming that Bankitalia is subject to (EU) interests outside the control of Italian democratic institutions.

With Italy holding the third-largest gold reserves in the world, behind only the United States and Germany and in the current uncertain international climate gold remains a safe-haven asset par excellence. For a government under pressure, a wild card that would allow the country to weather a period of instability. However, it was soon pointed out by the European Central Bank (ECB) that such a move would jeopardize central bank independence. The ECB also feared that this initiative could open the door for the gold reserves to be used in the future by the government in Rome to finance itself or even to reduce its ballooning public debt—which exceeds three trillion euros—violating European Treaties that prohibit public sector financing through banks. ‘The ECB remains unclear about the specific objective’, the issuing institution warned in a note in early December, in which it invited ‘the Italian authorities to reconsider this project’.

The final version, according to corriere.it/economia/fi…, is watered out and seems not to be contrary to the EU treaty or good governance: Gold, Agreement on Reserves for Italians: But the Bank of Italy Will Remain in Charge of Managing Them

The latest version of the amendment will read as follows: “The gold reserves belong to the Italian people and are managed independently by the Bank of Italy.” A few definitive words for a lengthy negotiation that involved the main institutions in Rome, Frankfurt, and Brussels: namely, Palazzo Chigi and the Ministry of Economy, and then the ECB and the European Commission. It was a painstaking process, balancing political expediency and realism.

The amendment that should overcome the ECB’s opposition. For citizens, nothing changes. It’s reasonable to imagine contacts between Panetta and Meloni behind the latest negotiations.

The Bank of Italy is expected to approve the new wording today, and the budget is settled. The effect on the budget is effectively nothing, zero. According to Il Corriere, Italy’s gold—2,452 tons worth approximately 300 billion euro—will continue to be stored in Palazzo Koch in Rome, but physically, still mostly outside the country for the time being. It is still under the surveillance of an independent body as part of the ECB system. However, Meloni will be able to say she has established an ownership principle that wasn’t there before. Hence it is largely symbolic but close at heart for Meloni’s party that already in 2019 called for ‘taking appropriate initiatives to ensure that any gold reserves still held abroad are brought back to Italy’. This last point will not be achieved, but is very likely to be revisited later in the season.