Germany's Gold Repatriation Unlikely To Assuage Public Concerns

Thursday’s AM fix was USD 1,683.25, EUR 1,260.11, and GBP 1,050.85 per ounce.

Wednesday’s AM fix was USD 1,679.75, EUR 1,262.78 and GBP 1,047.55 per ounce.


Gold inched up $1.00 or 0.06% in New York Wednesday and closed at $1,679.90/oz. Silver rose to $31.46 in Asia before it dropped off to $31.07 in London, but it then climbed to as high as $31.551 in New York and finished with a gain of 0.25%.

Gold held firm on Thursday, as investors weighed concern about slowing global economic growth and expectations for more stimulus measures.

Platinum supply shortages in South Africa limited its 7 day rally.

Thomson Reuters GEMS reported that gold investment favoured by negative real interest rates and debt concerns, is expected to drive prices to a record average high in 2013.

Although the U.S. Fed minutes earlier in the month stirred concerns about tightening monetary policy, the U.S. debt ceiling issue still looms and without an agreement the U.S. government will run out of money by mid February.

The Bundesbank announced Wednesday that they will repatriate 674 metric tons of their total 3,391 metric ton gold reserves from vaults in Paris and New York to restore public confidence in the safety of Germany’s gold reserves.

Whether the repatriation of only some 20% of Germany's gold reserves from the Federal Reserve Bank of New York and the Banque of Paris back to Frankfurt manages to allay German concerns remains in question - especially given that the transfer from the Federal Reserve is set to take place slowly over a seven year period and will only be completed in 2020.

The German Precious Metals Association and Germany's ‘Repatriate Our Gold’ campaign said that the move by the Bundesbank did not negate the need for a full audit of Germany's gold.

They want this to take place in order to protect against impairment of the gold reserves through leases and swaps. Indeed, they have called for independent, full, neutral and physical audits of the gold reserves of the world's central banks and the repatriation of all central bank gold - the physical transport of gold reserves back into the respective sovereign ownership countries.

It seems likely that we may only have seen another important milestone in the debate about German and global gold reserves.

Mohamed El-Erian of PIMCO in an op-ed piece in the Financial Times said that the German gold move should have “minimum systemic impact."

But he acknowledged the risk that this could be wrong and the decision could “fuel greater suspicion” which could result in a “hit to what remains in multilateral policy cooperation would be problematic for virtually everybody.”

He warned that “growing mutual mistrusts” could “translate into larger multilateral tensions, then the world would find itself facing even greater difficulties resolving payments imbalances and resisting beggar-thy-neighbor national policies.”