Germany holds the second-largest gold reserves globally, with a significant portion stored at the Federal Reserve Bank in New York. As Donald Trump’s presidency continues, questions are being raised about the security of these assets and whether they might be at risk of political interference.
DW examines the debate surrounding a potential repatriation of the gold bars to Germany.
Who owns Germany’s gold reserves?
The gold reserves are owned by Deutsche Bundesbank, Germany’s central bank, and serve to maintain the stability of the currency.
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While German parliamentarians can discuss the ‘future’ of the reserves and their security, the final decision regarding the location of storage rests with the German central bank.
Where are Germany’s gold reserves located?
The U.S. Federal Reserve’s (Fed) vault in New York holds up to 6,000 tons of gold, making it the largest gold storage facility in the world.
According to the German central bank, Germany’s total gold reserves amount to 3,350 tons.
Approximately 37 percent (1,236 tons), valued at around 160 billion euros (roughly $173 billion USD), of Germany’s gold is stored at the Fed in New York. Thirteen percent is held at the Bank of England in London, and the remaining 50 percent is kept at the Bundesbank in Frankfurt.
Germany ranks as the second-largest holder of gold reserves globally, after the United States, which possesses 8,133 tons. Italy holds the third-largest amount (2,451 tons), followed by France (2,437 tons) and Russia (2,326 tons).
China ranks sixth with the world’s sixth-largest gold reserves (2,304 tons), followed by Switzerland (1,039 tons), India (880.2 tons), Japan (846 tons), and Turkey (644.3 tons).
Indonesia is far outside the top 25 countries with the largest gold reserves. According to Bloomberg Tech, Indonesia’s central bank currently holds approximately 80 tons of gold reserves stored domestically.
Why is so much German gold in the U.S.?
The reserves originate from the Bretton Woods monetary system established in 1944. This U.S.-initiated system fixed exchange rates for all currencies against the U.S. Dollar. Germany joined the system in 1952.
During the “economic miracle” of the 1950s and 1960s, Germany’s export surpluses in dollars were exchanged for gold. For convenience and cost reasons, the gold was stored directly at that location.
during the Cold War, security considerations played a role: the gold was stored far from the reach of the Soviet Union.
Are there risks to storing gold reserves abroad?
Storing reserves abroad carries risks. Venezuela serves as a case study. In emergency situations, only gold held in domestic vaults is directly accessible.
In 2018, the Bank of England refused to grant access to the Venezuelan government for its gold reserves held in London, citing financial sanctions against the Maduro regime.
The Bank of England as well faced uncertainty regarding which Venezuelan authority was authorized to give instructions regarding the gold storage.
In early 2019, the British government, aligning with the U.S. And parts of the European Union, officially recognized Juan Guaidó as Venezuela’s interim president, further complicating whether instructions from the Maduro government could be legally followed by the Bank of England.
Are there risks to Germany’s gold reserves in the U.S.?
Experts are divided on this issue. Many support repatriating the gold reserves due to declining trust in the U.S. Government.
Stefan Rie, a capital market strategist at investment firm Acatis, suggested that Trump might say, “you are investing too little in defense.” He added, “He could say that you owe us, and now we will collect.”
Achim Wambach, president of the Leibniz Centre for European Economic Research (ZEW), also believes that “the U.S. Is currently not a reliable partner for the European Union.” The dependence on the U.S. Needs to be reassessed in this context.
However, others consider these concerns to be exaggerated. “Whoever owns the gold, if the U.S. Suddenly seized the gold of its owners, the New York gold trading center would collapse,” said Johannes Beermann, a former member of the Bundesbank’s central board, to DW.
German central bank president Joachim Nagel does not witness any risk. In an interview with the German newspaper FAZ, he stated, “I have no doubt that our gold at the Fed in New York is stored safely. It’s a currency reserve with special protection status.”
Has Germany previously repatriated gold reserves?
Yes. The primary impetus was the global financial crisis of 2008 and the Eurozone crisis in 2010. Between 2013 and 2017, the Bundesbank transferred around 300 tons from the U.S. And 374 tons from France to Frankfurt.
Are other countries also withdrawing their reserves from the U.S.?
Yes. Citing the need to quickly access gold reserves in a crisis, the Dutch central bank withdrew approximately 122 tons from New York in 2014.
Austria and Belgium have reviewed their gold storage strategies. Hungary and Poland have increased their domestic gold reserves since 2018 and brought gold reserves back from abroad.
Can gold reserves help ‘heal’ a country’s finances?
While the use of gold reserves for this purpose is often restricted, the trend exists. Russia, according to domestic media reports, used the sale of reserves to finance its state finances.
It was reported that the gold reserves of Russia’s National Wealth Fund (NWF) fell from 405.7 to 173.1 tons since 2022 due to the high costs of the war against Ukraine.
According to the Goldreporter platform, Turkey, Uzbekistan, and Kazakhstan also routinely use their gold reserves to obtain liquidity.
In Italy, the governing Fratelli d’Italia party argues that gold reserves should be declared public property.
Experts see such a definition as a risk, as future governments could more easily use the gold reserves to repay debts or finance the state budget.
Such political intervention could shake investor confidence internationally.
This article was first published in German
Adapted by Sorta Caroline
Editor: Yuniman Farid
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