Sovereign gold: why Germany requires its metal reserves from the USA
Two of the world's largest holders of gold reserves in the world — Germany and Italy — are beginning to think about returning their gold from the United States, where it has been stored for decades. So far, we are not talking about official initiatives of the governments and central banks of the respective countries, but representatives of parties from across the political spectrum, as well as public organizations, are raising their voices. Given the deterioration of relations between the EU and the United States, these plans may well come to fruition. Why the Germans and Italians keep their precious metals in America at all and what is the reason for their desire to repatriate them — in the Izvestia article.
No more paranoia
In recent months, the number of people concerned about the safety of European gold in the United States has increased significantly. Fabio De Masi, a former member of the European Parliament from the German leftist party Die Linke and now a member of the Sarah Wagenknecht Bloc, told the British Financial Times this week that in "turbulent times" there are "serious arguments" in favor of transporting more gold to Europe or directly to Germany. At first glance, given his party affiliation, one would expect something like this: a leftist, and even a representative of a populist party.
The problem is that these ideas have also settled among the completely mainstream part of the opposite side of the political field. For example, Peter Gauweiler, an ex-MP from the conservative Christian Social Union (the Bavarian "element" of the CDU/CSU alliance), stressed that the Bundesbank "should not look for easy ways" to protect the country's gold reserves. He said that the regulator should first answer the question of whether the placement of German gold reserves abroad has become safe in the last 10 years, taking into account various geopolitical risks.
A similar position is taken by the Alternative for Germany party (currently the second largest in the Bundestag), whose representatives complain that 10 years ago they were called conspiracy theorists and paranoids for these proposals.
Finally, various public organizations like the European Taxpayers Association, whose chairman Michael Jaeger called for the gold to be returned home immediately, "so that the European central banks have full control over it at any moment." In general, there is a consensus among party and non-party members on this issue.
As for Italy, in 2019, being in opposition, the party of the current Prime Minister Giorgia Meloni, the Brothers of Italy, advocated the repatriation of gold. Meloni personally promised to return the gold if she came to power. However, after becoming prime minister in 2022, she began to hush up this topic in an effort to maintain friendly relations with the United States and avoid deepening the trade war. Fabio Rampelli, a deputy from the Brothers of Italy, said that the current position of the party is as follows: the "geographical location" of gold is of "relative importance" because it is located with a "historical friend and ally." But the public has become more active, considering the current situation to be unreliable.
What you protect, you have
Speaking about the reasons for wanting to bring gold back home, it is necessary to understand how it ended up abroad in the first place. Before the Second World War and immediately after it, the gold reserves of the vast majority of countries were stored on their territory. Any other situation would be considered an attack on sovereignty.
The changes began in the 1950s and 1960s. European countries, rebuilt thanks to the Marshall Plan, began to take advantage of the fact that America did not fence itself off with tariffs. The cost of producing goods in Europe was lower than in the United States, due to significantly lower salaries, as well as government support for many industries. As a result, a whole group of countries has generated a significant trade surplus with the United States. Well, since dollars were exchanged for gold under the Bretton Woods system (until French President Charles de Gaulle experimentally established the impossibility of implementing this scheme in full), the reserves obtained as a result of such trade remained in the form of gold reserves.
In general, European countries (unlike Asian ones) still keep the lion's share of their national savings in gold. Accumulation in dollars is not very relevant: until 2008, these imbalances were not taken care of at all, and during the crisis of the late noughties, the US Federal Reserve provided central banks in Europe with dollar swap lines so that they could quickly receive the currency at any time. Germany and Italy are, respectively, in second and third places in terms of gold reserves after the United States itself. And it just so happens that a significant part of this stock (Germany — more than a third, 1,236 tons) is kept in America. In addition to German and Italian gold, the United States also holds part of the reserves of Lebanon, the Netherlands and India.
The official reason for the transfer of a significant part of the gold overseas was once called the Soviet threat. The German government sent the precious metal to America so that in the event of a military conflict it would not fall to the USSR. Admittedly, this is not the most satisfactory explanation: at the time when gold was being transported to the United States, detente reigned in Europe, and economic cooperation between Germany and the USSR was gaining momentum from year to year. The opposition often said otherwise: that the United States controls European countries in this way. In addition, it has been repeatedly suggested that there is no physical gold in the United States anymore. However, this version also raises doubts: why did only part of the stocks go to the United States, and why did some European countries go for it, while others did not?
The third position is probably the closest to the truth. New York is the world's largest trading center for both physical and paper gold — the American market is the most liquid in the world. In this case, the reserves can be realized relatively quickly. Such a consideration could well play a role in decision-making in countries that have huge reserves. They kept most of the precious metal at home, and transferred the smaller part to the United States in order to be able to quickly sell it on the open market.
What has changed now
All this time in Germany, the topic of gold repatriation has not been off the agenda, having intensified in the 2010s. And although it was mostly raised by anti-systemic parties that did not even have parliamentary representation, the gold gradually returned. Just over 10 years ago, the Bundesbank repatriated over 300 tons each from New York and Paris. By the way, the argument for withdrawing money from the capital of a neighboring state was the transition to the euro, which meant there was no need to keep gold reserves to balance mutual trade.
But now, against the background of what is happening in the world, the topic is fully legitimized for many reasons at once. First, tensions between the US and the EU have escalated, and not only because of geopolitical differences. If America and Europe do not reach a consensus on tariffs, this rift will become even wider. Secondly, in Germany, they are concerned about the pressure of US President Donald Trump on the Fed, which, as previously believed, was independent of the executive branch in making its decisions (and although in fact the situation is not so clear, at least this appearance was maintained). The transfer of the decision-making center from the Fed to the White House may pose a risk for countries that hold some assets in the United States, including physical gold.
Finally, we now have a situation where the price of gold is continuously rising. The precious metal has already exceeded $3,000 per ounce, thus tripling the cost of investments in it in recent years. The gold reserve has become a much more significant investment, and it is quite natural to keep it "closer to the body" in conditions of turbulence. Moreover, central banks, in principle, actively purchase precious metals: compared to the mid-2000s, the volume of these holdings in physical terms has increased by more than 20% and is now approaching 38 thousand tons, which is about 17% of the gold mined in the entire history of mankind. If the global financial system continues to fragment, the value of these reserves will skyrocket further, and gold may become the most important "bridge" connecting global trade and financial blocks. As, in fact, historically it was.
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