Gold Repatriations, Platinum Squeeze, Xiaomi order surge.
Gold Repatriations
From time to time the question of where the safest place to store gold comes up. Most individuals have to make a decision about whether to keep the gold at home and keep quiet about it, or to pay for storage somewhere else.
The decision on which of those options to pick will be heavily influenced by how secure one feels in one’s own home. Countries are not much different.
I received this email today which may be of interest.
Hi Eoin, I have recently seen an FT article saying that Germany and Italy are being pressed to repatriate $250 billion of gold from the US. What is your take on this and how would it impact Tariff negotiations and USD strength? (If the US actually has the gold). Your comments are valued. Kind regards,
The movements to repatriate gold from the USA and the UK have been gaining momentum globally since the Global Financial Crisis. Countries want to have their gold close to hand so they can lay hands on it if the need arises.
When Venezuela attempted to repatriate its gold from the UK, it hit a roadblock for political reasons. The UK and US governments did not want to afford the Maduro government the opportunity to further erode Venezuela’s financial position and were more interested in fomenting regime change.
That was a wakeup call for other central banks. The biggest concern they have is that they will not have access to their gold when they need it because of politics in the UK or USA.
The confiscation of Russia’s foreign currency reserves following its invasion of Ukraine rammed home that point even more forcefully. Today, a country cannot be sure the USA will deliver gold when asked. That is a problem.
The reason gold reserves were deposited in the UK and USA in the first place was because of the odds of an invasion. The potential for gold to be stolen was high enough to justify the migration.
Today, the greater risk is that the USA is not a reliable partner. The last thing any country wants is for their gold to be held hostage to trade negotiations. I don’t think that is a serious risk but in the current environment it cannot be ruled out either. That is reason enough to repatriate gold before it becomes a problem.
I do not believe there is any question about whether the gold is at the Federal Reserve vault in New York. The gold is not a US reserve. It is not counted in the USA’s sovereign assets and is unlikely to have any effect on the value of the Dollar.
The fact that the USA is no longer deemed to be a reliable custodian is more important and is a reason for not holding US Dollars.
Incidentally, as the Dollar goes down, subscription costs are improving for all ex-US potential subscribers.
The citizens of Germany and Italy have an additional consideration. Can they trust their governments to be sound custodians of their nation’s gold?
Gordon Brown sold the UK’s gold at the bottom of a secular bear market. The benefit of having a nation’s gold overseas is that it is beyond the ability of politicians to interfere with.
