Calls grow for Germany to repatriate U.S.-held gold

Germany is facing renewed pressure to bring home some of its gold held in the United States due to geopolitical uncertainties stemming from the shift in transatlantic relations.

The European nation currently has the world’s second-largest gold reserves, and keeps a large portion (about a third) in the New York Federal Reserve’s vaults in Manhattan. For decades, those gold bars — estimated at about 1,200 tonnes — had been stored there to ensure easy access in case of global conflict.

Italy and Germany expressed concern last June after U.S. President Donald Trump alarmed investors with comments about the Federal Reserve chairman that appeared to threaten the institution’s independence. The concerns spiked again recently with a potential government investigation of Federal Reserve Chairman Jerome Powell. 

“In the interest of greater strategic independence from the U.S., the Bundesbank would therefore be well advised to consider repatriating the gold,” Emanuel Mönch, a former head of research at the Bundesbank, said in an interview with the financial newspaper Handelsblatt.

Trade tensions

Many within Germany are concerned that America is now no longer safe to store its assets. Since last April, at the height of global trade tensions ignited by Trump, politicians and fiscal experts in Germany have been calling for a repatriation of its U.S.-held gold.

Support for repatriation has also come from other quarters, including Michael Jäger, head of the European Taxpayers Association, who since last year has called for Germany to move the gold as quickly as possible in case its relations with the U.S. deteriorate.

This month, Jäger once again reiterated his plea after the U.S. ramped up the pressure to seize Greenland. “Trump is unpredictable and he does everything to generate revenue. That’s why our gold is no longer safe in the Fed’s vaults,” he told the Rheinische Post.

However, not all experts back the proposal. Clemens Fuest, president of the Ifo Institute for Economic Research, warned that repatriation could inflame diplomatic tensions and have unintended consequences

Cold War 

Germany’s gold reserve strategy dates to the Cold War era, when storing bullion abroad was seen as a safeguard against potential Soviet aggression. In addition to New York, it also has gold in London and Paris.

The calls come at a time when gold prices are soaring to record highs. This week, the metal surpassed $5,100 an oz. for the first time, extending a rally that saw prices rise by 80% over the past year. At today’s prices, Germany’s gold held in New York would amount to about $128 billion.

In addition to Germany, Italy, as the third-largest gold reserve holder, has been pressured to return its gold stored in New York.