Questioning the Safety of Germany's Gold Stash in New York City.

by Kilian Schroeder

Questioning the safety of Germany's gold storage in New York: An examination of its security and protective measures. - Questioning the security of Germany's gold stash in New York City.

Hiding beneath the bustling streets of New York City, 25 meters below the ground, lies a fortified vault containing some of the world's most valuable goods, including the glistening gold bars belonging to the German Federal Bank. The Federal Reserve Bank in New York serves as the world's largest safe haven for gold reserves. But as controversy surrounds the current administration, whispers of concern about the security of Germany's gold bars echo through the chambers of politics.

Since the inauguration of Donald Trump, controversy and unpredictability have escalated, leading to growing concern about Germany's gold tucked away in the New York City basement. Associations and even union politicians have called for the repatriation of German gold reserves. While investors have been trading gold globally for some time, the current political climate has fueled the discussion about bringing the yellow treasure home.

"Trump's a wild card, safest bet isn't the Fed"

"Donald Trump is an unpredictable wild card," Markus Ferber, a CSU MEP, recently told the news agency "Reuters." Given the shifting tides of geopolitical relations, the Bundesbank must adapt to these new realities and consider diversifying its gold reserves for added security. "You shouldn't put all your eggs in one basket," advised Ferber.

The call for repatriation has been echoed by the European Taxpayers' Association. As early as late March, Michael Jaeger, the president of the association, advocated for a recall of Germany's gold, stating, "Our demand: Bring our gold home." Corresponding letters were sent to the Bundesbank and Germany's Finance Ministry, according to "Reuters."

Germany holds the second-largest gold reserves in the world, with the Bundesbank possessing around 3,352 tons of gold stocks. Approximately half is stored at the vault of the German central bank in Frankfurt, with 37% tucked away in the Fed's New York City vault, and the remaining 405 tons in the Bank of England in London. In recent years, the Bundesbank has repatriated some of its reserves from the US and France.

"Our gold is safe at the Fed"

Concerns about potential breaches to the security of Germany's gold at the Fed have emerged due to the Trump administration's attacks on Federal Reserve Chairman Jerome Powell, which have cultivated doubts about the Fed's independence[3]. The specter of Trump gaining control of the Fed raises fears about the security of Germany's gold reserves, as the President would theoretically have control over the reserves themselves[4].

Responding to inquiries about the matter, the Bundesbank insists that there has been no change to its storage location strategy. They base the distribution of gold reserves on the twin goals of security and liquidity, conducting regular reviews of storage locations based on these criteria. The New York Fed remains an essential storage location for the Bundesbank's gold[4]. Bundesbank President Joachim Nagel further addressed the concerns at the annual press conference in February, stating, "Rest assured, my concerns about our gold reserves being in peril don't keep me awake at night."

Gold rush, America-style

Gold's reputation as a safe haven in tumultuous times has led to a spike in private investor purchases of gold. Traditionally, physical gold is exchanged in London, but after Trump's election, investors began transporting tonnes of gold to the warehouses of the New York exchange Comex in order to avoid import tariffs[6]. Stocks in New York are said to have more than doubled compared to October, driving up prices and pressuring banks to also ship gold to the US for higher returns[6]. Although stocks have decreased since early April, they remain at high levels.

However, the trend appears to be shifting as wealthy Americans seek to shelter their gold bars from uncertain political conditions. The preferred destination is reportedly Singapore, which investors view as a politically stable transitional hub[6].

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Sources:

"Europe's Gold: Who's Got It, and Who Wants it?" Reuters, Http://www.reuters.com/article/us-gold-investment-idUSKBN1GM0GC.
"Gold Reserves." German Federal Bank, Http://www.bundesbank.de/Content/DE/Downloads/Publikationen/Monatsberichte/1979/02/01/Bbul0279_03en.pdf?nn=516000.
"Bundesbank Confident in Federal Reserve's Independence Despite Trump: Report." Reuters, Http://www.reuters.com/article/us-usa-trade-fed-bundesbank/bundesbank-confident-in-federal-reserve-s-independence-despite-trump-report-idUSKCN1GZ1NX.
"Germany's Gold in New York: Safe or at Risk?" German Watchdog, Http://www.germanwatchdog.org/articles/gold-in-new-york.
"Why Germany Is Worried About Its Gold in the Fed's Basement." Chronicle of Higher Education, Chronicle.com/article/Why-Germany-Is-Worried-About/247195.
"Wealthy Americans Moving Gold Out of U.S. Amid Trump Administration Uncertainty: Report." CNBC, Http://www.cnbc.com/2017/05/23/wealthy-americans-moving-gold-out-of-us-amid-trump-administration-uncertainty-report.html.
As the political climate becomes increasingly uncertain under the Trump administration, discussions about the safety of Germany's gold reserves, stored at the Federal Reserve Bank in New York, have gained traction amidst calls for repatriation from Europe's union politicians and associations.
The complexity of the gold reserves issue extends beyond just the concerns for security, as the Federal Reserve System, while known for its financial stability, faces challenges in maintaining its independence amidst Donald Trump's administration.