German Gold Returns Home: How Populism is Influencing Monetary Policy
Germany has completed the transfer of $13 billion in gold reserves from New York to Frankfurt. The transfer is one step in a plan developed by Germany’s central bank in 2013 that aims to repatriate half the gold reserves it keeps abroad. The final transfer is expected from Paris later this year, completing the project three years ahead of schedule.
Germany is not bringing home its gold bullion in response to concerns about President Trump’s monetary policy, officials said. Instead, it’s a recognition that the broader political and economic climate has shifted—not to mention a response to populist pressure within Germany and across Europe.
Germany’s gold reserves, valued at $127 billion, are the second-largest stockpile of precious metal in the world. The German government cultivated these reserves after World War II, to protect German economic prosperity. During the Cold War, up to 98% of the reserves were stored abroad.
Around 2012, conspiracy theories questioned whether Germany still had the gold reserves it claimed to possess. At the same time, the “Bring Our Gold Back Home” campaign fueled fears that the euro crisis could lead to the loss of German gold reserves.
The plan to bring Germany’s gold home is gaining traction. Candidates like France’s Marine Le Pen and movements like 5-Star in Italy openly advocate withdrawing from the Eurozone, leading some to suggest that the gold will be needed to back a new German currency should the euro collapse.
Though gold has not been directly linked to currency since the US ended the Bretton Woods agreement in 1973, gold reserves can improve international confidence in a currency and help keep trade flowing.
For now, Germany appears to be staying the course. As laid out in the 2013 plan, half the country’s foreign gold reserves will stay in London and New York, and the Bundesbank has no plans to move them.