If investors want to investigate a mystery they might wonder what happened to Germany’s gold? It matters because if German gold is missing along with the gold from a number of other countries the amount of gold in the world is much less then assumed. This will obviously effect the commodities market in precious metals. If it is proven that world reserves are much lower than is being advertised, the price of gold would naturally increase possibly dramatically.
It will also have an effect on the American dollar (USD) since the scene of the crime is in New York. If the United States is actually holding less gold then is being claimed, it puts a new downward pressure on the value of the dollar.
It also brings into question the way the governments of the world store their gold, as well as how trustworthy are the bankers and custodians of the gold. This has major implications for not just countries, but institutions, corporations and individual investors as well.
Germany has the second largest gold reserves in the world. The largest holder is the United States if you can believe what is being claimed by authorities there.
German reserves of gold stand at 3,400 tons (worth over $150 billion USD) which has been kept in 3 locations outside of Germany and one inside the country. As the financial capital of Germany, Frankfort is the obvious place to store gold in the country. The other locations are Paris, London, and New York.
Germany made the decision to begin repatriation of their gold in 2012. The stated goal is to have 50% of their total holdings brought home by 2020 instead of just having 1/3 of their total holdings kept at Frankfurt.
The Germans decided to take all of their gold which amounts to 374 tons held by the Banque de France. It makes up 11% of the total German reserve. France has not charged any money for storage of the German gold.
Reserves in London are to remain the same at 445 tons which amounts to 13% of the total stockpile. The Germans had already withdrawn 940 tons from the United Kingdom in 2000 and 2001. The reason given at the time, was to save on storage fees that today still cost 550,000 British pounds yearly.
The remaining German gold is kept at the New York Federal Bank. The Germans wanted to withdraw 300 tons, reducing their total holdings there from 45% to 37%.
The reason to keep German gold west of the country during the Cold War was to keep the cache as far away from the Soviet Union as possible. Despite recent events in Crimea and the rest of Ukraine, a Russian invasion of Central Europe and Germany is unlikely at this time in history.
The United States was more than happy to store the gold for Germany during the postwar period as the Germans reconstituted a national holding once again. Purchases and sales by the Germans ceased in 1973 except for special commemoration coins.
The benefit to store the gold for the United States was that it provided additional support in the value of the USD, over the years. It enhanced the status of the USD in being a global reserve currency. Like the French, the Americans never charged anything for holding the gold for Germany.
There are a number of reasons that the Germans may have decided to bring their gold home including changing geopolitical circumstances, the decline in the value of the USD, and poor financial as well as monetary policy of the United States government.
In addition, modern Germany has always been cautious in finance and monetary policy. They pride themselves as being good economic stewards. The country has maintained consistently a manufacturing base of high quality items and a rather large trade surplus for decades . It was not unusual therefore, for the German Court of Auditors to demand in 2012 that the Central Bank of Germany verify and audit, its official gold holdings.
The Central Bank of Germany, the Bundesbank had not checked the gold physically nor had outside auditors verify authenticity or weight, since the gold had left German hands. When Philipp Missfelder, a member of the ruling party in power asked to view the German gold in London and Paris he was denied access. The official reason given by the Bundesbank was that these facilities lacked visiting rooms.
However,the real mystery begins in 2012 when a representative of Germany’s Central Bank arrived in New York to inspect German holdings, being held at the Federal Reserve Bank of New York. He was himself, denied admission. Why were the Germans being told that they would be unable to verify the 1,500 tons of gold being housed for them in New York?
The Federal Reserve Bank of New York also had excuses why representatives from the Bundesbank would be unable to see German gold. The response from Germany was not flattering. Accusations of corruption and dishonesty soon followed.
After a rash of negative international reactions, the Federal Reserve finally agreed to give back over 600 tons of gold, but insist it will take until 2020 to be able to achieve this task. Hence, the German announced date for the repatriation of this portion of German gold.
Well, the first delivery of German gold made by the Federal Reserve was half the amount agreed to, and it no longer was clearly marked as being German gold. It seemed to have been melted down and recast in a new form. The reason given by the Fed was that storage requirements and new policy procedures make this kind of activity necessary.
Of course, the Germans will need to authenticate the weight and purity of these shipments. The question soon arising is why are they unable to have their original bars returned?
The answer although logical, is somewhat troubling for investors everywhere. It is because the gold the Germans had stored there years before, no longer exists. It would explain why the German officials were denied access to see their gold and why it will take until 2020 to sent back just 600 tons, from a total holding of 1,500 tons.
An audit done in 2012 by the Inspector General of the Treasury in the United States gives credence to this supposition. After establishing that almost all the gold held by the United States (99.98%) is supposed to be housed at the Federal Reserve bank of New York, a question soon arose. The question was, where is all the gold that is purported to be there?
The Germans has deposited 1,500 tons of gold, yet the audit by the Treasury of the United States showed the total cache to only contain, 419 metric tons in total.
There was reputed to be 7,000 tons of gold being housed at this bank. Where is the rest of it? This is an important question because 98% of the entirety is owned by foreign central banks. Will they not also wish to see and possibly withdraw their holdings, as the obvious fraud becomes more well known?
No one seems to be willing to talk about this and other discrepancies in gold holdings in the United States. The official stance of Germany is that they are satisfied with the deal to get back 600 tons over 7 years. One might ask what about the other 900 tons? Will the Germans remain silent as the Federal Reserve seems unable to keep its own commitment of delivery of German gold?
It begs the question, what else is the United States government and its institutions not be totally truthful about?
This writer recommends that if an investor wishes to make a substantial investment in gold, silver or other precious metals you might consider taking physical possession of the gold, rather than have some institution or company store it.
Caution and common sense should alert investors to the fact that in the case of gold, and more than likely other precious metals as well, the laws of supply and demand do not apply here. Logic would dictate that the same gold is probably being claimed by a number of investors. When this Ponzi Scheme finally collapses, one must assume that the larger institutions and central banks will have more clout in getting their share of the remaining gold. An individual investor might be left with nothing, especially if the price of gold or other precious metal spikes to a new high. The perpetrators in this con, would then be financially unable to replace the gold, that they were supposed to be holding for the single investor.