Gold Resurgence: Central Banks Prioritize Ownership and Control

By Doug Young – 25 September 2023

Introduction

Central banks worldwide are shifting their focus to gold ownership, emphasizing the need to not only possess gold reserves but also to have control over them.

This shift marks a significant change in the traditional approach of storing gold reserves outside national borders.

The move is driven by various factors, including security concerns and the practical necessity of keeping gold conveniently located near global trading centers.

Here we explore the reasons behind this shift and examine notable examples of gold repatriation.

Historical Practices and Changing Views

For decades, governments and central banks have stored their gold reserves outside their own countries. This practice was considered a means to ensure security, as stashing gold in multiple locations reduced the risk of losing inventory in the event of theft or other unforeseen circumstances.

Additionally, countries that purchased large quantities of gold through global trading centers like London and New York found it convenient to store their reserves near these hubs, given the logistical and security challenges involved in shipping gold back home.

However, recent trends indicate a change in this approach. According to the annual Invesco Global Sovereign Asset Management study, an increasing number of governments and central banks are opting to bring their gold reserves back home from foreign storage.

Three years ago, 50 percent of these institutions stored their gold domestically, while now the percentage has risen to 68 percent. Survey respondents predict that five years from now, nearly 75 percent of gold reserves will be retained within national borders.

Notable Examples of Gold Repatriation

Several countries have already embarked on significant gold repatriation efforts.

Germany made headlines in 2013 when it started reclaiming the gold it had stored in the United States and France. By 2017, the Bundesbank, Germany’s central bank, had repatriated nearly 750 metric tons of gold. The official reason provided by the Bundesbank was to build trust and confidence domestically.

Similarly, the Central Bank of the Netherlands repatriated a significant portion of its gold from the United States in 2014. Officials stated that this move would have a positive effect on public confidence.

In 2019, Poland’s central bank repatriated 100 metric tons of gold from the Bank of England, with the Polish Central Bank Governor declaring that gold symbolizes the strength of the country.

Global Significance and Implications

The increasing trend of gold repatriation reflects the perceived importance of gold in underscoring sovereign strength and stability.

Central banks worldwide view gold as an essential asset for maintaining the stability of their monetary systems.

The recent survey conducted by Invesco highlights the concerns of central banks over the precedence set by the U.S. freezing Russian reserves. A majority of respondents agreed that this event made gold more attractive as a safe-haven asset.

Conclusion

As central banks prioritize ownership and control of their gold reserves, it raises important questions about the role of gold in ensuring stability.

The shift towards repatriation underscores the significance placed on gold as a safe-haven asset and a symbol of national strength.

Central banks worldwide are increasingly relying on gold to safeguard their monetary systems, and this trend invites individual investors to consider the importance of gold in maintaining stability in their portfolios.