Germans Fret about Their Foreign Gold Reserves October 27, 2012
A large portion of Germany's massive gold reserves
are stored abroad, mainly in the Federal Reserve in New
York. But are the bars really where they are supposed to
be? A dispute has broken out over whether the central bank
needs to check on its gold, or if Germany can trust its
Germany has gold reserves of just under 3,400
tons, the second-largest reserves in the world after the
United States. Much of that is in the safekeeping of central
banks outside Germany, especially in the US Federal Reserve
in New York. One would think that with such a valuable stash,
worth around €133 billion ($170 billion), the German
government would want to keep a close eye on its whereabouts.
But now a bizarre dispute has broken out between different
German institutions over how closely the reserves should
Germany's federal audit office, the Bundesrechnungshof,
which monitors the German government's financial management,
is unhappy with how Germany's central bank, the Bundesbank,
keeps tabs on its gold. According to media reports, the
auditors are dissatisfied with the fact that gold reserves
in Frankfurt are more closely monitored than those held
In Germany, spot checks are carried out to make sure that
the gold bars are in the right place. But for the German
gold that is stored on the Bundesbank's behalf by the US
Federal Reserve in New York, the Bank of England in London
and the Banque de France in France, the German central bank
relies on the assurances of its foreign counterparts that
the gold is where it should be. The three foreign central
banks give the Bundesbank annual statements confirming the
size of the reserves, but the Germans do not usually carry
out physical inspections of the bars.
According to German media reports, the Bundesrechnungshof
has now recommended in its confidential annual audit of
the Bundesbank for 2011 that Germany's central bank check
its foreign gold reserves with yearly spot checks.
The Bundesbank has rejected the demand, arguing that central
banks do not usually check each others' reserves. "The
scope of the checks that the Bundesrechnungshof wants does
not correspond to the usual practices among central banks,"
the Bundesbank said in a statement quoted by the Frankfurter
Allgemeine Zeitung newspaper. "There are no doubts
about the integrity and the reputation of these foreign
Now the finance committee of the German parliament, the
Bundestag, has gotten involved. Parliamentarians apparently
demanded to see the Bundesrechnungshof's audit report on
the Bundesbank after they were alarmed by a report in the
influential tabloid daily Bild, which claimed that the central
bank had not checked its gold reserves in five years.. The
Bundesrechnungshof will now provide the committee with its
report, a spokesman for the federal auditors confirmed on
Germany moved some of its gold reserves abroad during the
Cold War to protect them from a possible Soviet attack.
Some of the gold was moved back to Frankfurt after the collapse
of communism. But the Bundesbank argues that it still makes
sense to store some gold in major financial centers so that
it can be sold quickly if necessary. Although the Bundesbank
does not provide exact details about the distribution, it
has revealed that the largest share of Germany's gold is
held in New York, followed by Frankfurt, London and Paris.
Skeptical about the Reserves
In times of uncertainty about the future of Europe's common
currency, gold is a hot topic, and some Germans take a dim
view of the fact that much of the country's gold -- which
theoretically belongs to the people -- is held abroad. Some
members of parliament have even expressed doubts as to whether
the foreign gold reserves really exist. Philipp Missfelder,
a member of the conservative Christian Democratic Union
(CDU), wanted to see the gold for himself and traveled to
New York in person to inspect the holdings, according to
the newspaper Frankfurter Rundschau. His trip was apparently
unsuccessful, though. When he visited the Fed's safes in
New York, staff were either unable or unwilling to show
him exactly which bars belonged to Germany.
Peter Gauweiler, a Bundestag member with the CDU's Bavarian
sister party, the Christian Social Union (CSU), is also
skeptical about the foreign gold reserves. In recent years
he has attempted to gain more information about Germany's
gold through parliamentary questions. Last year, he had
an economics professor prepare an expert report on the subject,
which concluded that the Bundesbank was not fulfilling its
inventory regulations by failing to physically inspect the
In July 2011, SPIEGEL reported that Bundesbank employees
had physically seen the gold in New York within the previous
six months. However, the last time it had been checked before
that was in June 2007.
Gauweiler doubts that the Bundesbank would have immediate
access to all its gold if necessary, suggesting that part
of the gold may have even been lent out -- a claim that
the Bundesbank rejects.
Bringing Back Home
Some Germans even want to bring the gold reserves back
to Germany. An initiative called "Gold Action"
is campaigning under the slogan: "Repatriate Our Gold!"
Its petition has been signed by prominent industrialist
Hans-Olaf Henkel and Frank Schäffler, a parliamentarian
with the business-friendly Free Democrats who is known for
his euroskeptic views.
The initiative alleges that there is an "acute"
danger that the German gold could be expropriated as a result
of the financial and debt crisis. They argue that the German
government could soon be forced to sell gold to cover the
costs of the crisis.
But the Bundesbank wants to leave the gold where it is.
Observers point out that apart from the high cost of transporting
the gold back to Frankfurt, the symbolic effect of Germany
repatriating its gold reserves might unsettle the nervous
financial markets, who could see it as a sign of an impending
collapse of the euro.