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Die Welt's Monday report on the growing clamor over Germany's gold stored abroad

Section: Daily Dispatches

Thanks to GATA's friends Lars Schall and Peter Boehringer for the translation from German to English.

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CDU Politician Wants to Bring German Gold Home

By Daniel Eckert and Holger Zschapitz
Die Welt, Berlin
Monday, October 22, 2012

After members of Parliament were blocked in their attempt to inspect the gold of the Bundesbank stored at the Banque de France in Paris, leading economists and politicians are calling to transfer the German gold to Germany. "We'd prefer it to be kept in Germany," Philipp Missfelder, CDU politician, told Die Welt.

Together with his colleague Marco Wanderwitz from his parliamentary group, Missfelder wanted to view the extensive German gold stocks on site. In a letter Bundesbank Board Member Carl-Ludwig Thiele informed them that the French central bank does not have appropriate premises for visits. The same applies to the Bank of England in London.

"The response by the Bundesbank has made us even more suspicious. This secrecy is not good," Missfelder told Die Welt. Dozens of letters have gone between him and Bundesbank until this final cancelation of his visits to the Bank de France and Bank of England vaults. ...

... Dispatch continues below ...


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The CDU politician now encourages transferring the precious metal back to Germany. If it was so complicated to inspect the gold on site, he says, it would seem better to bring the bars back to the Federal Republic. Economists also support his call.

In September Banque de France Chief Christian Noyer replied to the question about the status of the Bundesbank's gold in Paris: "Please be assured we guard it very well. ... Our clients can inspect this whenever they want."

Responding to an inquiry by the Die Welt, the Bundesbank said Noyer's statement related only to institutions and not to individual members of parliament.

On Monday the Federal Court of Auditors demanded regular physical monitoring of the German gold reserves stored abroad. The Federal Court recommended for the Bundesbank to renegotiate the authorization for physical examination of the reserves held in the three foreign repositories.

The Bundesbank has so far never fully examined the ingots stored outside German borders. The institution has, however, now succumbed at least partly to the pressure and announced the transfer of part of the German gold reserves from the United States to Germany. Here the ingots are to be melted down to check the quantity and authenticity of the precious metal, a spokesman said. The Federal Court of Auditors, however, was not satisfied with this, but described the transfer from the US Federal Reserve only as a "first step, but not a comprehensive procedure."

"With gold reserves, direct access is crucial," says Folker Hellmeyer, chief economist at Bremer Landesbank, and the precious metal is an "ultima ratio" of monetary policy.

Experts estimate that only a fraction of German precious metal reserves are stored domestically. The Bundesbank itself states --

-- that two thirds of its gold are kept beyond German borders. "This is based on historic developments so and makes business sense," a Bundesbank spokesperson explained to Die Welt.

The gold reserves date back to the times of the Bretton Woods international monetary system (1944-1971), when nations with current account surpluses built up gold reserves. This included Germany. "These reserves were and are held at the major gold exchanges, so that the Bundesbank has access in case of an emergency," according to statements from the Bundesbank.

But experts such as Hellmeyer have doubts that this argument still stands: "Today gold is no longer used as compensation for current balances as was done in the Bretton Woods era," Hellmeyer says. "Storing the gold reserves at the major exchanges is therefore no longer mandatory." He believes that within 10 years the bulk of central bank gold reserves will be stored in the respective nations and no longer at the major exchanges in New York, London, or Paris.

Thorsten Polleit, chief economist at Degussa Goldhandel gold trading has similar views. "In a time of unbacked fiat currency the storage of gold at exchanges abroad is becoming an economic and political risk," Polleit says. The argument is that the gold will be needed if the paper currencies without gold backing start suffering serious credibility problems. This, in Polleit's view, would be related to major economic and perhaps also political upheavals. In such circumstances "it is no longer possible to rely on the contractual loyalty of foreign central banks where the gold is held."

The Bundesbank is one of the world's major gold holders. The German gold holding is stated to be 109.2 million ounces. Those reserves have a current market value of about E144 billion. This would suffice to free all German cities and communities from their burden of debt, with their current liabilities amounting to E133 billion.

Only the US Federal Reserve own a larger gold treasure with 261,5 million ounces. A gold ounce equals 31.1 grams.

In the meantime, a citizen initiative has been started --

-- demanding "Bring home our gold!" --

-- with Hellmeyer as well as the FDP financial spokesman with responsibility for Bundesbank policy Frank Schaffler and the former president of the Federation of German Industries, Hans-Olaf Henkel being among the supporters of the initiative. According to the initiative, more than 10,000 citizens have joined the initiative, including many prominent figures from politics, science, and the economy.

"We hope that this matter will evolve now," says Missfelder. He perceives the clear statements from the Federal Court of Auditors as a partial success.

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