Where do the Germans stock up their Gold Reserves? In Germany of course, you might say! It is indeed a silly question! All of Germany’s gold reserves are likely to be packed off safely in a deep vault, at a secret location in the city of Frankfurt, surrounded and protected by the topmost security systems they have! However, as has been revealed in recent times, this is far from the actual truth!
Surprisingly, most of Germany’s gold reserves, which happens to be the second largest in the world, volume-wise, is being held by Paris, London and New York! And now, there is a strong ongoing campaign underway in Germany for bringing it all back home. And the campaign is gathering steam with every passing day! This decision to store gold reserves elsewhere, speaks of three distinct characteristics of the monetary system of the world. And none of them are particularly reassuring!
First, the current generation of German citizens is indeed much more assertive with respect to their national interests, in comparison to their ancestors. For almost half a decade, Germans were more anxious about establishing their identity as world citizens. They attempted to assuage their war related guilt by being part of imminent international bodies. However, at present, they appear content to establish their identity as German citizens and stand up for their rights.
Secondly, there is dwindling trust in financial institutions. The central banks have developed a mechanism of credits and debits, since it was much easier to transfer gold through ledgers than too physically move it around in trucks and ships. Therefore, it made perfect sense that the gold that originally belonged to Germany was stored elsewhere. However, these systems are no longer trusted by the people. They are displaying continued discontent over assets that simply feature in balance sheets; rather, physical wealth that can be touched and felt is what they prefer now. This is true not only for national gold but for other physical assets as well!
Thirdly, the most important fact remains that the German sentiment has been building up, opposing the single currency. After all, what do you do when you have a vault of gold with your central bank? Naturally, you use it to start a brand new currency for your nation. Therefore, the entire campaign that has been launched to bring back gold is actually all about bringing back money that can be truly trusted by people. And Germany is looking for a way out of the heavy responsibilities it has to shoulder for bailing out neighbors.
And, this phenomenon is hardly restricted to the country of Germany alone. Distrust for central banks is becoming common in every country! The campaign that is underway in Germany is just an example. There would be many more to follow in the effort to keep tabs on their gold reserves!
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Chief Market Analyst, ITM Trading