Germans and Italians: Bring our Gold home

Calls to bring Germany’s gold home are growing, and now voices in Italy are urging that country’s government to do the same.

Germany owns the second-largest gold reserves in the world at 3,352 tonnes. Italy ranks number three with 2,452 tonnes. Both countries utilize the New York Federal Reserve Bank, storing more than a third of their gold reserves in the bank’s Manhattan vaults.

According to a recent article in the Financial Times, policymakers in both countries are considering bringing their gold back to Europe due to President Trump’s “erratic policymaking” and growing geopolitical unrest.   

New York was once considered a safe place to store European gold, especially during the Cold War era when the threat of a Soviet invasion of Western Europe loomed large. But with the U.S. aggressively using economic pressure as a foreign policy tool, the wisdom of strong Italian and German gold in New York no longer seems quite so obvious.

After all, what's to stop the U.S. from holding gold reserves hostage to further its own aims?

The world has taken notice of the way the U.S. (and other Western powers) weaponized the dollar after Russia invaded Ukraine. Some countries were already trying to limit exposure to the dollar to minimize the impact of U.S. economic pressure before Russia invaded Ukraine, and de-dollarization has accelerated since.

According to a report by the Atlantic Council, “In recent years, and especially since Russia’s invasion of Ukraine and the Group of Seven (G7)’s subsequent escalation in the use of financial sanctions, some countries have been signaling their intention to diversify away from dollars.”

The trade war and President Trump’s propensity to use tariffs as a billy club have raised concerns even higher.  

Foreign leaders have also noted the way the U.S. president has tried to bully Federal Reserve Chairman Jerome Powell into cutting interest rates. They worry that further erosion of the central bank’s independence could further jeopardize their gold holdings in New York.

The German Taxpayer Federation recently sent a letter to the central bank, urging it to bring Germany's gold home.

“Trump wants to control the Fed, which would also mean controlling the German gold reserves in the U.S. It’s our money; it should be brought back.”

The Taxpayers Association of Europe sent letters to Germany and Italy’s finance ministers, and to their central banks, urging them to reconsider their reliance on the Federal Reserve as a gold custodian.

“We are very concerned about Trump tampering with the Federal Reserve Bank’s independence. Our recommendation is to bring the [German and Italian] gold home to ensure European central banks have unlimited control over it at any given point in time.”

Calls to bring German gold home are coming from both sides of the political aisle. Former conservative MP Peter Gauweiler told the Financial Times the Bundesbank “must not take any shortcuts” in efforts to safeguard the country’s gold.

“We need to address the question if storing the gold abroad has become more secure and stable over the past decade or not. The answer to this is self-evident, as geopolitical risk has made the world more insecure.”

Meanwhile, Fabio De Masi, a former left-wing populist MEP, told the FT that there are “strong arguments” for returning gold to Germany in these “turbulent times.”

There is also growing public pressure for gold repatriation in both countries.

Italian economic commentator Enrico Grazzini recently wrote, “Leaving 43 percent of Italy’s gold reserves in America under the unreliable Trump administration is very dangerous for the national interest.”

While these concerns may seem overwrought from a U.S. point of view, it's important to remember that the American perception doesn't matter. If U.S. actions have raised concerns abroad, policymakers need to take that into consideration, whether they think the worry is justified or not. 

The grassroots campaign to bring German gold home predates the Trump administration. In 2013, the Bundesbank decided to store half its gold at home, moving 674 tonnes from France back to Germany.

Peter Boehringer was a key figure in that early push for gold repatriation. He told the Financial Times it isn’t just about the Trump administration. He thinks a country’s gold should always be close at hand.

“Gold is an asset of last resort for central banks, and hence it needs to be stored without any third-party risk. It’s not just legal ownership but physical control over the gold that really matters.”

Officials in both Germany and Italy seem reluctant to rock the boat. A German investment analyst told the FT that a move to bring gold home would send a negative signal to the U.S.

“Bringing the gold back now with great fanfare would send a signal that relations with the U.S. are deteriorating.”

In a statement, the Bundesbank said it “regularly evaluates the storage locations for its gold holdings” based on its 2013 guidelines, focusing on security and liquidity to “ensure that gold can be sold or exchanged into foreign currencies if needed.” It emphasized that the New York Fed would continue to serve as an important storage site.

“We have no doubt that the New York Fed is a trustworthy and reliable partner for the safekeeping of our gold reserves.”

Italy's Prime Minister, Giorgia Meloni, has supported gold repatriation in the past, but according to the FT, she’s been silent on the issue of late because “she wants to maintain a friendly relationship with Trump while averting the threat of a deepening trade war.”

Concerns about U.S. control over gold isn’t limited to Germany and Italy According to a World Gold Council survey in 2023, a “substantial share” of central banks expressed concern about potential sanctions after the U.S. and other Western countries froze almost half of Russia’s $650 billion gold and forex reserves in the wake of its invasion of Ukraine. According to the WGC, 68 percent of the banks surveyed said they plan to keep their gold reserve within their country’s borders. This was up from 50 percent in 2020.

One anonymously quoted central bank official told Reuters, “We did have it [gold] held in London… but now we’ve transferred it back to our country to hold as a safe haven asset and to keep it safe.” 

Last year, India repatriated 100 tonnes of its gold.

There has been speculation that other countries have been moving gold and other assets out of the U.S. in the wake of economic sanctions on Russia, but it’s been difficult to confirm because the Federal Reserve will not release information on the amount of gold in its vaults. 

The gold repatriation trend started long before the West slapped sanctions on Russia. In 2019, Poland brought home 100 tons of gold. Hungary and Romania also repatriated some of their gold reserves around that same time. In the summer of 2017, Germany completed a project returning roughly half of its gold reserves back inside its borders. In 2015, Australia launched efforts to bring half of its reserves home. The Netherlands and Belgium have also initiated repatriation programs.

This gold repatriation trend underscores the importance of holding physical gold free from counterparty risk.  

If you store your gold and silver with a third party, you could lose your metal through theft, fraud, or an act of God. Of course, you could lose silver and gold stored in your home the same way (except for fraud), so you have to weigh the risk of using third-party storage and keeping large amounts of silver and gold at home.

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