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Nations Want Their Gold in Their Hands Now
It’s interesting to see how central banks try to persuade us to believe in financial markets and paper assets, but when it comes to gold, suddenly this layer of trust is gone. Many countries store part of their gold reserves in foreign vaults, but in recent years, central banks have begun returning the gold to their own vaults. This is called “gold repatriation.” Holland, for instance, has returned 122.5 tons of gold from the Federal Reserve Bank of New York to their vault in Amsterdam, saying that it “felt that in times of financial crisis, it was better to have the gold near at hand.” Germany’s central bank moved 300 tons of gold from the US and 374 tons from France so that the Bundesbank will be storing half of its official 3,390 tons of gold in Frankfurt. London was home to 80% of Austria’s gold reserves, but Austria has repatriated most of its gold, so now only 30% is held in London and 50% in Austria. The reason, the bank says? Risk diversification. Other central banks are buying up gold to diversify their foreign-exchange reserves. India, for instance, has purchased 200 tons from the IMF, and Mexico has bought close to 100 tons. Russia and China are also participating in the largest bullion buying spree in 40 years. Romania is joining the gold repatriation race, recently proposing legislation that would require its central bank to hold most of its gold domestically. These aren’t the only countries interested in gold repatriation. The list goes on! (Learn more by reading our other article: What Malaysia and Russia’s Gold Reserves Say About the Rise of Gold.) According to the World Gold Council, central banks bought a total of 651.5 tons of gold in 2018—the most gold purchased in over 50 years. So, this is too big to ignore. Central banks—which are the most sophisticated investors in the world, have the highest possible levels of “insider knowledge” about the economy, and possess a way to print paper money—buy and hoard gold like never before in recent history. If so many nations are repatriating gold, shouldn’t you at least diversify your portfolio with gold instead of relying 100% on stocks, bonds, and other paper assets that the central banks are selling? Get started by learning how to open a precious metals IRA.