Since 2013, Bundesbank, the German Federal Bank, has had plans to repatriate large quantities of its gold. Until recently, large holdings have been kept in Paris and New York. The market was surprised to hear that the E.U. financial powerhouse has already brought back over half of its gold holdings to Germany. With the move underway, strategists and market watchers are wondering what is in store.
Germany Reaching for Gold — Is the Euro in Jeopardy?
No one truly knows the reason behind Germany’s decision to repatriate their gold. As this is a long-standing decision from 2013, speculations over the reason have evolved. Some have guessed that the trust between the various federal banks had broken down while others see this as a hedge against a Euro decline or even a buffer for a Euro zone collapse. Other theories include the “Trump Factor” causing trade and economic unease.
A Bundesbank board member, Carl-Ludwig Thiele, said, “We have a lot of discussions about Trump, regarding implications on monetary policy, macroeconomics, etc., but we trust the central bank of the U.S.” This indicates that they are merely seeking what is right for Germany, not feeding into an idea of deep-seeded mistrust.
What This Means for Gold
All in all, these speculations are just that — pure guesses. What can be said, though, is private investors and governments alike are taking a special interest in gold right now. Despite the hype coming from this German announcement, gold showed a decline in the U.S., largely attributed to comments from Fed Chairman Janet Yellen. Earlier in the week, gold hit $1,236 an ounce, but closed today around $1,225. Futures fluctuated up and down today after reacting to ambiguous remarks about when U.S. rate increases will occur.
Safe Haven Gold
Germany’s response to uncertainty about the market is in line with what the U.S. market has seen since the start of the new year. With an unclear picture of the economy and international trade, more and more investors are seeking to hedge their bets by investing in gold.
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