Introduction to the Gold Repatriation Trend

Gold's role in international finance and geopolitics has changed dramatically since 2008. The Great Financial Crisis reminded central banks of radical uncertainty and the humbling aspect of risk. Instead of net sellers, central banks have turned into net buyers of gold, steadily purchasing more than 400 tonnes a year.

Most European central banks own relatively more gold than their Asian peers. Thus, some European governments haven't bought additional metal but have instead reassessed their gold policy.

In 2013 the German central bank was the first to announce it would repatriate gold from the Banque de France (BdF, "Bank of France") and the Federal Reserve Bank of New York. Eventually it would have 50% of its gold stored in Germany. The other half would be left in New York and London. According to the German central bank their gold policy serves three objectives: cost efficiency, security, and liquidity.

Cost efficiency has to do with storage costs at different locations. Security is about the safety of vaults and in which country the vaults are located. How much is a country willing to store abroad? Liquidity involves holding bars in liquid marketplaces such as London, i.e., to efficiently swap metal for foreign exchange in times of emergency.