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Economy

European central banks step up gold repatriation

TOKYO -- European central banks are repatriating some of their gold reserves as they lose faith in the euro and become increasingly wary of terrorism.     

     Gold bullion deposited by central banks around the world is piling up in the basement of the Federal Reserve Bank of New York. As of 2012, the bank's vaults had 530,000 gold bars, weighing about 6,700 tons. That was more than twice the world's total personal gold consumption for the year.

     Former U.S. Federal Reserve Chairman Alan Greenspan, speaking in New York at the end of October, said the Fed's quantitative easing, which ended around the same time, had not galvanized effective demand in the real economy. He also noted that gold reserves serve an important political function.

     The following month, nearly 50 tons of gold bars were removed from the New York Fed's vaults. The amount of gold stored at the vaults started to decline in 2014. Germany has so far repatriated 85 tons of its reserves, while the Netherlands has reclaimed 122 tons of the precious metal.

     Germany plans to repatriate a total of 300 tons of gold from New York by the end of 2020. Although details have not been disclosed for security reasons, in these situations, gold is usually shipped from New York by air. An airplane can carry up to 3 tons of the metal at a time, which means more than 100 gold-laden flights will cross the Atlantic Ocean.

     Austria, meanwhile, has decided to repatriate 110 tons out of its 280 tons of gold reserves in the U.K. Countries occasionally reveal when they have repatriated gold but are rarely, if ever, forthcoming about their reasons for doing so.

Distrust and fear

Last November, Switzerland held a national referendum related to gold reserves. The ballot included a measure to prohibit the Swiss National Bank from making further gold sales and one requiring it to repatriate Swiss-owned gold.  

     The referendum, which was eventually rejected, was triggered by distrust of the euro. Switzerland is not part of the eurozone, but it does include the currency in its foreign reserves.

     Koichiro Kamei, a financial and precious metals analyst, said European countries are each trying to manage their own gold reserves amid uncertainty over the outlook of the euro.

     Growing trade with China is also prompting gold repatriation, according to Hiroyuki Kikukawa, chief analyst at commodity futures brokerage Nihon Unicom.

     Conflict with Islamic State militants, meanwhile, is making it more risky for countries to hold gold abroad. Then New York Board of Trade kept 8 tons of gold bullion in vaults in the basement of the World Trade Center, which collapsed in the 9/11 terrorist attacks in 2001.

(Nikkei)

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