The present “buzz” is that Germany is pulling their gold out of the USA for some reason involving lack of trust in the USA. Then there is the same action per London gold (so one presumes the same non-trust of London markets / economies).
h/t Crospatch in T9 comment=45244
But WHY is all that German gold in London and the USA to begin with?
If you don’t know why something is, you can’t properly say why it stops.
Has a great ‘catch up’ on the history of State Gold movements. From Nationalist Spain sending $Billions of it to Stalin for ‘safe keeping’ and an arms deal (never to be seen again) to Belgium shipping a load out under threat of Nazi invasion to a safe “French” bank in an African colony (only to have France fall and the Vichy French hand it over… so still more ‘lost gold’ not accounted.)
When did the German Gold come here? Well, back when there were two German nations and the USSR. Neither of those exists now. So the Germans were making a boat load of money selling cars and stuff to the USA, then converting those $Dollars to gold IN the USA and leaving it in our banks / vaults. Some other gold was shipped to places like Paris and London so as to be outside the reach of the USSR should a land invasion happen.
At this point, I’m not seeing a lot of reason to leave those piles of gold all over the place. The USSR is gone. NATO is very capable, and it is far more likely that the Russians will be involved in Syria than trying to cross Ukraine and Poland to get to Germany. Easier to just sell them gas for gold.
At the same time, the widespread acceptance of the Euro means Germany does not need a pile of gold in Paris for “settlement” of accounts vs the D.Mark.
As the Cold War raged in the 1960s and 70s, then-West Germany, with its powerful economy booming after years of struggles following two world wars, began to make contingency plans to protect its gold reserves in the case of a possible invasion by the Soviet Union. By the height of the Cold War, more than 95 percent of the nation’s gold reserves were being held overseas. The amount of gold continued to swell, as Germany’s post-war trade surplus with the west was converted into gold bullion under the terms of the post-World War II Bretton Woods financial agreement. Following the fall of the Berlin Wall in 1989 and the reunification of the country the following year, the Bundesbank began recalling its reserves and, according to recently announced plans, will have nearly half its gold capital in storage at its central bank in Frankfurt by 2020. The other half will remain in reserves in New York and London.
Germany is also not the only country to have repatriated its gold in recent years: Hong Kong withdrew its entire reserves from British banks in the early 2000s, and in 2011, Venezuela pulled its international stash, later selling a significant part of its gold holdings to Russia and China. Bundesbank officials stressed that the move was based more on a change in the geopolitical landscape than anything else. While it is only withdrawing portions of its reserves in the United States and Great Britain, it is making a complete withdrawal of its gold from France, stating that the acceptance of the Euro makes it unnecessary to keep large deposits on hand in Paris. Some analysts believe that Germany’s decision to recall its overseas holdings amounts to little more than an internal audit of its finances. Others, however, hint at a darker motive, and consider Germany’s move to be signal of its lack of faith in the stability of American and British financial markets.
On Fast Money they brought up another point. During the most recent “Financial Crisis” when the banks were in question, access to national gold reserves was frozen. For some weeks, they simply could not do anything with their gold. I know that would make me a bit less than interested in leaving all my gold in the hands of a system that could halt my access at any time.
So it looks quite reasonable to me that Germany wants to put 1/2 under their direct control “at home” in their own vaults. The other half in London and New York gives good geographic diversification and has large lots in major “money centers” where a settlement of accounts can be moving a registration number in that vault from one “Name” to another. (One of the original reasons for large money center banks was to reduce all the shipping of gold for ‘settlement’ and the attendant losses at sea).
So things look more politically driven than “worry driven” to me. Hong Kong under China taking home the gold. Venezuela (probably rightly) making sure the USA can’t ‘freeze its assets’. Germany saying “Hey, cold war is over and settlement inside the EU doesn’t need gold in Paris. Trade with China mattering more and USA not so much.”
It does, mostly, tend to reflect the ever lowering importance of the USA to global trade and money flows, though. Why have Real Money™ tied up in the less relevant USA when it can be at home or ready to use buying resources from Australia or settling accounts with China? Or perhaps swapped to Russia for Natural Gas heat in winter.
Add in some desire to make Germany a “Money Center” in its own right, and things are quite reasonable. It is just a matter of the USA becoming more of a sideshow to global trade and settlement.
Some Gold Charts
Just to use this as a moment to check the gold action:
Precious metals charts covered here:
Shows gold GLD as basically a “flat roller” for the last year. Something to trade quarterly, but not a long term riser. TV shows have been full of “now is the time to buy gold” ads, that usually mean it isn’t as they have to pay to drum up buyers. But right now ‘near’ a buy signal. MACD with “blue on top”, but below the zero line. DMI with ‘red on top’, but looks like a crossover about to happen. RSI has had a ‘near 20’ moment, but is now at 50 (where slowly dropping ‘flat rollers’ reverse downside…)
So I’m just not feeling the love for gold at the moment. Frankly, the FXA Australian Dollar has less volatility and a nice rise line as a place to park for safe keeping. But on a trade basis, I could see trading gold here. Though on a ‘faster chart’. Likely a 10 day hourly. ( I’d use 15 minute, but that the “Gold Fix” happens in London so the fast action is largely over by the time California wakes up.) Mostly the chart there says to just avoid those folks cheapening their currencies (USA, Japan) and stay with enduring value of any sort.
The “one stop” chart here:
Shows TIP flatish and US Stocks running up (though in non-US currencies, might well be more nearly flat as the $US drops). It does look like time to do a full on WSW again. Rotation out of TIPs / WIP and into ‘something’ likely a good idea. US Stocks as a probable, but selected other nations stocks perhaps better.
But gold is mostly being a volatile trade rather than a long term investment at this point.