All that glitters is definitely gold in a new exhibition at Germany’s central bank that lifts the veil on the nation’s massive reserves of the precious metal, partly to reassure skeptics that the prized ingots are really there.
Europe’s top economy and export powerhouse has the world’s second-largest gold reserves after the US, but for decades almost none of the about 3,400 tonnes of yellow metal, today worth a staggering 117 billion euros (US$142.1 billion), could be found on German soil.
To keep the gold safe from a possible Soviet invasion during the Cold War, as well as for other historical reasons, the bars were instead stored in the treasuries of central banks in New York, London and Paris.
However, growing public pressure spurred the Deutsche Bundesbank to store half of its reserves at home, a feat it completed last year through a series of cloak-and-dagger shipments from the US Federal Reserve and the Banque de France.
Storage fees charged by the Bank of England had already prompted Germany to repatriate most of the gold it held there in 2000.
All that bullion is now kept under lock and key in a secret location in the bank’s basement in Frankfurt — except for the eight bars on display at its Money Museum as part of the exhibition “Gold — Treasures at the Deutsche Bundesbank,” which runs until September.
“We’re doing this to show citizens that the gold bars are here, to show transparency,” Bundesbank board member Carl-Ludwig Thiele told reporters, standing next to the gleaming 12kg bars in glass display cases. “We want there to be trust in the Bundesbank central bank as an institution, and in the reserves of the Bundesbank. And you can only win trust through transparency.”
The bank has attributed its gold repatriation efforts largely to a changed geopolitical context.
However, some have said the real impetus came from criticism over the past few years from politicians and members of the public, who wondered aloud whether the Bundesbank was keeping close enough tabs on the nation’s riches abroad.
The grumbles mounted during the eurozone debt crisis, which sent investors fleeing for safe havens, like gold.
Among the loudest critics was euroskeptic Peter Boehringer, now a lawmaker for the far-right Alternative for Germany party, who launched a “Bring home our gold” campaign that made national headlines.
“Especially during the years of the financial and sovereign debt crisis, the Bundesbank was confronted with the desire for detailed information about the gold,” Thiele said. “It even went so far that some questioned whether the gold holdings at home and abroad were real.”
In 2013, the Bundesbank unveiled a plan to bring home half of its 270,000 ingots.
In the eyes of 63-year-old Bernhard Loederbusch, one of the visitors at the museum, it was the right decision.
“If you own something, you should have it at home. All it takes is for a conflict to erupt abroad and before you know it, the gold is gone,” the former banker told reporters, after poring over rare coins also on display.
Today, 1,710 tonnes of gold are kept in Frankfurt, with just more than 1,200 tonnes remaining in New York and about 430 in London.
The Bundesbank last year retrieved the last of its stash stored in Paris, saying that as both countries share the euro, having gold in French vaults would be of little use to Germany in a crisis, when the metal would need to be quickly converted into liquidity.
However, bank officials have said keeping the rest of the German treasures overseas makes sense, as the Fed is home to the No. 1 reserve currency and London is the world’s leading gold trading center.
Germany, which had no gold at all after World War II, accumulated its riches in the post-war years known as the economic miracle, when its exporting prowess saw it run up large trade surpluses with other nations.
Under the Bretton Woods system, which allowed countries to convert surpluses into gold at a fixed rate of US$35 per ounce, it built up huge stockpiles of gold.
In 1971, then-US president Richard Nixon abandoned the system, as the dollar’s value plummeted against gold.
While gold today is no longer as vital to the financial system as it once was, it remains “an anchor of stability,” the ultimate safe harbor in uncertain times, the Bundesbank said.
To Germans, whose national consciousness is still scarred by the hyperinflation of the Weimar Republic in the 1920s, the tangibleness of gold is key to its enduring appeal.
Seeing the gold up close was “impressive,” Loederbusch said
“It embodies everything: money, power, greed. This is what people were killed for, what wars were fought over. Gold is fascinating,” he said.
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