Germany Wants to Repatriate Its Gold, the Start of a Big Movement?

A statement can sometimes be a time bomb. Through the voices of senior politicians, Germany declares its intention to recover the gold it is storing in the United States. Far from being a simple communication stunt, this announcement reflects the profound upheavals currently affecting the international financial system. Above all, it illustrates the gradual erosion of American monetary hegemony, now marked by a loss of confidence.

In these troubled times, gold is more than just a metal. Above all, it embodies a symbol of economic power, linking every nation to its past and its sovereignty. Every nation seeks to protect itself in the face of uncertainty - in financial terms, gold plays this role of stability. This dynamic translates into purchases of yellow metal, but also into control of a country's reserves. Few know it, but a country's gold is often held outside its national territory, in New York or London in particular, for both financial and historical reasons (in particular, the fear during the Second World War that gold might be seized by the Nazi regime). Of the more than 3,000 tons of gold held by Germany - the second largest holder behind the United States - some 1,200 tons, worth more than 113 billion euros, are still in the Fed's vaults. In addition, more than half of the Bundesbank's reserves are stored in Frankfurt, with a small portion held by the Bank of England.

This gold was accumulated in the aftermath of the Second World War as part of the Bretton Woods system. Through an unprecedented economic revival, made possible in particular by the cancellation of its debt under the Marshall Plan, West Germany had accumulated massive gold reserves thanks to its export surpluses. Given its trust in the United States and American omnipotence, West Germany, like most European countries, chose to deposit a substantial portion of its gold reserves in New York. Of course, some countries, including France under General De Gaulle, chose to withdraw the gold they had previously stockpiled. But this decision remained marginal, and the tradition continued after the collapse of the Bretton Woods system in 1971. Keeping gold in the United States offers a number of advantages: liquidity, security, ease of access, and an implicit alliance with America's nuclear power. These assets also guarantee that any central bank can convert them into dollars (or any other hard currency) in the event of an emergency.

But trust, like democracy, is a fragile element that can be lost at any time. Currency, whose gold has been recognized as such for millennia, is no exception to this rule, since it is itself founded on trust. Germany's demand to repatriate its reserves therefore appears first and foremost to be a political response. If Germany has chosen to withdraw the gold it holds, it is because it is losing confidence in its historic ally. The United States is now threatening Europe on every front - economic (tariffs), military (withdrawal from NATO), energy (purchase of American shale gas) - and Scholz's government is one of the main parties concerned. Added to this are suspicions about the very existence of the gold reserves stored in the Fort Knox vaults, the last full audit of which dates back to 1953. “Maybe it's there, maybe it's not,” said Elon Musk. For his part, the President of the United States said, “We hope everything’s fine with Fort Knox, but we’re gonna go to Fort Knox, the fabled Fort Knox, and make sure the gold is there ... If the gold isn’t there, we’re gonna be very upset". In a world where alliances are no more than facades, verifying the real presence of gold in the United States becomes an obvious necessity.

Even before the new tariff measures imposed on Europe, Berlin had prepared the terrain. By 2020, Germany was demanding the repatriation of all its gold to ensure its continued existence. The trade war recently launched by the United States has only accelerated an already existing trend. For Germany, this is a major decision, as it holds a significant proportion of gold in its foreign exchange reserves. The yellow metal has played a fundamental role since the traumatic Weimar hyperinflation of the 1920s, as it represents a tangible physical resource that, unlike money, cannot collapse. Gold accounts for almost 70% of its foreign exchange reserves, compared with just 2% for China and 6% for Switzerland. 

In doing so, however, Germany is no exception. It would join countries such as India, which recently repatriated a significant portion of its gold (one of the largest movements since 1991), and the Netherlands, which organized the transfer of a significant portion of its gold reserves to Amsterdam in 2014. But above all, like other countries that have opted to repatriate their reserves from the United States, including Russia, Venezuela, Turkey… all countries whose relations with the world's leading power are particularly tainted. That Germany should adopt such a position reveals the extent of the tensions between Europe and the United States, at a time when Trump has decided to turn his gaze away from the Old Continent and commit his country to reclaiming the nation-state.

This dynamic would have far-reaching consequences. Admittedly, the United States is still the world's largest gold depository, with New York in first place (where over a quarter of the world's gold reserves are stored). But this situation could soon be reversed. If Germany implements this measure, it would be seen as a warning signal for other nations to follow. Today, over thirty countries continue to store part of their gold reserves on American soil: alongside major European players such as France and Italy are many emerging powers, in a context where many governments remain discreet about the exact location of their holdings. We could then witness a global movement, the consequences of which would extend to American financial assets.

The financial hegemony of the United States would be severely impacted. All other things being equal, some countries holding US Treasury bonds would decide to unload them (even though the markets have posted significant losses in recent weeks), driving down bond prices and increasing the cost of debt. U.S. long rates have already been rising since Trump's announcements on tariffs, in contradiction with the Fed's and White House's hopes for control. The value of the dollar, closely linked to Treasury bonds, would be further affected, making imports more expensive and fuelling inflation. The Fed could attempt to cushion the blow by buying back bonds on a massive scale, as it has done in the past, notably during the health crisis. But against a backdrop of persistent inflation, this strategy would risk creating new imbalances that would affect the dollar.

Admittedly, the gold stocks held by the world's central banks - around $2.7 trillion - remain modest compared with the size of the Treasuries market, valued at over $8 trillion. But the underlying dynamic works against Washington, as the de-dollarization of the world is underway. Many emerging countries are continuing to de-dollarize by buying gold, and China, the world's second largest economy, is steadily reducing its exposure to the US financial system. Finally, the trend to follow is that of Europe: with this German decision, if European countries - major investors in American securities - follow suit, the whole of American monetary domination will be called into question.

Gold, for its part, can only welcome this message. Although a rise in the dollar no longer influences the price of the yellow metal, a fall in the US currency has a positive influence on it. Above all, a country's decision to repatriate its gold reflects not only a clear loss of confidence in the depositary nation, the United States, but also an assertive desire to give the yellow metal an increasingly important role. 

The world is quietly moving towards a reappropriation of its wealth, far from the myths of happy interdependence promoted by globalization. In this respect, Germany's decision reflects both the great return of nationalism and the uncertainty of a world where the law of the strongest has become commonplace. As global balances are redrawn, gold is once again becoming what it would never have ceased to be: not only a store of value, but also of power. And if Germany succeeds in repatriating all its gold reserves, the signal it sends out to the international financial system could be major…