Why do many countries no longer trust gold deposits in the United States?

60 countries store gold in the United States

The desire of central banks to accumulate more gold is understandable. It is the only asset in the world that does not have inherent currency risks. Now that geopolitics are at the forefront, trade wars are raging, economists are expecting a US stock market crash, a dodgy future for the dollar and a global recession, gold bars are becoming very useful.

Storing 7,000 tons of gold worth nearly 350 billion USD, the gold vault of the US Federal Reserve (FED) in New York is said to be the largest gold storage facility in the world. Photo: Casino

Ten years ago, gold from about 60 countries was stored in the United States, mainly for safety in case of military conflict and to increase liquidity. Because the New York Mercantile Exchange (NYMEX) conducts the largest precious metal transactions.

Gold is stored close to its consumer markets to reduce transportation costs, which are very expensive for precious metals due to expensive insurance premiums. The multi-million dollar cost of transporting gold reserves is only decided in times of economic or political emergency.

According to the US Treasury, Fort Knox and other depositories currently hold 261 million ounces of gold. But the last audit was conducted in the 1960s. And all efforts to initiate a new audit have been blocked by Congress.

It is argued that the Americans have been using other countries' gold for their own purposes: they have been leasing it to banks and operating in the market to control the price of precious metals.

In this connection, a reasonable question arises: Is Washington ready to return gold that does not belong to the United States at any time? In order not to risk this, more and more countries are demanding the return of their gold reserves to their own countries.

Gold repatriation

The wave of gold repatriation began in 2012, when Venezuela announced it was taking back all 160 tons from the United States at a value of about $9 billion. Then-President Hugo Chavez said the gold bars had to be urgently repatriated or they could become hostages and tools of pressure from Washington.

Six years later, that’s exactly what happened. Last October/November, the Bank of England blocked the transfer of $1.2 billion worth of gold to Venezuela. According to a Bloomberg report, Washington was behind the decision.

Illustration photo. Source: Leonhard Foeger/Reuters.

In 2014, the Dutch Central Bank repatriated 120 tonnes of gold to Amsterdam from New York – nearly 4 million ounces. This means that 30% of the Netherlands’ gold reserves are now in the US, up from 50% previously.

In Amsterdam, they explained: it is unwise and inappropriate to store half of the gold reserves in one place. "Perhaps this made sense during the Cold War, but not now," the Dutch Central Bank said.

Analysts are sure that the Netherlands will continue to repatriate gold from the US to be less dependent on Donald Trump's unpredictable actions.

Germany's Bundesbank also wants its gold back. Berlin began a program in 2012 to repatriate part of its gold reserves, stored in the United States since the end of World War II, returning 300 tonnes of the precious metal to the Bundesbank treasury in Frankfurt am Main.

Türkiye finally completed the repatriation of its gold reserves in April last year. Last year, the Turkish Central Bank bought back 187 tonnes, making it the second-largest buyer of the precious metal in the world after Russia. Ankara has 591 tonnes of gold in total (as of the end of December), 27.8 tonnes of which were delivered from the US and held in a local storage facility.

Loss of faith

The flow of gold from the United States continues almost uninterrupted. The reasons are obvious: the growth of Fed interest rates, pressure on the euro and other currencies, increasing geopolitical risks and trade wars launched by Washington against the whole world.

The gold stored in the vaults of the US Federal Reserve is in the form of bars, similar in shape to building bricks and stacked on top of each other. Photo: Latimes.

In this context, the global economy is looking to reduce its dependence on the dollar. Gold is a reliable hedge against crisis and financial instability, but now people no longer trust the Americans. There is no guarantee that Washington, increasingly under financial pressure, will not freeze the assets of "unfriendly" countries.

For Russia, there is nothing to worry about. The Central Bank keeps its gold reserves domestically, the Chairman of the State Duma Committee on Financial Markets, Anatoly Aksakov, reported last year.

"No one can touch the gold. We do not trust our gold to anyone," he stressed.