Global gold reserve relocation move by central banks
Due to increasing geopolitical risks and sanctions, central banks are positioning their gold reserves domestically and in secure financial centers.
Geopolitical unrest and global risks are driving central banks to relocate their gold reserves domestically and to flexible centers like London. Countries such as the Netherlands, Germany, France, India, Poland, and Turkey are altering the geographical distribution of their reserves.
Transfers by the Netherlands and France
The Netherlands Central Bank transferred approximately 86 tons of gold from vaults in the US and Canada to London. Meanwhile, France liquidated its last 129 tons of gold in New York, purchased gold in Europe complying with LBMA standards, and stated that this transaction carried low risk.
Steps taken by Germany and other countries
Germany transported a total of 674 tons of gold from New York and Paris to Frankfurt between 2013 and 2017. Storage of the reserves began with 50.6% in Frankfurt, 36.6% in New York, and 12.8% in London.
Positions of India, Poland, and Turkey
Two years ago, India brought over 100 tons of gold from the UK into its own vaults. Poland transported approximately 100 tons of gold from the Bank of England to its home country in 2019. Turkey, on the other hand, moved its gold domestically during the 2017-2018 period and continues to keep it within the custody of Borsa Istanbul and in London.
The importance of the London hub
London stands out as the world's largest physical gold trading center. Thousands of bars located in the Bank of England's vaults can change hands via accounts, facilitating the rapid conversion of assets into cash during times of crisis.
Motivations for relocating reserves
The freezing of Russia's foreign exchange reserves raised concerns that reserves held in foreign countries could become inaccessible. Political tensions with the US administration, control over money, crisis preparedness, and the need for diversification have accelerated this strategy by central banks.
The share of the dollar in reserves
Central banks' growing interest in gold has coincided with concerns regarding the weight of the dollar in global reserves. According to World Gold Council research, 73% of central banks anticipate that the share of the dollar will decrease over the next five years.