|
The hot talk in the gold market
over the last 24 hours is that the Bundesbank will
announce moves today to repatriate a portion of its gold bullion held in New
York and all of its gold in Paris. Around 45% is currently stored in New
York, with 31% in Frankfurt, 13% in London and 11% in Paris. In total, the
Germans claim ownership of over 270,000 bars, totalling
3,396 tonnes (the second largest official stash in
the world behind the USA). This infographic provides a nice visual illustration of the quantities involved.
Further details will come out of
Frankfurt later today, and of course, we’re far from any kind of
confirmation of shipment and delivery. Nevertheless, parallels are being
drawn with de Gaulle’s famous 1965 speech that defended the idea of
gold money and attacked the Bretton Woods “dollar standard”.
Since 1958 de Gaulle’s government had been swapping dollar reserves for
gold –as it was legally entitled to do under the Bretton Woods
arrangement whereby all currencies were convertible into dollars at fixed
rates, while the dollar was convertible into gold at the fixed price of $35
per ounce. By 1967 the proportion of the Banque de
France’s foreign exchange reserves held in gold stood at 91.9% (it has
since slipped back to 71.1%, though this is still well above the global
average of 14.4%).
US government spending on Lyndon
Johnson’s “Great Society” welfare programmes
and the Vietnam War led to increasing current account deficits and growing
demands for gold from European allies. This culminated with Nixon’s
1971 decision to end the dollar’s convertibility into gold, in order to
preserve America’s gold stock and – in his words –
“to protect the dollar”.
History doesn’t repeat,
but it does rhyme. The coming years could well see similarly seismic economic
events, owing to the increasing political and financial significance of gold.
|
