The Netherlands Has Just Moved 86 Tonnes of Its Gold Reserves From the US and Canada to London, But Why?

Investorideas.com (www.investorideas.com), a leader in mining investing news and home of the Exploring Mining Podcast, issues market commentary from Rick Kanda, Managing Director at The Gold Bullion Company.

De Nederlandsche Bank said the move came amid rising geopolitical uncertainty, with gold held in London considered more easily tradable and accessible in a crisis.

With this in mind, Rick Kanda, Managing Director at The Gold Bullion Company, has shared his thoughts on what this tells us about where countries feel safest holding their gold and what this could mean for everyday investors.

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Why does the US hold other countries’ gold?

“Most of the gold went to the States during WWII to keep it out of the way of the German Army, but now that threat isn’t here, countries are reassessing whether keeping strategic assets thousands of miles from home still makes sense.

“Gold is a physical commodity that isn’t created or managed by a government in a way that currency or other financial assets are. Therefore, when central banks physically hold their own gold, they gain a degree of independence and security, especially in times of geopolitical and financial uncertainty.”

Why are countries moving their gold from the US?

The Netherlands isn’t the only country reassessing its overseas gold holdings; other countries, including European central banks, are increasingly diversifying where reserves are stored. Trade and military wars have been prompting countries to take precautions and hold their gold closer to home, with geopolitical risk, accessibility and crisis preparedness all playing a part.

Why is London considered to be a more stable option than the US?

“For the Netherlands, moving gold to London makes its reserves more readily tradable and available in a crisis, and the same applies for the rest of Europe. Apart from that, London is seen globally as a major trading centre, which makes it a great choice. If countries want to sell gold fast in a crisis, London is the place to be, making the Bank of England a popular place to store gold. In fact, the Bank of England is one of the largest custodians of gold in the world, holding 400,000 bars worth more than GBP 200 billion.”

Should everyday investors take note?

“Everyday investors don’t necessarily need to take note of the fact that central banks are moving their gold reserves closer to home; the more interesting factor to note should be why they are becoming more concerned about where their physical gold is held, and should everyday investors think about the same risks? I think this shift should remind us that ownership and access to assets can matter as much as the asset itself, and it raises an important question about wealth diversification.

“Central banks are clearly taking geopolitical risk, accessibility and crisis preparedness seriously, and I think everyday investors should consider whether their own portfolios are sufficiently diversified to withstand periods of uncertainty.”

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