Where Is Germany’s Gold?

Almost half of Germany’s gold is stored in vaults under the streets of Manhattan. Or is it?

Peter Boehringer hates the word “conspiracy.” It implies something crazy, and if you spend even a little time with the 45-year-old German, it becomes clear he’s driven by a desire for order. On a recent morning in Munich, he’s dressed in a cobalt blue shirt that matches his blue tie and blue eyes. His black hair is cropped close above his receded hairline. In his gray Volkswagen minivan, the cup holder contains two identical water bottles, each filled to the same level. At the end of a daylong interview, for which Boehringer has arranged an hour-by-hour itinerary, he sends a follow-up e-mail with a numbered summation of points he’s made. No. 2 says that the crusade he’s been waging for the last three years is simply about transparency. “Questions,” he writes, “by definition cannot be ‘conspiracy theories.’ ”

Boehringer is a gold bug, a member of the impassioned tribe of investors and academics who distrust central banks and paper money, unless the governments that print it will exchange the cash for gold or silver from their vaults. He has an asset management firm that invests his own money and that of clients in gold, silver, and mining stocks, and he’s a founder of the nonprofit German Precious Metal Society, which educates the public about “the craziness of unbacked monetary systems,” he says. In short, Boehringer is worried that the global economy is built on a fiction of currencies that aren’t backed by precious metals. Which is why he set out to make sure the gold that Germany and other nations say they have actually exists.

Almost half of Germany’s gold resides at 33 Liberty St., the headquarters of the Federal Reserve Bank of New York, 80 feet below street level in a vault that sits on Manhattan’s bedrock. In 2012, Boehringer started a campaign on his blog to bring it home. He argued the gold should be shipped to the German central bank in Frankfurt. The hoard, amassed during Germany’s postwar boom, had never been subject to a published bar-by-bar physical review by its owners.

That lack of accounting had become an insatiable itch for Boehringer. As the volunteer chairman of a private storage company for silver and gold investors based in Gerstetten, Germany, Boehringer personally counts the holdings each year by lugging metal valued at some €140 million ($161 million) from one end of the vault to the other, just to make sure it’s all there. His blog became a hub for precious-metal fans. As gold prices peaked in 2011, the Taxpayers Association of Europe asked him to draft a letter to the Deutsche Bundesbank seeking to know precisely where the central bank’s gold was. He eagerly agreed to help the group, which advocates for lower taxes and serves as an umbrella for 29 national associations across the continent. After receiving a response that wasn’t detailed enough to satisfy him, Boehringer pressed on, starting the “Repatriate Our Gold” campaign in February 2012. He conceded it had low odds of success. Gold bugs largely inhabit the fringes of finance, and some of their apocalyptic arguments for investing had begun to show cracks as gold prices slid. Opponents including bankers and journalists branded Boehringer a conspiracy theorist for even suggesting something was amiss at the core of global finance. Then the seemingly impossible happened: He started to win.

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Less than 175,000 metric tons (386 million pounds) of gold have been mined in all human history, according to the World Gold Council. Melt it all down—King Tutankhamun’s death mask, the bars in Fort Knox, your wedding ring—and it would form a cube 21 meters on each side, reaching just one eighth the height of the Washington Monument. A 1-kilogram gold bar is the size of a flip phone and could buy a BMW.

Gold also has a deeper appeal. When stocks and bonds are plummeting on paper, gold is reassuringly physical. Speaking in October at the Council on Foreign Relations, former Federal Reserve Chairman Alan Greenspan said gold is so universally treated like money itself, it’s as if it’s “inbred into human beings.” The fact that gold can be touched means, of course, that it can also disappear.

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Boehringer had to wait until Christmas Eve 2013 to see if the Bundesbank was making good on the pledge. That day, the central bank announced the first-year tally in the tabloid Bild under a front-page headline, “Today Only Good News.” “At last! The Bundesbank gets its gold treasure back,” the story said. The amounts, however, were underwhelming. Although 32 tons came from the Bank of France, just 5 tons came from New York—a tenth of the original plan of 50 tons a year from the New York Fed.

“Why so little material?” Boehringer recalls wondering. “Something smelled fishy.” The article quoted Bundesbank President Jens Weidmann saying the repatriation had been “a huge logistical challenge.” Yet one ton of gold, formed into a cube, is just larger than a plastic milk crate. Five tons of gold bars can fit into the back of a pickup truck, assuming the truck’s suspension can handle the weight.

“The organisational preparations were very time-consuming since the required agreements and contracts are voluminous and detailed,” the Bundesbank’s Thiele said in a statement four weeks later. Additionally, some bars in New York had to be melted and recast. To Boehringer, the recasting was the ultimate red flag. It meant any trace of original serial numbers had been wiped out. “Their untouched existence since the 1960s is no longer provable,” Boehringer says.

The Bundesbank explained that it recast the bars because they hadn’t met the “London good delivery” standard. Such gold is at least 99.5 percent pure and comes in bars of roughly 400 troy ounces, or 12.44 kilograms. They must bear certain marks, such as year of manufacture, and have sides that measure within specified dimensions. The gold in American vaults is a mix of London good delivery and lower-quality bars. Boehringer figured maybe the German bars had oddball weights and purities and needed to be recast.

Full article: Where Is Germany’s Gold? Almost half of Germany’s gold is stored in vaults under the streets of Manhattan. Or is it? (Bloomberg)