Since 2012, there’s been an unprecedented call from foreign nations to repatriate their gold from Federal Reserve vaults in the U.S. This is an incredible development given many countries’ 71-year reliance on the Fed as a custodian for their bullion. Over the last few years, countries including, but not limited to, Germany, the Netherlands, France, Belgium, Austria, Poland, Ecuador, Finland, Switzerland, Venezuela, and Romania have either formally requested repatriation of their gold or are in discussions with the Fed about it. Some of these nations, mind you, have held more than 50% of their entire reserves of bullion in the U.S. since 1944, when the Dollar became the world’s reserve currency.
Something huge must have happened in the last few years to prompt such action. That something may be a break in foreign gold holders’ trust in the Fed as a custodian of their precious metals.
There’s evidence that, in recent years, the Fed has been leveraging some of its foreign gold holdings to lower skyrocketing gold prices as part of its grand scheme to “engineer” an economic recovery from the 2008 Financial Crisis. This is to be expected. After all, the Fed has spent the past 7 years throwing everything but the kitchen sink at the chronically-ill American economy and its epidemic of long-term unemployment and underemployment: It’s bailed out the Too Big to Fail banks to the tune of $14 trillion. It’s printed more than $4.2 trillion. It’s crushed down interest rates to zero and has kept them there. Naturally, the good people at the Eccles Building would include leveraging their foreign gold holdings in their campaign to prop up the economy. After all, high gold prices are a proxy for fears about the future of the economy, and prices reached generational highs in late summer 2011–3.5 years into the Fed’s post-crisis “recovery”.
(Interestingly, gold prices began their long journey downward from their summer 2011 peak just after the Economic Cycle Research Institute called a double dip recession and the Bureau of Economic Analysis–if you believe government data–reported that we narrowly missed a second recession due to GDP growth hovering just above zero.) Gold prices are supposed to rise when economic data are bad!
So, if the Fed has been leveraging its foreign gold holdings in order to lower the price of bullion, it’s quite possible that it simply doesn’t have in its possession the amount of foreign gold it should. Again, this isn’t a stretch. In fact, it’s Occam’s Razor: Hypothecation is a common practice in the precious metals world, and, recently, the Fed has been flat-out refusing foreign nations from auditing their gold and will only return large holdings on installment plans.
Pretty suspicious behavior, particularly given the long history of foreign nations continuing to store their gold in Fed vaults during times in which repatriation would have made more sense.
Consider the following:
Full article: Repatriation of Gold from Fed Suggests Historic Vote of No Confidence (Solidus Center)