On May 28, the Austrian Central Bank surprised the world when it announced that it too would follow in the footsteps of Germany and the Netherlands, and repatriate half of its sovereign physical gold, currently held almost entirely at the Bank of England, to Austria while transferring a modest portion in Switzerland by the year 2020.
Back then, the central bank headed by Ewald Nowotny said it took the decision after recommendations made by the Austrian Court of Audit in February, which warned of a "heightened concentration risk" linked to storing the majority of its reserves in Britain. At the time, the bank had argued the policy was warranted because London was a major international centre for the gold trade."
This was the official statement the Austrian National Bank (OeNB) released in May:
In May 2015, the gold reserves held by the OeNB amounted to 280 tons, having remained unchanged since 2007. Austria’s gold reserves are fully owned by the OeNB, which maintains and manages them with utmost care. In line with the OeNB’s current gold storage policy, 17 % of its gold holdings are at present kept in Austria, 80 % in the United Kingdom and 3 % in Switzerland.
Recently, the Governing Board of the OeNB adopted the 2020 gold storage policy following a regular in-house gold strategy and storage policy review, while also considering the recommendations made by the Austrian Court of Audit. The cornerstones of this policy are as follows:
- By the year 2020, 50% of Austria’s gold reserves are to be held in Austria (OeNB and Münze Österreich AG), 30% in London and 20% in Switzerland.
- Starting from mid-2015, the new storage policy will be gradually implemented in keeping with security and logistical requirements.
- A comprehensive review and, if need be, adaptation of the storage policy is scheduled for 2019.
- The OeNB will regularly report on the progress in its upcoming annual reports.
What the central bank did not say, is that by repatriating its gold from the UK, it was implicitly confirming that trust is now very publicly fraying at the highest levels of the international monetary system, with first Germany, then the Netherlands, then Austria, and most recently China, all demonstrating they are moving and/or building up their domestic gold reserves, and withdrawing their gold held at either the NY Fed or the Bank of England, something hardly surprising for those who have read our article explaining What Happens When You Hand Over Your Gold To The Bank Of England For "Safekeeping".
Which is also why yesterday, with great fanfare, Austria proudly announced to the world that it has moved 15 tonnes of gold from London of its gold reserves as part of its aforementioned repatriation plan.
"By the end of November, the Austrian National Bank brought 15 tonnes of its gold back into its own vaults," the OeNB said in a statement. A spokesman for the central bank said it had begun repatriating the gold from London in October.
According to Reuters, after the repatriation, Austria held roughly 65 tonnes of gold, or about 23 percent of its reserves, on its territory, the spokesman said. Around three quarters, 209 tonnes, were in London, he said, and six tonnes were in Switzerland.
"London and Zurich remain the most significant trading centres for physical gold," the OeNB said in its statement, a point it has made before in explaining why it kept such a large share of its reserves abroad.
In the decades after World War Two, security concerns also played a part because international trading centres were the best place to make use of the gold if needed in the case of an international crisis, the OeNB said in its statement.
"Geopolitical considerations in the time of the Cold War also played a role," said the central bank in Vienna, which was only an hour's drive away from the Iron Curtain that divided Europe for four decades.
It would appear that despite conditions between the west and Russia deteriorating to levels not seen since the depths of the cold war, Austira is more confident it can withstand the renewed Russian "threat" by storing its gold in house, rather than "trusting" Goldman's Mark Carney, currently performing his GS alumnus duties as the head of the Bank of England, with possession of its gold.
How times have changed.
* * *
But perhaps what was most surprising about the repatriation is that in order to "prove" the gold is indeed back, the Austrian central bank also released a 3 minute clip showing not only where the Austrian gold is located now:
... but where it is headed:
... how it is measured:
... how it is tested using ultrasound:
... while validating its Rand Refinery serial numbers (read more about the refinery that has processed one third of all gold ever mined here):
... and finally holding a gold welcoming celebration party for media and journalists in its vault room:
The full clip is below.
We congratulate the Austrians on have such access and transparency to their own gold: sadly, for some unknown reason, when it comes to the US gold held at Fort Knox, the secrecy over the past several decades has prevented any member of the media or public to observe the thousands of tons which the US allegedly holds in storage. On behalf of the general population.
We wonder: why do Austrians celebrate the arrival of their gold and televize it for the entire world to see, while the world's allegedly biggest gold inventory remains a national secret, even, or rather especially, from those to whom it supposedly belongs - the citizens of USA?