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Central Banks Repatriate Gold: How Will This Affect Investors?

Bernice Napach

Gold is rebounding. News that the Bank of Japan set a 2% inflation target and is buying 13 trillion yen worth of assets ($146 billion) rallied gold prices Tuesday, to near a one-month high of $1,697.80 set last week.

That’s not surprising since gold, more than any other commodity, rises and falls along with changing government policies globally.

Germany made even bigger splash than Japan in the gold market recently with its surprise announcement last week that the Bundesbank would begin repatriating gold reserves held overseas. The central bank said it wanted to keep more than 50% of its gold reserves at home, up from slightly less than one-third currently. With that in mind, the Bundesbank will move all its gold reserves now held in Paris back to Germany, and reduce its reserves held in New York City.

Related: Gold's Uptrend is Still Intact: Peter Schiff

“Germany is saying that gold is money,” says Jim Rickards, author of Currency Wars: The Making of the Next Global Crisis. Otherwise, says Rickards, they would just leave the gold where it currently is stored.

And Germany isn’t alone. There’s talk that the Netherlands and Azerbaijan will also repatriate gold reserves.

China, the second largest global economy but the sixth largest holder of gold, according to the World Gold Council, is increasing its gold reserves, Rickards tells The Daily Ticker.

“If the Chinese repeat their pattern I expect late this year or early 2014 the Chinese will announce, ‘We’ve got 3,000 tons or maybe 4,000 tons.’ That will be a shock because suddenly the world will wake up and say why is China buying all this gold?" says Rickards.

He says the the reason is obvious: “Gold is the real base money.”

Rickards is bullish on gold short term and says gold prices will rise the most in currencies that are weakening the most.

“In dollar terms gold hasn’t gone up that much lately but in yen terms—with the devaluation of the yen, gold is partly a function of the currency wars,” he says.

Tell Us What You Think!

Is gold money?

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