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Where in the World Is the Gold?

By Erin Fischer

Gold is leaving the U.S.—and fast. Before you get the wrong idea, let me explain…

Turkey has been making headlines lately for pulling 220 tons of gold out of the U.S. Federal Reserve System (FRS) on April 19, 2018—an amount valued at $25.3 billion. But it’s not the only country doing so. A rising number of nations have also begun pulling their gold from U.S. vaults, including Germany, Netherlands, Austria, Belgium, Russia, China, and Azerbaijan.

Turkey’s decision to withdraw this gold is likely a political move by Turkish President Recep Tayyip Erdogan, as Erdogan has recently taken additional steps to prioritize his currency. In fact, in recent weeks, he urged the International Monetary Fund (IMF) to pay loans in gold as opposed to U.S. dollars. Erdogan explains, “These debts should be in gold. Because at this point, the karat of gold is unlike anything else. The world is continually putting us under currency pressure with the dollar. We need to save states and nations from this currency pressure.”

George Gero, managing director at RBC Wealth Management, explains the appeal of gold to nations like Turkey as follows, “With gold, there is no political allegiance. Gold makes a lot of countries comfortable as a holding, especially if they fear inflation. Many countries prefer to hold their own gold.” Gero also noted that, through this act, Turkey is trying to gain “more independence” from the U.S. dollar.

Although Turkey has received the most attention for pulling its gold from the U.S., as mentioned before, they are not the only nation making efforts to repatriate their gold. Last summer, Germany’s central bank moved 674 metric tons of gold from both the FRS and the Banque de France three years earlier than anticipated. The bank had also reportedly moved another 940 tons of the yellow metal from the Bank of England.

What’s the Rush?

U.S. Federal ReserveSo, what’s the motivation for moving all this gold from the U.S.? Many people don’t trust the U.S. Treasury’s claims that it currently holds 261 million ounces (approximately 8,100 tons) of gold in Fort Knox and other locations. They worry the U.S.’s official gold reserves have not been fully audited and accounted for, and thus feel safer withdrawing their gold. This isn’t completely unfounded, as the Federal Reserve has never been subject to a thorough and independent audit—something that the government and Congress have actively resisted. Instead of putting blind faith in the U.S. government’s words, these nations feel safer repatriating their gold.

Furthermore, many of the gold bars held in FRS banks have a low purity and fail to meet international industry standards. Even if the amount held by the U.S. matched the official totals, the bars wouldn’t be accepted on the international market.

Moreover, the U.S. dollar’s position as global reserve currency has taken a major hit lately, especially in light of recent tariffs issued by the U.S. These tariffs have led many nations to move away from the dollar, whose value is derived from faith in the U.S. government. In fact, nations like Russia and China are building their gold reserves in an effort to create gold-backed currencies that will steer the world away from the U.S. dollar.

In recent months, the Chinese yuan has been growing stronger as China attempts to shift the world away from the petrodollar and toward a gold-backed petroyuan. Moreover, nations like Russia, Turkey, and Iran have been increasingly considering making payments in their own currencies as opposed to the dollar. And Iran has just issued a statement that it will be moving away from the dollar and toward the euro as its official reporting currency. Russia and China even arranged an agreement to avoid settlements in the dollar.

1-ounce Gold BarsClearly, there is a lack of trust for matters concerning the FRS—whether it be the gold held by the U.S. or the U.S. dollar. As a growing number of nations pull their gold from the U.S. and attempt to undercut the dollar, our position in the global economy will shift as we lose our status as the world’s reserve currency.

As efforts by countries like Russia, Turkey, and China have illustrated, gold is one of the most trusted ways to build a strong portfolio. If you’re looking to diversify your wealth outside of dollar-dominated assets, we now have 1-ounce LBMA approved gold bars (our choice) available for as low as Spot + $35 per ounce*. To add the world’s most trusted form of wealth insurance to your portfolio, please call us at 800-831-0007 or email us.

*Prices subject to change based on market fluctuation and product availability. Prices reflected are for cash, check, or bank wire. Free shipping, handling, and insurance are available for 1 oz gold bar purchases of 10 ounces or more. Offer expires Friday, June 1, 2018, or while supplies last.

 

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