The independence of the Federal Reserve is being challenged by Trump's interference, and escalating geopolitical risks are prompting Germany and Italy to face domestic pressure to withdraw over $245 billion in gold reserves from the United States. The substantial gold holdings of both central banks at the New York Fed account for more than a third of their total gold reserves. European taxpayer associations and some parliamentarians are calling for the gold to be repatriated, ensuring their national central banks have absolute control.

Key Details

Against the backdrop of Trump's repeated attacks on the Federal Reserve's independence and escalating geopolitical risks, Germany and Italy are facing calls to withdraw their gold reserves stored in the United States. The gold held by both countries at the Federal Reserve Bank of New York exceeds $245 billion in market value, accounting for more than a third of their respective gold reserves.

The European Taxpayers Association has written to the German and Italian finance ministries and central banks, urging policymakers to reconsider their reliance on the Federal Reserve as a gold custodian. Michael Jäger, the organization's president, stated:

"We are deeply concerned about Trump's interference with the Fed's independence and recommend repatriating the gold to ensure that European central banks have unlimited control over their gold at all times."

Former German conservative MP Peter Gauweiler emphasized that the Bundesbank must "never cut corners" in safeguarding the nation's gold reserves. He pointed out that geopolitical risks have made the world more insecure over the past decade, necessitating a re-evaluation of the safety of overseas gold holdings.

A recent survey covering over 70 global central banks shows that more central banks are considering storing gold domestically, fearing they might not be able to access their gold reserves during a crisis.

Historical Baggage and Practical Considerations

Germany and Italy hold the world's second and third-largest national gold reserves, respectively, with holdings of 3,352 tonnes and 2,452 tonnes, according to the World Gold Council. The storage of large quantities of gold by both countries at the Federal Reserve Bank of New York is primarily for historical reasons and also reflects New York's status alongside London as one of the world's most important gold trading centers.

Western European countries accumulated huge gold reserves during the two decades of economic prosperity after World War II, when they maintained large trade surpluses with the United States. Until 1971, under the Bretton Woods fixed exchange rate system, the dollar was convertible into gold by the US central bank. Storing precious metals across the Atlantic was also seen as a hedge against a potential war threat from the Soviet Union.

France repatriated most of its overseas gold reserves to Paris in the mid-1960s after President Charles de Gaulle lost faith in the Bretton Woods system. Germany, meanwhile, changed the Bundesbank's policy under the impetus of the "Repatriate Our Gold" grassroots movement launched in 2010.

Divergent Stances Across the Political Spectrum

In Germany, the idea of "bringing gold home" is gaining support from both ends of the political spectrum. Fabio De Masi, a former Left Party MEP who now belongs to the left-populist BSW party, told the media on the 23rd that there are "strong reasons" to move more gold back to Europe or Germany during "turbulent times."

Peter Boehringer, a precious metals expert who initiated the original movement and is now an MP for the Alternative for Germany party, stated:

"Gold is the last resort asset for central banks, and therefore needs to be stored without any third-party risk."

He emphasized that in times of severe distress, "not only legal ownership, but actual control over gold truly matters."

In 2013, the Bundesbank decided to store half of its reserves domestically, moving 674 tonnes of gold from Paris and New York to its Frankfurt headquarters through a high-security operation costing 7 million euros. Currently, 37% of the Bundesbank's gold reserves are still stored in New York.

Italy's Policy Shift

In Italy, Prime Minister Giorgia Meloni's Brothers of Italy party, when in opposition in 2019, lobbied for the repatriation of national gold reserves. Meloni at the time promised to bring Italian gold home if her party came to power.

However, since becoming Prime Minister in late 2022, Meloni has remained silent on the issue. She hopes to maintain friendly relations with Trump while avoiding the threat of deepening trade wars. Fabio Rampelli, an MP for the Brothers of Italy party, stated that the party's current position is that, given the gold is entrusted to "historical friends and allies," its "geographical location" is only of "relative importance."

Economic commentator Enrico Grazzini recently wrote in The Daily Fact:

"Leaving 43% of Italy's gold reserves in the United States under the unreliable Trump administration is very dangerous for national interests."

Bert Flossbach, a veteran German investor and co-founder of Flossbach von Storch, the country's largest independent asset manager, offered a similar perspective:

"Repatriating gold with great fanfare now would send a signal of deteriorating relations with the United States."

The Bundesbank stated that it "regularly assesses the storage locations of its gold holdings" based on guiding principles established in 2013. These principles focus not only on security but also on liquidity to "ensure that gold can be sold or exchanged for foreign currency when needed." The bank emphasized that the New York Fed remains an "important storage location" for German gold, adding: "We have no doubt that the New York Fed is a trustworthy and reliable partner for holding gold reserves."