The Hong Kong government has announced that its gold reserves will be recalled from the UK where they are currently stored, and transferred to a new purpose built vault under the Hong Kong Airport. Hong Kong is also expected to become a trading hub for bullion. It’s also likely that other Central Banks in the region will consider transferring their gold bullion reserves to the new facility.
But the key line to take note of in this report is [emphasis added is ours]…
“Central banks are increasingly aware of the importance of having gold reserves at time of financial crisis and having it easily available at their own disposal“.
This is just further evidence of lack of trust in the 2 major western financial centres – the USA and UK – particularly when it comes to gold. They have in the past been the centre of much discussion on the subject of gold leasing and gold price manipulation. A whole other subject in itself.
In April of this year the Dubai Multi Commodities Centre (DMCC) opened its new state of the art vault which is likely to attract the gold reserves of the central banks in the middle east region. These too would be withdrawn from the London Vaults.
Along with the custodial vaults in London, the Federal Reserve Bank of New York is where many foreign central banks currently store their gold. The N.Y. Fed website states:
“The reasons why foreign governments store their gold at the Federal Reserve Bank of New York can be summarized in three words: confidence, convenience and centrality.
• Confidence results from the bank being part of the Federal Reserve System, an agency of the U.S. government and the nation’s central bank. The political stability and economic strength of the United States, as well as the physical security provided by the bank’s vault are important factors. “
It seems confidence is somewhat lacking at the moment, as while still unproven there have been reports such as this one of Germany also demanding its gold reserves back from the USA.
If foreign central banks don’t trust the US and UK and want gold in their possession perhaps you should too? That’s why we always recommend a good portion of your gold portfolio should be held in physical bullion in the form of gold bars and coins and in your own possession. Check out our “How to Buy and Invest in Gold” page for some specific advice on this.
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