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Much of Germany's gold reserves are stored abroad, in vaults in the US, Britain and France. No one has actually seen the gold bars for a long time - which has prompted German federal auditors to call for a look.
In times of crisis, gold is considered to be a safe haven. But as the financial crisis has engulfed the European single currency zone, that very haven has shifted into the focus of politicians and Germany's National Audit Office. Questions are being raised as to whether the German Central Bank has in the past actually checked whether its gold stored in the US, France and the UK actually has the weight it is supposed to have. Only about 30 percent of the country's gold reserves are stored within Germany itself.
The National Audit Office – an independent authority that monitors Germany's finances – has on behalf of parliament looked into whether the central bank is properly checking its gold reserves. For months now, the office has been pushing for the central bank to check the reserves in an accurate way rather than just occasionally, or simply relying on confirmation from the other banks that store the German gold.
For Folker Hellmeyer, chief economist at Bremer Landesbank, a more regular validation should go without saying. Central banks are subject to the same requirements as all of the other financial institutes, he told DW. "In this respect, the shortcomings in monitoring our gold reserves have to be viewed quite critically. It makes sense that this issue has now been taken up by the National Audit Office."
The world's second largest gold reserves
After the US (8,133 tons), Germany has the world's second largest gold reserves - 3,396 tons with a current value of 130 billion euros ($169 billion). With the gold price on the rise, that value is expected to go up even further in the future.
Gold reserves are an important part of the reserves of national banks in the eurozone. According to the World Gold Council (WGC), the eurozone countries together hold over 10,787 tons of gold, the European Central Bank more than 502 tons. Austria, for instance, holds 280 tons, highly-indebted Greece has some 111 tons, Portugal 382 and Spain 281 tons.
Why store gold abroad?
Why is German gold stored abroad in the first place? Many explanations suggest that it's to do with the Cold War and with the fear of a confrontation between East and West, between the US and the former Soviet Union. Yet while this may explain why Germany chose to store it's gold in the US, it's doesn't really explain why it would have been stored in Britain or in France, says historian Werner Abelshauser.
According to Abelshauser, there are other reasons. Germany was faring very well as an export nation in the 1950s and 1960s, and the nation had a huge balance of payments surplus at the expense of the allied powers, he says. "They needed the allies' military protection, while the Americans, Brits and French were constantly short of cash."
In fact, Germany gave them loans, he says, adding he could well imagine certain 'gentlemen's agreements' were made in addition to the official loans. "Something like, we'll store our gold in your country, and that creates trust. In return, we can help you if you're in a tight spot."
The barter transaction was stationing troops in Germany, the professor explains: "Stationing troops in Germany was an effective lever to draw on Germany to compensate for their own problems with balancing payments," he says. "The Germans needed American troops in the country, if they didn't want to run the risk of becoming a nuclear battlefield."
Complete trust in partner banks
Germany's Bundesbank has meanwhile reacted to demands by the federal auditors, stressing it does not doubt 'the integrity, reputation and safety' of the foreign storage sites. The bank pointed out that the documents at hand and the procedure applied give proof of the stored gold reserves - completely and traceable over the past decades.
The auditors do not doubt the foreign partners' trustworthiness; however, they have demanded stricter controls. The central bank has agreed to ship 150 tons of gold from New York to Germany over the next three years, where it will be melted down and reformed to standard bars to test its authenticity.
When the German gold treasure returns to New York, it is not likely to be shipped via submarine - which is how legend has it the French brought their gold reserves home from the US in 1966. President Charles de Gaulle insisted on bringing the French gold bars to France and out of the grasp of the Federal Reserve, the US central bank that stored the gold in its vaults. De Gaulle did not want to become dependent on the US - not for all the gold in the world.