Gold glitters as mistrust spreads

Calls for European governments to repatriate the bullion they store in the US are a sign of something bigger.

- Gillian Tett

A decade ago, I asked officials at the New York Federal Reserve if I could peek at their gold reserves. They refused point blank.

The reason? Fed officials have long taken pride in having the world's biggest gold vault, dug 24m down into Manhattan's bedrock. But they prefer to keep it discreet, partly because many of the vault's 507,000 bars belong to countries such as Germany and Italy. Silence was literally golden.

Now, however, a discordant note has been sounded. In recent weeks, politicians in Germany and Italy have demanded the repatriation of their gold bars, worth an estimated US$245 billion (S$312.5 billion). So have others. "We are very concerned about (US President Donald) Trump tampering with the Federal Reserve Bank's independence," explains the Taxpayers Association of Europe.

Neither the Fed nor European governments seem minded to act, and there are no signs of bullion moving east. On the contrary, gold has flooded into, not out of, America since Mr Trump's election, prompting speculation that US government agencies, like private investors, might be stockpiling it (although there is no public proof of that).

Either way, what is indisputable is that these repatriation appeals are a sign of spreading mistrust. The reason those bars were placed in New York vaults in the first place is that America's allies have hitherto assumed that Washington was a responsible leader of the West — and the dollar-based finance system.