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Should China repatriate its 600 tons of gold reserves in U.S.?

english.sina.com | December 26, 2014

By Mei Jingya, Sina English

Where do governments store their gold reserves? According to media reports, more than 60 countries in the world have put a majority part of their gold reserves in the vaults of the Fed building in New York.

Is the Fed a safe haven? Since the financial crisis engulfed many regions, central banks have been printing money to save their crumbling economy, making depreciation of currencies an inevitable trend. And only recently when banks began to increase their gold holdings, their attention suddenly turns to the gold bars held abroad.

It's reported that on Nov.29, two opposition parties in the Dutch parliament urged the Minister of Finance to repatriate Dutch gold held overseas.

Coincidentally, Germany has also ordered a check on its gold reserves stored in US, intensifying their campaign to repatriate the gold reserves held abroad.

Surprisingly, the US Federal Reserve said no to both countries’ requests. In its official reply to Germany, the FED refused to allow German inspectors to even view the country’s massive gold reserves "in the interest of security and of the control process". 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.

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 (US$169 billion).

Fed’s rejection of German inspection has immediately prompted a series of questions over their safety.

Why do countries store gold abroad? How can US, as custodian of these reserves, say no to their owners’ inspection requests? Are the gold bars even there still?

China has also stored about 600 tons of gold bars in US Fed. Then should China repatriate these gold reserves? Are they safe? No reason to worry, at least it seems so to Chinese experts.

Sun Maohui, a professor of finance at Shanghai Normal University, told reporters the ownership of gold reserves is not open to question and US has no right to reject countries’ inspection request. But he added that Fed’s rejection does not necessarily mean there’s something wrong with those gold.

“Of course we should pay attention to the safety of gold reserves. But for China, they only account for 1.6 percent of China’s total foreign reserves.

Instead, we should be more concerned about the US debt, which is the No.1 priority,” said Sun.

Earlier, some experts said China storing all its 600 tons’ gold bars in Fed vaults is a hidden danger to the country’s financial security and called for repatriation of the gold as early as possible to stabilize the market.

“Each country’s gold reserves are directly related to Washington’s national credit. If something happens to those vaults, what the US loses is not just its qualification as custodian, but also its national credit,” said Pan Tieshan, a strategist at Haitong Securities.

“It’s unimaginable. If something happens, it will not only affect the price of gold, rather, the US dollar and even the global financial system would suffer miserably.”

Sun insisted that the Fed would never let that happen if it wants to retain its monetary hegemony of the US dollar.

 

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Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager

 

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