Gold Repatriation: Why Countries Want Their Gold Back

It’s no secret that central banks have been large buyers of gold over the past few years. Last year nearly set a record for gold purchases by central banks and the trend looks set to continue this year. But those central banks who already own gold are increasingly looking to hold onto it themselves. They no longer trust that their gold will be safe in New York, London, or Paris, and they’re increasingly looking to repatriate their gold and bring it back home. Do they know something that we don’t?

One of the first countries to repatriate its gold was Venezuela, which under President Hugo Chavez sought to repatriate the gold it held at the Federal Reserve Bank of New York. Chavez’ reason for repatriating that gold was to shore up his domestic financial situation due to his continued inflationary monetary policy. But other countries want to repatriate their gold to make sure that they maintain control over it during the next financial crisis.

The only thing worse than not owning gold is owning gold and not being able to control it. That’s the risk that countries that hold their gold overseas take. And that’s why more and more are deciding to repatriate their gold holdings. The fact that Venezuelan President Maduro recently tried to repatriate more gold from London and failed could be an impetus for that too.

Germany, Italy, Romania, and Hungary are other countries that have decided to repatriate their gold holdings, preferring to have their gold ready to use in the event of a financial crisis. Their actions go hand in hand with the actions of those central banks that are adding to their gold reserves, as both sets of nations understand that the global economy is headed toward recession.

Individual investors would do well to follow the example of these central banks and prepare their own balance sheets against a coming recession. There’s no better way to do that than by investing in gold, which has protected investors for centuries against all sorts of financial turmoil.