Why Gold is Leaving New York

Key Takeaways

• Central banks are diversifying where they store gold: Nations are shifting portions of their gold reserves out of New York (and Ottawa) to domestic vaults or European centers like London.
• Moves are driven by jurisdictional and political risks: While gold itself carries no counterparty risk, storing it abroad exposes central banks to political risk and potential access restrictions during geopolitical conflicts.
• Liquidity vs. control tradeoff: Storing gold in major hubs like New York and London provides high liquidity, whereas storing it at home guarantees direct control and eliminates reliance on foreign governments.
• Insuring against global financial fragmentation: Central banks are not abandoning the current monetary system; rather, they are hedging against potential geopolitical instability and system fragmentation.

For most of the postwar era, storing a nation’s gold in New York was not an act of dependence. It was an act of prudence.

The Federal Reserve Bank of New York, in downtown Manhattan, sits atop what remains the world’s largest known repository of monetary gold. Foreign governments and central banks began placing gold there more than a century ago, initially because war made moving bullion across Europe dangerous. The practice expanded during and after World War II and became integral to the Bretton Woods monetary system. At its 1973 peak, shortly after the United States ended the dollar’s convertibility into gold, the New York Fed held more than 12,000 metric tons.

There were good economic reasons for nations to store at least some of their gold abroad. A reserve asset is useful not simply because it exists, but because it can be mobilized. Gold sitting in New York or London could be sold, pledged, swapped, or transferred between central banks without shipping tons of metal around the world. Overseas custody also diversified physical and political risk. During the Cold War, keeping all of a country’s bullion within its borders was not necessarily the safest strategy. But the calculation is changing. 

Shift in Dutch and European Gold Reserves

A few weeks ago, De Nederlandsche Bank announced that it had shifted roughly 86 tons of gold away from New York and Ottawa. The Dutch move is particularly interesting because it was not, strictly speaking, a repatriation. Most of the reallocation went to London, not back to the Netherlands. About 59 tons of gold in New York were sold and replaced with internationally tradable bars in London; another 27 tons were physically moved from North America to the Netherlands while an equivalent amount moved from the Netherlands to London. New York’s share of Dutch gold reserves fell from 31.3 percent to 18.5 percent.

France made a similar move. The Banque de France disposed of 129 tons held in New York that did not conform to modern London Bullion Market Association (LBMA) standards and replaced it with higher-standard gold in Europe. France’s total gold holdings did not decline. The location and characteristics of the asset changed.

These transactions follow a longer movement toward reconsidering where national gold should reside. Germany provides the most prominent example. Beginning in 2013, the Bundesbank undertook a large relocation program, eventually transferring 300 tons from New York and 374 tons from Paris to Frankfurt. By 2017, slightly more than half of Germany’s roughly 3,378 tons was stored domestically. Importantly, Germany did not empty its New York account: roughly 1,236 tons remained there. The objective was diversification rather than autarky.

The Netherlands had already transferred 122.5 tons from New York to Amsterdam in 2014. Austria subsequently brought 90 tons home from London as part of a policy intended to keep half its reserves domestically. Hungary returned its gold reserves to domestic custody in 2018 while simultaneously increasing them tenfold. Serbia brought its foreign-held gold home in 2021. India has also substantially increased the proportion of its growing gold stock held domestically.

The motivations differ, but the economics can be reduced to a question familiar to any portfolio manager: What risks are being hedged, and at what cost?

The Jurisdictional Risk of Storing Gold Abroad

Foreign custody provides liquidity and geographic diversification. Domestic custody provides control. A gold bar sitting in a central bank’s own vault has essentially no counterparty risk. More importantly, it has very little jurisdictional risk. It cannot easily become inaccessible because another government changes its laws, imposes sanctions, freezes assets, or restricts financial transactions. That distinction has become considerably more salient in an era in which financial infrastructure itself has become an instrument of statecraft.

That doesn’t mean that central bankers suddenly believe the Federal Reserve is going to confiscate their bullion. Nor does it demonstrate concerns regarding an imminent collapse of the dollar. Those conclusions go considerably further than the evidence warrants. The New York Fed still held about 6,331 tons of monetary gold as of 2024, and the dollar remains the dominant reserve and transaction currency.

What has changed is the perceived distribution of tail risks. Gold is unique among reserve assets because it is simultaneously financial and physical. A US Treasury security is someone else’s liability. A bank deposit is someone else’s liability. Gold bullion is not. Yet once that bullion is stored in another jurisdiction, some of that independence is surrendered. The asset has no counterparty risk, but access to it can acquire political risk.

The growing incidence of gold recall is likely a sign that central banks are increasingly pricing that distinction. The World Gold Council’s 2026 survey found that 89 percent of responding reserve managers expected global central bank gold holdings to increase during the following year, while 45 percent expected their own institutions to add gold. Crisis performance, long-term value preservation, diversification, and geopolitical risk ranked prominently among their reasons. Central banks are also reconsidering where the metal resides: some are increasing domestic storage while others are diversifying among foreign vaults.

That last point matters. The story is not simply “gold is leaving America” – although it is. The Dutch also moved substantial reserves into London. Austria deliberately retains foreign holdings so that it can access major gold markets quickly. Germany still stores hundreds of tons in both New York and London.

A New Era of Geopolitical Reserve Diversification

What is emerging instead is a form of geopolitical portfolio diversification. For decades, reserve managers optimized primarily across safety, liquidity, and return. Increasingly, a fourth variable must be considered: jurisdiction. The expected cost of a low-probability event can rise substantially when its consequences are catastrophic. Even a small perceived probability of losing access to reserves can justify paying the comparatively modest costs of geographically diversifying them.

That is the most important signal contained in the current movement of gold. Central banks are not abandoning the international monetary system. They are, by moving gold to other nations and regions, insuring against its fragmentation.

Gold is an asset with no issuer, has no board of directors, and makes no promise to pay. And in these strategic relocation choices, nations are once again valuing it for precisely the characteristic that once made it seem a “barbarous relic:” ultimately, it belongs to whoever can get their hands on it.

 

About the author: Peter C. Earle, Ph.D, is the Director of Economics and Economic Freedom and is Head of Research who joined AIER in 2018. He holds a Ph.D in Economics from l’Universite d’Angers, an MA in Applied Economics from American University, an MBA (Finance), and a BS in Engineering from the United States Military Academy at West Point.

Prior to joining AIER, Dr. Earle spent over 20 years as a trader and analyst at a number of securities firms and hedge funds in the New York metropolitan area as well as engaging in extensive consulting within the cryptocurrency and gaming sectors. His research focuses on financial markets, monetary policy, macroeconomic forecasting, and problems in economic measurement. He has been quoted by the Wall Street Journal, the Financial Times, Barron’s, Bloomberg, Reuters, CNBC, Grant’s Interest Rate Observer, NPR, and in numerous other media outlets and publications.

 

Disclaimer: All opinions expressed by the author are the author’s opinions and do not reflect the opinions of Goldco. The author’s opinions are based on the author’s personal experience, education and information the author considers reliable. Goldco does not warrant that the information contained herein is complete or accurate, and it should not be relied upon as such.