January 25, 2012

Will the Dutch gold ever come home?

For years the amount of gold held abroad by the Dutch Central Bank (after this named DNB) was only to guess. Nout Wellink (former president of DNB from 1997-2011) never answered any question regarding this topic. But with the new president Klaas Knot just several months in office things have changed. During an interview with Nieuwsuur last January he stated that about 67 ton was stored in Amsterdam. Better translated as "I thought it was about 67 tonnes". Link (in Dutch)

With total holdings at 612,5 tonnes, this leaves 90% of our national gold stored abroad. And as the Ministry of Finance replied before; it is stored in London, Ottawa and New York. Link (in Dutch) 
In this post my intention is to discover what made Mr Knot make this statement. As Mr Wellink had his reasons to remain in silence, so has Mr Knot his reasons to be open. Will this eventually return our gold?

The first question that comes up is why our gold is mostly stored in New York and London. DNB is clear. When they want to sell some gold, it is easier to keep it close to the place where the gold is sold. And that DNB has sold a lot of gold can we see in this picture below. Notice (again) that although the weight in tonnes has lowered, the total value remained the same, or increased a bit.

This is one reason to stick to the current situation. Another reason Mr Knot pointed out is that repatriating the gold is going to be an expensive and hard to insure operation. He better could ask Venezuelan president Chavez how he managed to get their gold partially back. But okay, in the end valid reasons in some kind of way to let the gold stay where it now is.

But if Mr Knot is feeling good with this situation, why than this remarkably openness? A man in his position is very well aware of the weight of his words. And with his statement so began the call of getting our gold back home. Coincidence? I doubt it. In my opinion he knew this was going to happen. He knew the public would go mad with this knowledge reached to them by the bank director. So what could be his goal?

In this, it might be interesting to look at the next chart. In this remarkable chart we can see the estimated total gold amount, and the amount in the hands of the central banks.

What we see here is that the percentage of the gold held by the central banks stays about the same until roughly World War 2. After that, the total amount of gold held by those banks is barely moving. But as the total amount steadily increases, the percentage of central bank holdings is lowering as we speak. We can conclude that there is a clear shift here from public to private hands regarding gold possession. As we know; he who has the gold, makes the rules.

With this in mind it could be Mr Knots' purpose to purely get the focus on gold. In my opinion the gold stored overseas is never going to come back. This has several reasons.
1. Probably a great part, or everything of this gold has been sold into the markets.
2. With DNB asking  to get it back, it would offset a tremendous panic in the markets as this would be a sign of distrust. The implications would be that there would be a buying power of enormous volumes and the physical markets would quickly dry up.
So in both situations the gold will not return.

But what could be an alternative way of getting the gold into the Netherlands, or if we think bigger in the Euro-zone? First it starts with the conditions for buying gold. In the Euro-Zone the buying of gold is excluded from taxes. A very important point. And if we needed a subtle way of making people realize the importance of saving in gold. That is what could be happening now. People are talking and discussing about this subject and in the end could be very well intended to buy some themselves. As FOFOA has often explained the most important for the future system is the gold held in mostly private hands. As the confidence in the currency starts to evaporate among the people, so starts the re-building of the confidence in the new system with the people. And as we look back to the graph above this shift is taking place for decades now!

Probably there is a lot of gold held in private hands already in the Netherlands. When we look to Germany, France and Italy (numbers available) there is more gold in private hands than stored in their central banks. With this average there is probably more than 1000 tonnes already privately held in the Netherlands. When it comes down to answer my own question will the Dutch gold ever come home? My conviction is it will. Not in the way you probably first thought, but by the people. But this situation of buying us a ticket at these prices won't last forever. Actually it can end any time. Stop puzzling and running around in circles. Ask yourself the question: " is there a good reason for you NOT owning gold?"


Flore said...

if you had any doubts who freegolds on twitter is...

Boefke said...

Lol, When I was on Goudforum.com you already had created your twitter account.
Thank you for your re-tweets lately.

Blondie said...

"Notice (again) that although the weight in tonnes has lowered, the total value remained the same, or increased a bit."

Total nominal value (ie. when expressed in euros) may have remained roughly the same, but the fact remains that there is less actual gold and by logical extension less real value.

Depends how one views gold; perhaps I am too much the purist. On a short timescale the value has not been diminished, but on a longer one it definitely has.


"When it comes down to answer my own question will the Dutch gold ever come home? My conviction is it will. Not in the way you probably first thought, but by the people."

So you are saying that they will be individually compelled to privately repurchase it? If so, it is not the Dutch owned but in foreign storage that will be coming home is it? You shouldn't have to pay twice... perhaps I have misunderstood?

" is there a good reason for you NOT owning gold?"

Sure, if you have no surplus of value to preserve for the future.

Boefke said...

Hi Blondie,

Long time not spoken, how are you doing?

Happy to see you found my blog.

What you say about nominal value in Euro's is what I meant here. When we dig deeper in this subject and look at the system following this one, gold will be measured in weight.....and so value has definitely decreased.

About the gold held abroad. My best guess is this will be settled in currency. As I say, my best guess. Than it isn't paid twice, but is DNB disadvantaged in a way.
As the buying by the people could increase there would be some kind of an advantage though. The gold isn't sold by DNB so the public won't go mad on them, and the monetary gold has moved into private hands. As I say, a possibility.

The surplus of value is in some kind of way supposed to be present. A bit naive perhaps by me, but I think people with no excessive savings won't visit my blog........now reading tit again, naive.

Thanks for your comment, appreciate it.

Blondie said...

"The gold isn't sold by DNB so the public won't go mad on them"

If it has been "settled in currency", then it has effectively been sold hasn't it?

If the DNB are settled in cash, which is possible but not necessarily inevitable, said cash will not be enough to repurchase the original quantity of physical "sold", will it?

I like your blog by the way.

As we have discussed before, the benefits of Freegold will not be limited to those with "excessive savings". IMO this is the bigger story, being a cause for real optimism for our collective future for every single one of us.

Those with "excessive savings" will arrive at gold, and thus precipitate Freegold, for no other reason than their own self-interest. Everyone else would sleep much better (ie. find great value in) understanding the positive implications that envelope everyone when the savers act on this self-interest.

Is the word verification for each comment necessary? I have had no problems without it on my blogs

Boefke said...

It would not necessary be sold. It could be a make or break deal by the Americans, isn't it?

The cash would definitely not be enough to repurchase the quantity held abroad. But that's the way you and me look at it. A very big part of the people look at this nominal. So there wouldn't be a big problem here for the most of them.

We both agree on the last statement made. We all benefit from the shift. I know not everyone thinks the same about this, or it doesn't fit in their new "hard" system.

And in this light the focus shouldn't just be on gold. On the other hand the benefits can't easily be seen these days as a lot of people have to go through really tough times.....

Word verification? Don't know what you mean, going after it.

Blondie said...

"that's the way you and me look at it. A very big part of the people look at this nominal. So there wouldn't be a big problem here for the most of them"

They won't necessarily look at these things in nominal terms afterward though will they? They may feel differently then. No doubt the DNB have their reasons, criteria and perspective upon which the base their actions. Only time will reveal these, and pass judgement. In the meantime, we speculate.


Word verification is the typing in of distorted characters that must be done to allow placement of a comment on this blog. As blog owner, you do not have to do this, but everyone else does, unless you turn off comment word verification in your blog settings. Few other blogs seem to bother with it, and they have no problems.

Its just a bit of an annoyance to commenters (this one at least!)

Boefke said...

At least, I think I solved the verification problem.

Boefke said...

Digged through the gmail archives and found my post back! Only had to edite the images again.....

That's life with Blogger......there is a manner in which things can be solved, it only is not the easiest one.