Bundesbank Slashed London Gold Holdings in Mystery Move

Ambrose Evans-Pritchard

Germany withdrew two-thirds of its vast gold holdings from Bank of England vaults shortly after the launch of the euro more than a decade ago, according to a confidential report by German auditors.

The revelation came as Germany's budget watchdog demanded an on-site probe of the country's remaining gold reserves in London, Paris and New York to verify whether the metal really exists.

The German Court of Auditors told legislators the gold had “never been verified physically” and ordered the Bundesbank to secure access to the storage sites. It called for repatriation of 150 tons over the next three years to test the quality and weight of the gold bars. It said Frankfurt has no register of numbered gold bars.

The report also claimed the Bundesbank had slashed its holdings in London from 1,440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by airfreight.

The shift came when the euro was at its weakest, but also as the Bank of England was selling off most of Britain's gold reserves – at market lows – on orders from Gordon Brown.

The Bundesbank may have withdrawn its bullion because it did not have specifically allocated bars in London. It may have decided that the Bank of England had lent out too much gold, and that it was safer to repatriate the metal.

The report follows claims by the German civic campaign group ‘Bring Back our Gold’ and its US allies in the Gold Anti-Trust Committee that official data cannot be trusted. They allege central banks have loaned out or ‘sold short’ much of their gold.

German legislators agree: “All the gold must come home: it is precisely in this crisis that we need certainty over our gold reserves,” said Heinz-Peter Haustein of the Free Democrats.

source: telegraph