Make sure you really own it

Back in January 2012 Venezuela finished an important task it started in 2011 - moving 160 tonnes of the gold it owned, back into the country. The gold was previously held in overseas vaults.

Other countries have followed suit. India repatriated 274 tonnes between 2023 and 2026. France started its own repatriation procedure in 1963 and its total gold holdings - 2,437 tonnes - is now within its own borders, managed by the central bank.

They're not the only countries keen on getting their gold under their control. In 2013 Germany's central bank said it would take back 300 tonnes from US vaults and 374 from French ones by 2020. It now has 50% of its gold back in Frankfurt.

In 2017 Turkey started withdrawing around 350 tonnes of its own gold from vaults in the UK, the US and Switzerland. In 2019 Poland started a two-year repatriation of 100 tonnes of gold. Romania passed a law in 2019 stipulating that only 5% of its gold can be stored abroad, though the gold remains overseas.

Sixteen years ago countries were happy to have just 50% of their gold under their own control. Today almost 70% have the gold in their own hands. Why? Does this trend have any message for private individuals?

Control

Countries with gold held overseas can use that gold, either in swaps, or a lease, or as collateral - or sell it. All of these however depend on the custodian (whoever manages the vault in which your gold sits) doing what you ask.

Venezuela has almost $3 billion of its gold - about 31 tonnes, 15% of its total central bank reserves - still sitting in the Bank of England (BoE). The Venezuelan government has for years tried to repatriate this gold, resorting to legal action in 2020 to recover it. The case remains blocked in the London courts, tangled up in knotty wrangles. The bottom line however is that while the gold is legally Venezuela's, the BoE (backed by the British government) is still blocking its handover to Caracas.

This isn't the only example of a country being denied gold that it legally owns. During the First World War Romania shipped more than 90 tonnes of gold to Tzarist Russia for safekeeping. After the Bolshevik revolution in 1917 the new government confiscated that gold. It has never been returned and is a sore point between the neighbors.

Perhaps the biggest lesson comes with Russia. Central bankers everywhere took note of the West's freezing of Russia's foreign exchange reserves in 2022. Assets in foreign jurisdictions can be weaponized overnight. No gold was seized as Russia manages all its own gold.

Other factors have also assisted the drive for countries to take complete control of their gold. A combination of fear and nationalism has gripped some. In 2019, before he became Slovakia's Prime Minister, Robert Fico, called for Slovakia's 31.7 tonnes of gold held at the BoE to be repatriated. He said "You can hardly trust even your closest allies after the Munich Agreement. I guarantee that if something happens, we won't see a single gram of this gold." In 1938 Britain, France and Italy sacrificed the Sudetenland, Czechoslovakia's strategically important western area, to Germany. Slovakia's gold is still in BoE vaults.

In place of hope

Countries leaving their gold in vaults controlled by other nations are running a risk. At critical moments, or at moments when they offend a power that has greater muscle, that gold can be frozen and have no operational value at all. Gold only functions as a truly reserve asset if you actually control it.

For individuals that's why holding allocated (not unallocated) gold is critical. Much of the gold that is traded today deals in unallocated gold. That way of owning gold has several risks. Probably the most serious is counterparty risk. If the institution that issued your paper pledge runs into trouble it can sell the metal, without any consideration to your gold. What you own with unallocated gold is a paper pledge - nothing is defined as your exclusive property.

Which is one reason why you should own gold with Glint. Glint's gold is allocated. Not only is it held in a Zurich vault, it is truly yours. It can't be lent out or used to settle the company's debts. There are, in other words, no counterparty risks.

In place of the kind of hope held by many of the world's gold holders, Glint gives you the reassurance that, no matter the circumstances, your gold really is untouchable by others.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.