Why is Germany sitting on $599 billion of gold?

Thu Jan 29 2026

Eighty feet below the streets of Manhattan there’s a New York Fed vault containing some $220 billion of German gold. Perhaps it’s time Germany sold some of it.

My provocative suggestion was prompted by recent calls from opposition German politicians and the Bundesbank’s former head of research Emanuel Mönch to repatriate this 1,236-ton stash, made up of almost 100,000 bars. These demands follow US President Donald Trump undermining the independence of the Federal Reserve and his evident disdain for NATO allies.

But shipping the bullion home would further strain Berlin’s relationship with Washington and antagonize Trump, who seems to care a great deal about gold. Just look at his gilded restyling of the White House. Deliberate or not, his erratic behavior is causing an exodus from the dollar and has driven precious metals prices to the moon.

That’s greatly benefited the Bundesbank, which controls its nation’s gold reserves — the world’s largest after America’s. They’re worth about €500 billion ($599 billion) at current prices. That’s equivalent to 18% of the country’s debt and is a near 19-fold increase since Germany adopted the euro in 1999.

Germany finished bringing home 300 tons of gold from New York in 2017 following domestic political pressure for more transparency and a tighter grip on its reserves. Its holdings there date back to the postwar Bretton Woods system when the dollar was backed by the metal. New York is a major trading hub for gold, alongside London.

Today neither the Bundesbank nor Germany’s coalition government want to repatriate more. “I have no doubt that our gold at the New York Fed continues to be securely stored,” the central bank’s president Joachim Nagel said this week. That’s surprising given Trump’s disregard for institutional norms. But Berlin is stuck between a geopolitical nugget and a hard place on this issue. I’ve a better solution: Why not sell some of the hoard, taking advantage of soaring prices and rampant demand?

This isn’t investment advice. I don’t know whether gold prices are nearing a peak or will keep rising. To be transparent, I own a bit of gold and in hindsight wish I owned more. I’m conscious, too, that encouraging the Bundesbank to part with treasure is borderline heresy in a country that experienced hyperinflation in the 1920s.

Nowadays there are few practical reasons to hold so much. As a euro member, Germany no longer has its own currency. Yet the national stockpile retains huge symbolic importance. Parting with it would be unpopular. “Selling some of the gold gradually at these sky-high prices to reduce federal borrowing would make perfect economic sense,” Holger Schmieding, Berenberg’s chief economist, tells me. “But it’d be politically dangerous. Germans love the Bundesbank as it is.”

Numerous institutional and legal hurdles stand in the way of a sale. European treaties rightly safeguard the independence of national central banks — something I was reminded of recently when Rome and the European Central Bank tussled over the ownership of Italy’s gold.

Implementation would be difficult, too. It would be self-defeating for Germany to sink the gold price by selling a big chunk. Investors might view such a move as a sign of economic weakness or monetary financing of the budget, depending on how the proceeds were used. This would need careful choreography.

The Bundesbank would be fiercely opposed. Nagel said in 2024 he hadn’t considered selling gold for a “nanosecond” and he’s said similar more recently. The central bank declined to comment for this column.

But with gold now comprising more than 80% of Germany’s official reserve assets, it’s worth pondering whether this stockpile could be put to more productive use? Even from a pure risk-management perspective it seems imprudent to have nearly all the Bundesbank’s eggs in such a volatile asset. Although the central bank isn’t a returns-obsessed hedge fund, it might be a good moment to take profits.

To recap, central bank demand is contributing to skyrocketing gold prices, together with feverish retail speculation and the so-called debasement trade. Neighboring Poland, not a euro-zone member, has been buying heaps.

Yet Germany’s far larger holdings go back to its hefty current account surpluses after World War II. Apart from modest sales to mint gold coins, nowadays the Bundesbank leaves its stash untouched. About half is in Frankfurt, 12% in London and the rest in New York, where it accrues no interest.

The Bundesbank’s resistance to selling was correct in past decades. It held steady even as fellow Europeans were offloading the metal in the early 2000s. Notoriously, UK Chancellor of the Exchequer Gordon Brown authorized the sale of some 400 tons of gold between 1999 and 2002. That was at an average price of $275 per ounce, bringing in $3.5 billion that was reinvested in interest-bearing foreign-currency reserves. Today it would be worth $70 billion or so. You’d think that might give anyone pause before encouraging similar, but bear with me.

It’s true that the soaring value of its gold reserves has had one striking benefit for the Bundesbank: It was a counterweight to the drain on its finances following the recent period of “quantitative easing,” where it had to buy lots of low-yielding bonds at the behest of the ECB.

Because of a mismatch between the assets it acquired and the interest it has to pay on credit institutions’ deposits, the Bundesbank has reported roughly €20 billion of losses in each of the past two years. But thanks to the massive revaluation of its gold holdings, its net equity position has increased to more than €250 billion when last measured in February 2025.

Unfortunately, German taxpayers don’t benefit. The Bundesbank halted profit distributions to the government in 2020, and it probably won’t make any payouts for several more years because of its bond problems. For context, between 2010 and 2019 the federal government received about €25 billion of dividends from the central bank.

This is where an injection of cash from Bundesbank gold sales would be very handy. Germany faces enormous economic, demographic and fiscal challenges. Chancellor Friedrich Merz has cast off fiscal restraint and the country will borrow several hundred billion euros to fund new infrastructure and rearmament — adding considerably to the national debt.

The worry is that any proceeds from gold sales would lessen the pressure on the government to enact much-needed spending reforms. Just look at how some of the €500 billion of new infrastructure funds is being spent.

Although German politicians have said little on this topic lately, in the 1990s and early 2000s a succession of officials suggested the Bundesbank could sell gold to do things like pay for flood damages, create a cultural foundation or prop up social insurance. None of that happened.

So maybe the Bundesbank should come up with its own suggestion, as it did in 2004. Back then its president Ernst Welteke proposed selling up to 600 tons — or more than a sixth of the reserves — to purchase interest-bearing assets and seed a foundation to support research and education. He faced considerable pushback and resigned over a separate matter before it could be implemented.

Two decades later, there’s serious appeal in the idea of using the proceeds from even a moderate amount of gold sales to benefit future generations, help alleviate the productivity crisis and boost growth. It deserves more than that nanosecond of thought.

Source: https://economictimes.indiatimes.com