Central Banks Shift Gold Storage Strategy Amid Rising Geopolitical Uncertainty

Central banks are reassessing their gold storage arrangements, moving reserves to improve liquidity and accessibility. The latest example is De Nederlandsche Bank (DNB) transferring 86t of gold from New York and Ottawa to London. This operation was designed to strengthen DNB's preparedness for severe crises by improving the tradability of its gold reserves.

The decision might seem like another instance of a central bank bringing its gold closer to home, but it is more revealing than that. The Netherlands' share of Dutch gold reserves in London rose from 18.1% to 32.1%, surpassing domestic holdings of 30.8%. The shares held in New York and Ottawa fell to 18.5% each.

This was a strategic reallocation of reserve locations, not just bullion being flown across the Atlantic. Around 59t was sold in New York and replaced with internationally tradable gold in London. More than 27t of gold was physically transported from North America to DNB's facility in Zeist, while a similar quantity moved from Zeist to London.

Central banks are increasingly optimising across three considerations: custody risk, physical accessibility, and market liquidity. This evolution is illustrated by DNB's decision to move gold from North America predominantly to London to make it more readily deployable. In 2014, it moved gold from New York to Amsterdam to increase the proportion held domestically.

The World Gold Council's Central Bank Gold Reserves Survey found that 57% of respondents cited the Bank of England as their most commonly used vaulting location, while 49% reported holding at least some gold domestically. The survey also revealed growing interest among several central banks in reassessing and diversifying their gold storage arrangements.