European Central Banks Shift Gold Reserves to London for Liquidity and Crisis Readiness

European central banks are shifting their gold reserves out of North America, driven by a combination of economic and logistical factors. The Dutch central bank (DNB) recently moved 86 tonnes of gold from North America to London, increasing the city’s share of its reserves to 32.1% from 18.1%. This relocation aims to improve crisis preparedness by ensuring the gold is “readily available for use in a crisis situation,” according to DNB.

While geopolitical tensions are a factor, they are not the primary motivation. Joseph Cavatoni, Senior Market Strategist at the World Gold Council, told the BBC that inflation, interest rates, and liquidity considerations are key drivers. Central banks are focusing on better managing their reserve assets rather than preparing for imminent crises.

The Netherlands is not alone in this trend. Banque de France sold 129 tonnes of gold held in New York and replaced it with gold meeting London Bullion Market Association standards in Europe. The move was described as an upgrade in reserve quality rather than a change in size. London’s appeal lies in its deep liquidity and large quantities of gold bars meeting the London Good Delivery standard, with the Bank of England’s vaults holding around 400,000 bars worth over GBP 200 billion.

Central banks have been increasing their gold reserves, averaging around 1,000 tonnes per year over the past four years. Domestic storage is expensive due to security and infrastructure costs, making international storage more attractive. Goldman Sachs expects gold prices to reach USD 4,900 per troy ounce by the end of the year, reflecting its enduring value as a reserve asset.