Central Banks Reposition Gold Reserves in London as Geopolitical Tensions Rise

A central bank governor says he never expects to use his country's gold. Yet his institution has spent months — and real money — relocating 86 tonnes of it across an ocean so it can be deployed the moment it is needed. That contradiction sits at the heart of the issue.

De Nederlandsche Bank (DNB) has rebalanced its gold reserves out of New York and Ottawa and into London, citing "geopolitical unrest." However, the fuller explanation lies in a single word buried further down its press release.

The move raises several questions: what actually happened, why London rather than a location closer to home became the destination, and what a 1930s precedent reveals about the significance of this decision. There is also growing pressure for gold to be formally recognised as a High Quality Liquid Asset (HQLA) within banking regulation — a change with implications for anyone holding physical gold personally rather than through a central bank vault.

This is not the first time the Netherlands has reorganised its gold. In 2014, DNB repatriated 122 tonnes of gold from the Federal Reserve Bank of New York back to Amsterdam, a move it framed at the time as an appropriate distribution of its reserves. It later shipped part of that Dutch stock to Frankfurt vaults operated by Germany's Bundesbank. The latest rebalancing therefore continues a decade-long repositioning of the country's roughly 612 tonnes of official gold.

The choice of London also reflects practical realities of the gold market. London is the world's largest centre for physical gold trading and settlement, home to the vaults underpinning the London Bullion Market Association (LBMA) market. Holding gold there keeps it close to the deepest pool of liquidity, where bars can be lent, swapped or sold quickly — which matters for a reserve asset that must be usable "the moment it is needed."

France has already withdrawn all of its gold from the New York Fed. Germany faces similar pressure at home. This is unlikely to be the last relocation of its kind, and current market conditions illustrate why.

At the time of writing, gold was trading around $4,470 to $4,490, up between half a percent and a full percent — on top of an already strong August.

Fittingly, the impetus comes from precisely the kind of geopolitical unrest DNB referenced in its own statement. Trump described a "very heavy" US strike on Iran on Wednesday, while also suggesting the conflict would not drag on, and traders have been reacting to that mixed signal ever since. Silver has followed suit, sitting around $66 — up roughly 60 percent from a year ago.

Central bank demand more broadly has been a defining feature of the gold market in recent years. According to the World Gold Council, official sector buying has run at around 1,000 tonnes a year since 2022 — roughly double the pace of the previous decade — led largely by emerging market central banks. Against that backdrop, questions about where reserves physically sit, not just how much exists, have taken on renewed importance for reserve managers. What bears watching next is whether other European institutions follow DNB's lead, and whether regulators move on the HQLA question.

About the Author

David Russell is the CEO of GoldCore. Until Summer 2023, he was Director of Marketing and Communications, responsible for all marketing and communications strategies and branding. He joined GoldCore in 2008 as Director of Business Development and later took over as Director of Marketing and Communications in 2020. Prior to this, Russell managed and operated his own marketing agency and completed multiple coaching qualifications.

"Working for GoldCore gives you a fantastic lens through which to view global financial and geopolitical developments. I am very proud to be part of a company that contributes to increasing investors understanding of these developments," he said.

When not at work, Russell is passionate about sailing and has completed the Round Ireland Yacht Race twice.

Source: GoldSeek