FRANKFURT Germany's central bank plans to bring home hundreds of tonnes of gold, part of the reserves it kept in the United States and France during the Cold War for safety from any Soviet invasion.
The Bundesbank's decision to move the bullion, announced on Wednesday, stems partly from a desire among some German politicians to keep a direct eye on its condition. The bank also now has space in its own vaults for a metal widely seen as underpinning confidence in the country's economic clout.
Only a third of Germany's nearly 3,400 tonnes of gold, valued at almost 138 billion euros are now stored in Frankfurt, with 45 percent in New York. Germany's gold reserves are second in size only to those of the United States.
"Now, the political security situation has changed because the East-West conflict is over. Considerations to store the gold as far west and as far from the Iron Curtain as possible had to be reconsidered," Bundesbank board member Carl-Ludwig Thiele told reporters on Wednesday.
West Germany amassed gold reserves after World War Two due to rapid economic expansion that saw growing exports to the United States, where its dollar earnings were turned into gold under the Bretton Woods agreement that Germany joined in 1952.
As the Cold War set in, the gold remained in central bank vaults abroad, well out of Moscow's reach.
The German Federal Court of Auditors, which oversees the government's financial management, called last October for an official inspection of the gold stored at foreign central banks, because they have never been fully checked.
The Bundesbank is ready to comply although it has said it saw no need to count the bars or check their gold content itself as written assurances from the other central banks were sufficient.
Thiele stressed that the bank had taken the decision itself to hold more gold in Frankfurt but accepted the implication that it would now have direct oversight of the reserves.
"If I hold gold in my own vaults, I have to check it myself," Thiele said.
Gold is important "to create confidence in the currency, in the economic power of our country," Thiele said, but he added that "a complete shift is not appropriate".
This year, the Bundesbank will start transferring 300 tonnes of gold from the Federal Reserve in New York and all its gold stored at the Bank of France in Paris - 374 tonnes - to Frankfurt, so that by 2020 half of its total will be in Germany.
Before German reunification in 1990, 97 percent of Germany's gold was stored abroad. The Bundesbank then started bringing some home and in 2000 transferred 931 tonnes from the Bank of England.
While it will continue to hold about 13 percent of its gold reserves in London, even after 2020, the Bundesbank will no longer keep any in Paris as both countries now share the euro.
"A single currency in Europe makes it less necessary to hold gold in euro zone partner countries," Thiele said.
Also, one factor behind the decision is that the Bundesbank has gained physical space in its vaults after the transition to the euro from the deutschmark.
The central bank did not want to disclose how much the gold transfers would cost and how the gold would be transported.
"This is above all a historical anomaly, which is now being corrected," said David Marsh, chairman of think tank OMFIF, which issued a report this month in which it foresaw growing importance for gold.
(Additional reporting by Paul Carrel; Editing by Anthony Barker)