Where You Keep the Gold Is Who You Think Wins

Happy Sunday.

Fifty feet under Manhattan, on bedrock that can carry hundreds of thousands of gold bars, three people have to be in the room to change a lightbulb.

A lot of the gold down there is European, and Goldman’s commodity team pointed out recently why it arrived. European central banks shipped part of their reserves to New York during the Cold War. If Soviet tanks came west, Manhattan was the one place the metal would still be theirs. Britain had run the wartime version in 1940, loading its gold reserve onto warships and sending it through U-boat water to Canada, in an operation it called Operation Fish.

Between March and August, the Dutch central bank moved 86 tonnes out of New York and Ottawa and into London. About twelve billion dollars. Their total holdings did not change by a gram.

What the Dutch actually did

Most of the gold never crossed the ocean. The Dutch sold fifty nine tonnes in New York and bought the same amount in London, a book entry in everything but name. The other twenty seven tonnes flew, but not directly. Those bars went to the Dutch vault in Zeist, and an equal weight of bars already sitting in Zeist went on to the Bank of England, because the Dutch bars met British standards and the North American bars would have needed melting and recasting.

The split afterward: about thirty two percent in London, about thirty one percent at home in Zeist, and roughly eighteen and a half percent each in New York and Ottawa. Before the move, most Dutch gold sat in North America. After it, most sits in Europe.

A fifty nine tonne swap between New York and London cleared without anyone noticing. Any central bank can do this quietly. The only reason you read about the Dutch is that the Dutch put out a press release. The World Gold Council’s 2026 survey found one in ten central banks moved gold between overseas locations in the past year, and another nine percent brought more of it home.

What tradable means

The Dutch explanation had nothing to do with theft and nothing to do with price. Gold at the Bank of England conforms to international market standards, they said, which makes it the world’s most easily tradable gold. The bars in New York and Ottawa could not be used as quickly or as directly in a crisis situation. The Fed’s vault holds a century of mismatched shapes and sizes, which is why the lending and borrowing market in bullion runs in London and not New York.

Gold in New York protects you against losing it. Gold in London protects you against needing to sell it in a week. A central bank only needs to sell gold in a week if the rest of its reserves have stopped working, and the rest of a central bank’s reserves are dollars and Treasuries.

London is not a vault that cannot freeze you. The Bank of England sat on Venezuela’s gold for years because Britain did not recognize the Maduro government. The Dutch knew that and chose London anyway. They were choosing whose freeze to be on the right side of, which is a judgment about who they expect to still be aligned with when something breaks. For eighty years the Dutch answer was America.

The 2022 precedent

When the West froze Russian central bank reserves, somewhere between three hundred billion and six hundred thirty billion dollars depending on what you count, the frozen assets were not exotic. They were Treasuries, bunds and gilts in respectable custody, unreachable overnight.

That policy was defensible, it was bipartisan, and it worked. It also showed every reserve manager that the settlement system behaves like a policy instrument when Washington decides it should. They did not conclude that America was untrustworthy. They concluded that access was a variable, and a variable goes in a model, and eventually somebody acts on it.

Note the dates. American debt math has been ugly for twenty years and the gold stayed in New York the whole time. What happened in the last eighteen months is that allies started getting treated like counterparties: tariffs, open talk of acquiring Greenland, public wavering on military backing. Nothing in the debt numbers changed over those eighteen months. The treatment of allies did.

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What the numbers show

Emerging market central banks held about five percent of reserves in gold in 2022. Today it is near eleven. Developed markets sit around twenty six, so there is room to keep going. Central banks as a group have added roughly a thousand tonnes a year for four years, double the pace of the prior decade.

Gold also stopped obeying the one rule everyone modeled. From 2003 until early 2022, each one point rise in US real yields, meaning the interest rate after inflation, took about fourteen percent off the gold price. Between March 2022 and October 2023, real yields climbed more than four points. The model called for gold to lose about half its value. It gained seven percent. Over the next two years, with real yields nearly flat, it gained another hundred and ten. Models built on the old relationship have been calling gold overvalued since twenty five hundred dollars an ounce.

In the same survey, seventy four percent of reserve managers expect the dollar’s share of global reserves to fall over five years, and eighty three percent expect gold’s share to rise.

This is not a coordinated exit, and the sources are honest about it. India now keeps about seventy seven percent of its gold at home. France swapped a hundred twenty nine tonnes out of New York for European bars, booked around eleven billion euros in gains, and said the decision was not political. Germany moved over two hundred tonnes home years ago and still calls New York an important location. A dozen institutions arrived at the same decision separately.

The same question, in Treasuries

I gave you El-Erian’s list last week. The reliable buyers of long dated US debt are stepping back, and the issuance coming from governments and hyperscalers is far beyond what anyone can count on. What I want to add is who stepped in.

The US Treasury has doubled its buyback operations in long dated bonds to at least four billion per operation, funded by selling more short term bills. Scott Bessent said the plan out loud: we are going to make a market in these. When the announced size came in at six billion against expectations closer to ten, bond investors pushed back and the yields barely moved. The thirty year sits above five and a quarter percent. The ten year closed the week just under five after rising about a fifth of a percentage point. Gilts touched a nineteen year high, bunds a fifteen year high, and the odds of a Fed hike on the sixteenth moved to about ninety percent.

Ray Dalio reads the buyback program as a sign the government’s finances are at an inflection point, and puts a debt crisis roughly three years out, give or take two. You do not have to buy his clock to notice the arrangement. Foreign buyers are stepping back from American paper and the American government is buying more of it.

The private version

Physical gold is leaving Dubai for Singapore in historically outsized quantities, according to Maybank’s Singapore chief, and money that went from Singapore to Dubai over the past few years is coming back now that the Middle East conflict is running. His reasons were safe haven status, a stable government and strong legal protections. Wealthy Chinese families are moving businesses and buying homes in Malaysia because Kuala Lumpur looks cheap next to Singapore. Hurun now counts 1,110 Chinese billionaires against 1,000 American.

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Gold is a hedge on American governance

Everyone actually involved says this is not political.

The Bank of England hosts a lively market where central banks earn interest lending bullion, and New York’s odd bars cannot easily join it, so the Dutch move may be a revenue and liquidity upgrade that I have dressed up in geopolitics. The World Gold Council’s own strategist told the BBC that wars and trade tension played a role but did not top the list, and that he senses no impending doom. France said its decision was operational. Germany kept its New York holdings.

Dollar obituaries are their own genre, running since 1971, and every one has been wrong. Foreign holdings of Treasuries remain enormous. Eleven percent of emerging market reserves in gold leaves eighty nine percent in something else, and most of that is dollars.

The case for America also keeps getting stronger while this argument runs. Second quarter earnings per share for the S&P 500 rose more than fifty percent, still twenty five after stripping out investment mark ups. Forward earnings sit at a record. Multiples have contracted about twelve percent this year while the index gained thirteen, so you are paid better to own American companies today than you were in January.

The demography surprised me. The Census Bureau’s new projections rank the United States the 48th oldest country of 227 today and 110th by 2060, because everyone else is aging faster. Japan, the oldest country on earth right now, will not make the top twenty five by then. South Korea reaches forty one percent of its population over sixty five.

So the gold is a hedge on American governance. It says nothing about American growth, and those two get confused constantly.

The custody question

The usual reminder, I am not a financial advisor and none of this is advice.

The Dutch ran a custody exercise this spring and their allocation never moved. Almost nobody outside a central bank runs one, because the allocation question takes all the attention and the custody question does not come up until it is the only one left.

Two questions, then, neither about gold.

Where does each thing you own actually sit, and whose courts decide what happens to it under stress? Not which fund. Which jurisdiction, and which custodian.

And how many days sit between deciding to use something and having it in hand? A brokerage account and a building both show up as one number on a net worth statement, and in a bad month they are not the same instrument.

The Fed vault is still the safest place on the planet to put a bar of gold. It takes three people to change a lightbulb down there, and the Dutch left anyway.

Stay curious 😎

- John