The DNB hasn’t reallocated all of its gold reserves outside North America—of the 612 tons it holds, 18.5% remains in New York and Ottawa.
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But the situation wasn’t lost on economists in the current climate, in which a series of actions by the U.S. Treasury has—intentionally or not—drawn attention to the increasing risk premiums in the Treasury market.
As UBS’s Paul Donovan remarked this morning: “One reason U.S. Treasury Secretary Scott Bessent was reported to have intervened in the support of the yen in the past was the desire to prevent Japanese investors rushing for the exit of the U.S. Treasury bond market. While this was going on, the central bank of the Netherlands was apparently rushing to the exit of the New York Federal Reserve with as much gold as it could carry stuffed into its pockets.”
The move to improve liquidity of gold is “not normal behavior,” added Donovan, continuing: “The direct market impact is nil, the gold is still held as gold, and gold held in London is traded in dollars, so there’s no change in the foreign exchange markets directly.
“But, even allowing for the fact that central banks’ gold holdings tend to represent some of the most conservative and risk-averse decisions one can find anywhere, the signals around trust and the international reputation of the United States are quite dramatic.”
Risk profile
In March, the Banque de France—France’s central bank—also announced it had sold 129 tons (or 5% of its total gold holdings) in New York and had instead purchased gold in Europe. The DNB followed a similar path, selling the majority of its U.S. gold and repurchasing it closer to home, rather than physically moving it.
While the French central bank did not make any suggestion that its 2025 decision was due to geopolitical risk and liquidity (rather, it referenced wanting to bring the purity of its gold holdings to over 99.99%, and the U.S. stock was below that), any suggestion that hackles are raised over the risk profile of the U.S. is unhelpful to the nation’s borrowing.
While the Treasury Secretary said that his intervention into the Japanese yen last month was to help stabilize financial stability and trade in Asia, it also conveniently steadied the economy of one of its largest lenders. Bessent then announced a series of Treasury bond buybacks, which lowered elevated yields and eased financial conditions across the wider economy.
With U.S. national debt surpassing the $40 trillion mark a few weeks ago, questions about the country’s fiscal trajectory continue to mount. While there are no signs of a much-debated bond market “reckoning” at the moment, international banks moving their safest asset out of the U.S. raises questions about its longtime safe harbor status.
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