Why Does Germany Hold $599 Billion in Gold?

Eighty feet beneath the streets of Manhattan lies a Federal Reserve Bank of New York vault storing around $220 billion of German gold. Perhaps it’s time for Germany to sell some of it.

My provocative suggestion was prompted by recent calls from German opposition politicians and the former head of the Bundesbank research department, Emanuel Mönch, to repatriate this 1,236-ton reserve, made up of nearly 100,000 bars. These demands follow the behavior of U.S. President Donald Trump, who undermines the independence of the Federal Reserve and openly disregards NATO allies.

But transporting the gold back to Germany would further strain Berlin-Washington relations and anger Trump, who seems to place great value on gold. Just look at the gilded decor of the White House. Whether intentionally or not, his unpredictable behavior triggers dollar outflows and pushes precious metal prices skyward.

This has greatly benefited the Bundesbank, which manages the country’s gold reserves — the largest in the world after the U.S. They are valued at around €500 billion ($599 billion) at current prices, equivalent to 18% of the national debt and nearly a 19-fold increase since the introduction of the euro in 1999.

Germany completed the transfer of 300 tons of gold from New York in 2017 after domestic political pressure for greater transparency and tighter oversight of reserves. Its holdings there date back to the post-war Bretton Woods system, when the dollar was backed by gold. Today, New York is a major trading hub for gold, alongside London.

Neither the Bundesbank nor Germany’s coalition government wishes to repatriate more. “I have no doubt that our gold in New York continues to be safely stored,” said Bundesbank President Joachim Nagel this week. This is notable given Trump’s disregard for institutional norms. But Berlin is caught between a geopolitical rock and a hard place on this issue.

I have a better solution: why not sell a portion of the reserves, taking advantage of skyrocketing prices and immense demand?

This is not investment advice. I cannot say whether gold prices are near a peak or will continue to rise. To be honest, I own a small amount of gold, and looking back, I wish I had more. I also recognize that encouraging the Bundesbank to part with this treasure is almost heretical in a country that experienced hyperinflation in the 1920s.

Today, there are few practical reasons to hold such a large reserve. As a eurozone member, Germany no longer has its own currency. Still, the national reserve carries enormous symbolic weight. Parting with it would be unpopular.

“Selling part of the gold gradually at these sky-high prices to reduce federal debt would make economic sense,” says Holger Schmieding, chief economist at Berenberg. “But it would be politically dangerous. Germans love the Bundesbank as it is.”

Numerous institutional and legal obstacles stand in the way of such a sale. European treaties rightly protect the independence of national central banks — something recently reminded to me when Rome and the European Central Bank debated ownership of Italian gold.

Execution would also be difficult in practical terms. It would be self-defeating for Germany to depress the price of gold by selling a large portion of the reserves. Investors could interpret such a move as a sign of economic weakness or as financing the budget through money printing, depending on how the proceeds are used. This requires a careful strategy.

The Bundesbank would strongly resist. Nagel stated in 2024 that he had not considered selling gold “even for a nanosecond,” and made similar comments later. The central bank declined to comment for this publication.

But now, with gold accounting for more than 80% of Germany’s official reserve assets, it is worth considering whether this reserve could be used more productively. Even from a risk-management perspective, it seems unwise for nearly all of the Bundesbank’s eggs to be in such a volatile asset. While the central bank is not a hedge fund obsessed with returns, this could be a good moment to realize profits.

In summary, central bank demand contributes to the steep rise in gold prices, along with heated retail speculation and so-called “devaluation trades.” Neighboring Poland, which is not in the eurozone, is buying huge quantities.

Still, Germany’s much larger reserves stem from its substantial post-WWII current account surpluses. Aside from modest sales for minting gold coins, the Bundesbank today leaves its stockpile untouched. About half is in Frankfurt, 12% in London, and the remainder in New York, where it earns no interest.

The Bundesbank’s resistance to selling gold has been justified over the past decades. The central bank maintained its position even as other European countries divested metal in the early 2000s. Notably, U.K. Chancellor Gordon Brown allowed the sale of roughly 400 tons of gold between 1999 and 2002. The average price then was $275 per ounce, and the $3.5 billion proceeds were reinvested in interest-bearing foreign reserves. Today, that quantity would be worth around $70 billion. That alone would make anyone think twice before promoting similar deals — but we continue.

The high value of the gold reserves has also provided a noticeable advantage to the Bundesbank: they act as a counterweight to losses during the last period of quantitative easing, when the bank had to buy large volumes of low-yield bonds at the ECB’s insistence.

Due to the mismatch between acquired assets and the interest it must pay on bank deposits, the Bundesbank recorded approximately €20 billion in losses each of the past two years. But thanks to the massive revaluation of its gold reserves, its net capital position has increased to over €250 billion according to the latest measurement in February 2025.

Unfortunately, German taxpayers do not benefit. The Bundesbank halted profit distributions to the government in 2020 and will likely not make payments for several more years due to its bond issues. For context, between 2010 and 2019, the federal government received about €25 billion in dividends from the central bank.

Here, an infusion of funds from a gold sale at the Bundesbank would be extremely useful. Germany faces enormous economic, demographic, and fiscal challenges. Chancellor Friedrich Merz has relaxed fiscal discipline, and the country will borrow hundreds of billions of euros to finance new infrastructure and rearmament — significantly increasing the national debt.

The concern is that any proceeds from a gold sale would reduce the pressure on the government to implement vital spending reforms. Just look at how part of the €500 billion will be spent on new infrastructure.

Although German politicians have recently avoided commenting on the topic, in the 1990s and early 2000s, a series of officials proposed the Bundesbank sell gold for things like flood damage relief, creating a cultural foundation, or supporting social security. None of this materialized.

Perhaps the Bundesbank should propose its own idea, as it did in 2004. At that time, President Ernst Welteki suggested selling up to 600 tons — more than one-sixth of the reserves — to purchase interest-bearing assets and create a foundation supporting research and education. However, he faced strong opposition and resigned over another issue before the proposal could be implemented.

Twenty years later, the idea of using proceeds from even a moderate gold sale for the benefit of future generations, alleviating the productivity crisis, and stimulating growth makes serious sense. It deserves more than a “snap” thought.