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Weekly Blog: France Central Bank Gold Repatriated

by Chirag Sharma
Weekly Blog: France Central Bank Gold Repatriated

In 2013, at an LBMA Conference, the Central Bank of France disclosed that it holds 91% of its 2,435 tonnes of gold reserves in Paris.

In August 2018, the Central Bank of France indicated that it successfully repatriated the remaining 9% of 221 tonnes from abroad.

Since 2009, the bank has been upgrading all its monetary gold to LBMA Good Delivery standards - the globally acceptable standard - for ease of trading and liquidity provision from the London and New York bullion markets.

Gold’s role in international finance and geopolitics has changed dramatically since 2008. The Great Financial Crisis reminded central banks of radical uncertainty and the humbling aspect of risk. Instead of net sellers, central banks have turned into net buyers of gold, steadily purchasing more than 400 tonnes a year.

Of recent, the Russian invasion of Ukraine is driving up the gold price which again is reminiscent during periods of cross border conflicts and emergencies.

Repatriating all gold is related to France’s aim to revamp Paris as a gold trading center.

In 2018, BdF’s Second Deputy Governor, Sylvie Goulard, published an article in the LBMA’s magazine the Alchemist: “Banque de France and Gold: Past and Future.” Goulard praises Paris as one of the main gold trading hubs, next to London and New York, during the gold standard. And “the financial crisis [in 2008] acted as a wake-up call for gold,” she writes, which “proved to be an opportunity for gold and for the Banque de France.”

"Building on its long experience in managing its gold reserves, in 2012, the Banque de France began to extend its range of gold services to reserve managers. In addition to offering custody of physical gold in its vault in Paris, the Banque de France can buy and sell gold on the spot markets for its institutional customers, using its execution expertise. It can also offer gold swaps either for the purpose of using gold as collateral for deposits, which has been happening more and more since the Basel III framework recognised gold as eligible collateral, or for the purpose of raising foreign currency cash against gold. Finally, foreign central banks can engage in gold lease transactions with the Banque de France as principal, in order to increase the return on their gold holdings without increasing their counterparty risk.

"While these gold investment services have until now only been offered from London, it recently became possible for the Banque de France to offer them also from Paris, thanks to a partnership with a large commercial bank that is active in the gold market. As a result, with the improvements in the Banque de France’s vaults, and the innovations in its service offering, Paris could gradually re-emerge as a key marketplace for gold."

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