The Netherlands’ Dutch Central Bank recently acknowledged its reserve equalization plans, placing gold at the forefront of its overall contingency strategy. The central bank has gradually increased its gold reserves, equalizing the precious metal in relation to gross domestic product levels, to reach a level ground with other European and non-eurozone nations following similar strategies. The Netherlands believes that if, or when, a financial crisis occurs, gold prices will soar, and central banks will use their gold reserves to re-instate a gold standard, which the DCB wants to be prepared for.
“There are a number of things that make gold very attractive to central banks. Gold is like solidified confidence for the central bank. It’s something that has historically fulfilled that role. If we ever unexpectedly have to create a new currency or a systemic risk arises, the public can have confidence in DNB because whatever money we issue, we can back it with the same value in gold [gold standard],” Aerdt Houben, the Director of Financial Markets for the Dutch Central Bank, stated in an interview with Anna Dijkman from Het Financieele Dagblad.
The Netherlands’ move toward the gold standard proves that yet another nation has minimal faith in the euro in terms of its strength during economic turmoil. Rather than encouraging citizens to hold on to their currency during an economic crisis, the central bank has already encouraged buyers to protect their funds by moving away from the euro toward the safe-haven commodity of gold. The Netherlands is not the only nation fleeing from its currency toward the gold standard, either.
Numerous large and medium-sized economies in the eurozone are increasing their gold reserves to prepare for a potential gold standard.
Based on gold purchase rates and statements from central bankers, nations like Portugal, Austria, Belgium, and the Netherlands sold gold between the 1990s and 2008 to follow Germany, Italy, and France’s actions. The same trends are recurring today but with buying actions instead. Nations in the eurozone want to hold the correct amount of gold in their reserves relative to GDP.
“612 tonnes of gold. That’s our total holdings. It’s worth about €35 billion euros at the moment, and we have diversified it around the world, as a good investor should. We’ve spread it over four locations, with about 30% in the Netherlands, just over 30% in New York at the Federal Reserve, over 20% in Canada and 18% in London,” Houben explained.
In the early 1990s, China was one of the Dutch Central Bank’s top buyers during its selling periods, as developing Eastern countries were trying to reach the same status as Western forces.
The DCB’s sales to China decades back were just one example of gold reserves spreading evenly across economies to prepare for a gold standard. As the DCB increases its reserves today, following in the footsteps of other nations, clearly, we’re seeing the actions of some international standards regarding gold holdings coming into play. Nations around the globe understand the level of gold they need to survive and are preparing accordingly.
“We have about 4% of our GDP in our gold reserves. And that’s comparable to France, Germany, and Italy,” Houben explained, proving the international standards theory. China also currently carries 4% of its reserves in gold.
Whether or not central banks are communicating their plans on how much gold they intend to buy may not be entirely clear. We do know without a doubt that nations are favoring gold for a clear reason: the safe-haven asset retains its value when all else fails.
Nations like France, Austria, the Netherlands, and Germany have begun returning portions of their gold reserves to their homeland storage facilities for security and preparation purposes. Germany may have ulterior motives here, given its recent restrictions imposed by Western nations, though in general, we’re seeing a shift away from standard storage in liquid markets.
Nations like Sweden, Germany, and France have also upgraded their gold bars to adhere to wholesale industry standards for more instant trading. A lot of these signs could be hinting at the first preparations for gold standard trading.
“The beauty of gold is that it’s stable in value; it retains its value. That’s one of the reasons why central banks hold gold. Gold has intrinsic value, unlike a dollar or any other currency, let alone Bitcoin. Gold has value on its own. It’s a fungible product. It’s a liquid product; you can buy and sell it almost anywhere in the world. So, it’s really an outstanding commodity to base an exchange rate system [gold standard] on,” Houben explained.