Netherlands Moves Gold from New York, Undermining Trust in 'Safe Assets'

[Block Media Reporter Myung Jeong-seon] The Dutch central bank has decided to move its gold, which has been stored in New York, due to geopolitical uncertainties. Following France, European central banks are increasingly relocating their gold outside the United States, raising concerns about the status of the U.S. as a 'safe asset' in the global financial market.

Changes are also being detected in the U.S. Treasury market. Norway's sovereign wealth fund, the largest in the world, has proposed reducing its holdings of U.S. Treasury bonds and lowering the proportion of Treasury bonds in its total assets from 70% to 50%.

Market analysts suggest that President Trump's tariff policies and external pressures are heightening the caution of central banks and institutional investors regarding U.S. assets. As the U.S. fiscal deficit expands, Treasury yields are rising, and gold prices remain high, indicating a shift in global preferences for safe assets.

What’s Happening in Central Bank Vaults... Gold Leaving New York

According to major foreign media outlets such as MarketWatch on the 6th (local time), the Dutch central bank recently decided to transfer its gold stored in New York to London due to 'geopolitical uncertainty'.

This is not the first time central banks have moved gold outside the U.S. France recently disposed of all its gold stored in New York. Germany also transferred a significant amount of gold during President Trump's first term.

Since World War II, countries have stored their gold in the New York Federal Reserve Bank vault based on trust in the political and economic stability of the U.S. and its financial markets. Gold is part of foreign exchange reserves and is a representative safe asset that can be liquidated in times of financial market shocks.

Recent movements are linked not only to a preference for gold itself but also to the issue of whether assets can be directly controlled in emergencies.

Max Becker, president of American Hartford Gold, stated, "This is more about control than geography," adding, "Central banks want assurance that they can access and utilize the gold they hold when necessary."

Stephen Blitz, chief economist at GlobalData TS Lombard, also commented on the Netherlands' decision, stating that it is understandable for central banks to consider related risks in the context of increasing uncertainty in U.S. policies.

The White House has distanced itself from the view that the status of U.S. safe assets has been compromised. A White House official stated that the international leadership of the U.S., which has led countries to entrust their gold to the New York Fed since World War II, continues under the Trump administration.

Gold Prices Surge and U.S. Treasury Yields Rise... Changes in Safe Asset Dynamics

The sharp rise in gold prices is also linked to the movements of central banks.

Gold prices soared sharply after Russia's invasion of Ukraine in 2022. Four years ago, gold was priced around $2,000 per ounce, but it reached an all-time high of about $5,600 this January. Recently, it has been trading around $4,477.

According to the World Gold Council, the U.S. holds over 8,000 tons of gold, making it the largest gold holder in the world, followed by Germany, France, and Italy. The Netherlands holds about 1,300 tons of gold, which accounts for approximately 55% of its total foreign exchange reserves.

Warnings are also emerging regarding U.S. Treasury bonds, which have been considered a representative safe asset alongside gold.

The U.S. national debt reached $40 trillion this summer. With rising oil prices due to Middle Eastern conflicts and inflation concerns, the yield on 10-year U.S. Treasury bonds rose from around 4% in March to about 4.8% in September. The yield on 30-year Treasury bonds is at 5.247%.

Stephanie Link, chief investment strategist at Hightower Advisors, noted that it is important to observe whether the 10-year Treasury yield stays above 5% for more than one to two weeks.

If the rise in Treasury yields persists, it could signal not only an increased interest burden for the U.S. government but also a weakening demand for U.S. Treasuries among global investors.

In fact, the proportion of foreign investors in the U.S. Treasury market has been declining over the long term. The foreign ownership ratio, which rose to about 56% after the 2008 global financial crisis, fell to about 31% last year.

"Still No Alternatives..." Debate on U.S. Safe Asset Status Continues

However, there are also views that it is difficult to conclude that the movement of gold by central banks and the reduction of Treasury holdings signify a loss of the U.S. safe asset status.

Jim Baird, chief investment officer at Plante Moran Financial Advisors, assessed that there is still no market deep and liquid enough to replace U.S. Treasuries despite the U.S. fiscal issues.

This means that U.S. Treasuries remain a core safe asset in the global financial market. Since gold does not pay interest or dividends, it is more appropriate to view it as a means of hedging against geopolitical risks and inflation rather than a complete substitute for investment assets.

On the other hand, if long-term U.S. Treasury yields continue to rise, demand for gold may also increase further. Mike Trisi, vice president of risk at Apex Fintech Solutions, stated, "As long-term rates rise, demand for gold itself will increase."

Ultimately, recent movements by central banks are seen as efforts to reduce dependence on the U.S. in asset storage and foreign exchange reserve management, rather than a wholesale rejection of U.S. assets.

MarketWatch commented that "the U.S. still has the largest Treasury market and the dollar as the world's reserve currency," but noted that "the recent trend of taking gold out of New York vaults and reviewing the proportion of U.S. Treasuries indicates that the belief in the absolute safety of the U.S. has been shaken."