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Updated 02:26 15/11/19

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Dutch National Bank: If the entire system collapses, the gold stock provides a collateral to start over


Liam Sheasby

Liam Sheasby, News Editor
15 Oct 2019, 12:53 p.m.

Eagle-eyed gold investors recently spotted this article on the Dutch National Bank’s website, talking about the bank’s holding of gold as part of the Netherlands’ national reserve.

Aside the talk of how much gold the Netherlands owns (600 tonnes across Amsterdam, New York, London and Ottawa), the DNB article stresses how central bank gold holdings are a ‘beacon of trust’ and that in the very worst scenario, gold can help restart a financial system.

The following paragraph is translated from Dutch but is the key takeaway from the national bank’s argument:

Shares, bonds and other securities: there is a risk to everything. If things go wrong, prices may fall. But, crisis or not, a gold bar always holds value. Central banks such as DNB have traditionally had a lot of gold in their house. Gold is the ultimate apple for the thirsty: the trust anchor for the financial system. If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet. That gives a safe feeling.

Most gold investors won’t be surprised, especially given the high levels of bullion purchasing from Russia, China, and even other nations like Poland, Hungary, Kazakhstan, India, Iraq, Turkey are getting in on the process.

One particular incentive has been a move away from the US Dollar, which some nations – like Russia and Turkey – see as a tool used to manipulate markets and trading against them, while others like India are seeking to reduce the pressure a strong Dollar can have on the domestic currency.

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