Europe Wants Gold Back; Naive Governor Spurns Gold, Suffers Losses

Calls to bring Germany’s gold home are growing, and now voices in Italy are urging that country’s government to do the same.

Germany owns the second-largest gold reserves in the world at 3,352 tonnes. Italy ranks number three with 2,452 tonnes. Both countries utilize the New York Federal Reserve Bank, storing more than a third of their gold reserves in the bank’s Manhattan vaults.

According to a recent article in the Financial Times, policymakers in both countries are considering bringing their gold back to Europe due to President Donald Trump’s “erratic policymaking” and growing geopolitical unrest.

New York was once considered a safe place to store European gold, especially during the Cold War era when the threat of a Soviet invasion of Western Europe loomed large. But with the U.S. aggressively using economic pressure as a foreign policy tool, the wisdom of storing Italian and German gold in New York no longer seems quite so obvious.

Whether they are right or wrong, some nations are starting to worry the U.S. might hold gold reserves hostage to further its own aims.

The world has taken notice of the way the U.S. (and other Western powers) weaponized the dollar after Russia invaded Ukraine. Some countries were already trying to limit exposure to the dollar to minimize the impact of U.S. economic pressure before Russia invaded Ukraine, and de-dollarization has accelerated since.

This situation certainly bears watching, and Money Metals will certainly keep you posted on this and related matters.

Speaking of safeguarding physical assets like gold and silver, should the cost of storage itself be a major factor in considering precious metals as an investment option?

Liberal Idaho Governor Brad Little certainly thought so.

Last year, he vetoed a bill that would have given the Gem State the mere option to invest up to 7.5 percent of the state’s “idle moneys” in physical gold or silver. In effect, it would create a process for the state to hold reserves of gold and silver along with its other investment assets.

The governor’s stated objection to the legislation was “the many additional costs that will be borne by taxpayers for the storage, safeguard, and purchase of commodities such as gold or silver.”

Under current Idaho law, like many other states, the state treasurer is actually only authorized to hold cash, U.S. bonds, treasury bills, interest-bearing notes, corporate bonds, and money market funds. In other words, paper. And those paper assets not only have counterparty risk, but also their yields tend to be well below the rate of inflation. That's called a "negative real return."

Last week, an investigative journalist in Idaho published a report showing that Idaho lost out on more than $200 million in the past year alone -- simply because of the state's failure to own any gold. The yellow metal has risen almost 50 percent since Governor Little's veto... truly uncanny timing! As in truly bad timing.

Are the governor's supposed concerns about the cost of precious metals storage justified? And how much does it actually cost to store gold and silver?

Of course, storage costs do exist. But they are not high, and for large holdings, they are really really small. And it’s important to remember there are costs associated with investing in any assets.

When individuals or entities invest in bonds or equities, they incur broker fees, commissions, account maintenance fees, etc. These costs can vary significantly depending on the broker, the size of the portfolio, and other factors. In general, investors can expect to pay on average between 0.25 to 2 percent of the total assets under management in fees. At the high end, an investor could lose as much as $2,000 annually to fees and other charges on a $100,000 portfolio.

The annual average cost of vault storage can vary significantly depending on the provider, the location, and the specific services offered. However, the annual costs generally range between 0.3 percent and 0.75 percent of the total value of the gold being stored.

The storage fees at Money Metals' state-of-the-art bullion depository typically run less than 0.49 percent. That means the cost of storing $100,000 in gold would average around $490 per year. This fee includes lots of security and “all-risks” insurance coverage for the full value of the metal stored in the vault.

Money Metals’ storage fees for gold or silver held in an IRA are even less at 0.29 percent.

While the cost of storing gold and silver isn’t zero, it certainly isn’t a bank-breaker. This is especially true when you consider how much is lost due to inflation by holding cash.

The current annual CPI is 2.4 percent. If you accept this data (and you shouldn’t), it means the purchasing power of money sitting in bank accounts is losing 2.4 percent of its purchasing power every single year. When rates are low, the interest paid by banks to account holders often doesn’t even cover this monetary devaluation. When the CPI was in the 9 percent range, real interest rates were deeply negative. Under these conditions, a depositor is effectively paying the bank to hold its money.

This is why it is wise to have gold and silver on the table as an investment option to serve as an inflation hedge. Price inflation is always stealing the value of the dollar.

In 2024, gold gained over 26 percent. The yellow metal edged out U.S. stocks to rank first among traditional asset classes last year. And gold has increased another 24 percent so far in 2025.

Investors always need to factor in various costs associated with a given investment option, including storage fees for precious metals. There may even be times when it doesn't make sense to hold a lot of gold and silver. But there are certainly times (such as the last 18 months) when you absolutely want gold and silver -- and a lot of it!

Finally, before we get to this week’s interview let’s take a look at the weekly market action.

Gold is off now for the second week in a row, down 3.0% to come in at $3,280 an ounce. Silver is essentially unchanged at $36.22, meaning the gold:silver ratio continues to come down. It now sits at 90.5 to 1, the lowest figure we’ve seen in a little more than 3 months.

As for the PGMs, platinum was having a tremendous week until it finally ran into resistance here over the last 24 hours or so. The industrial metal reached over $1,400 an ounce in Thursday trading, reaching an 11-year high, but is now coming in at $1,356 an ounce, which is still good for a 5.7% weekly gain. Finally, palladium is having a nice week here as well, advancing 6.7% to trade at $1,144 as of this Friday morning recording.

********