In November, the press, as well as GoldBroker, announced the creation of a gold market in Paris, associating the Banque de France and the American bank JP Morgan. The news didn’t make any headlines and wasn’t much commented on, but now is the time to review this creation by shedding a new light on it, along with some revelations.
First, let’s point out that this is not a gold market in the traditional sense, namely that would quote Napoléons and bars, the two preferred pillars of the precious metal in France. That type of market has existed from 1948 to 2004, but its trading volume, too small, due to a heavier tax system than in the other European countries, led to its demise.
As a very well informed article in Revue Banque explains, Banque de France’s gold reserves will be “mobilized” in order to guarantee gold/currencies swaps and gold leasing. As of now, only other central banks will be able to use those financial products with the Banque de France, but since it has taken on JP Morgan as a partner (why not a French bank?), this opens up the possibility that, in the future, other international commercial banks may have access to them.
De facto, Banque de France’s gold is no more sanctuarized. In the case of a bad operation, a sudden financial crash or some wrong calculations, a portion of that gold – being used as collateral – will have to be removed from "La Souterraine", the gigantic vault located underneath Hotel Toulouse in Paris. With its 2,435 tonnes, France remains the fourth highest gold holder in the world, behind the United States (8,133 tonnes), Germany (3,373 tonnes), and close to Italy (2,451 tonnes). China has always understated its reserves and must certainly be part of this leading trio. But this gold belongs to France and its people, and it is meant as an ultimate guarantee (in the case the euro would explode, for instance... but it won’t happen because it is so strong, of course!). Thus, to mobilize it for financial operations is an error, and can even be considered as treason.
But why now? I’ll give you a hint: The announcement was not made by the Banque de France’s governor, François Villeroy de Galhau, but by Sylvie Goulard, briefly minister of the armies (from May 17 to June 19, 2017) who was parachuted on January 17, 2018 to second vice-governor of the Banque de France, without having any experience in this domain. Her ministerial career was stopped, notably, when it was made public that, while she was serving as a European deputy (2009-2017), she had worked as a special advisor for almost two years (October 2013 to January 2016) for the Berggruen Institute, an American think tank located in California, earning over €10,000 a month... Is Sylvie Goulard defending American interests? Tell me it isn’t so...
Let’s put pressure on the political leaders and the “Gilets jaunes” (Yellow Vests), who seem more efficient, to acknowledge this serious problem of monetary sovereignty: Banque de France’s gold must not be used as collateral for financial operations. It is important to revise this scandalous decision.
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Philippe Herlin Finance Researcher / Doctor in Economics
Philippe Herlin is a researcher in finance and a doctor in economics of the Conservatoire National des Arts et Métiers in Paris. A proponent of extreme-risk thinkers like Benoît Mandelbrot and Nassim Taleb, and of the Austrian School of Economics, he will be bringing his own views on the actual crisis, the Eurozone, the public debts and the banking system. Having written a book on gold that has become a reference (L’or, un placement d’avenir, Eyrolles 2012), he wishes to see gold play a growing role in our economies, all the way to its full re-monetization.