Cracks are emerging in the dominance of the Federal Reserve Bank of New York and the Bank of England, which have split the global physical gold vault market since World War II.
Right after Russia's 2022 invasion of Ukraine, the United States and the United Kingdom simultaneously froze Russia's gold-related asset. As the war with Iran intensified conflicts in the Middle East and demand for safe-haven assets grew, the security, neutrality, and physical accessibility of gold storage locations all came under reassessment.
According to Reuters on the 23rd (local time), the Central Bank of France (Banque de France) sold all 129 tons of gold bullion that it had kept for nearly 100 years in the underground vault of the New York Fed from last July to this January over 26 transactions. Most of the 129 tons of French gold in the New York Fed vault are old gold bullion purchased in the late 1920s. Their fineness, weight, and form do not match the London Bullion Market Association (LBMA) gold bar standard required by today's international gold transaction market. To use them as a means of settlement in the market, they must be remelted and refined to meet standard specifications.
Instead of physically bringing back the old gold bullion, the Central Bank of France chose to sell. It sold the old New York gold bullion at market prices in line with the period when gold prices hit a record high in the second half of last year. It then bought back the same amount in Europe as newly standardized bars when prices were relatively lower. Repeating the process of selling high and buying low 26 times, the Central Bank of France booked a price gain totaling 13.0 billion euros (about 22 trillion won).
As a result, after posting a net loss of 7.7 billion euros in 2024, the Central Bank of France returned to a net profit of 8.1 billion euros in the last fiscal year. France's total gold bullion holdings now stand at 2,437 tons, the same as before. The Central Bank of France also plans to sell all 134 tons of non-standard gold bullion that it could not sell by 2028.
Similar demands have erupted in Germany. The Central Bank of Germany previously repatriated 300 tons of gold bullion that had been stored in both New York and Paris over five years from 2013 to 2017. More recently, Michael Jäger, head of the German Taxpayers' Association, said, "President Trump is unpredictable and could take extreme measures for government revenue," arguing that Germany should promptly retrieve the gold kept at the New York Fed.
The New York Fed vault is a primary official gold bullion depository for foreign governments, central banks, and international organizations. The New York Fed states that it holds gold not only for its own government but also for foreign central banks and governments, and international organizations. As of 2024, it holds about 507,000 bars of gold bullion weighing 6,331 tons. The New York Fed says it does not commingle stored gold bullion with other countries' holdings, but instead keeps them in segregated compartments by country and returns them as is.
The Bank of England is the world's second-largest gold depository, reportedly holding about 400,000 gold bullion bars. Its biggest advantage is easy access to liquidity in London, the world's largest gold transaction market. London is not only a storage hub but also the center of the over-the-counter (OTC) spot gold market. The London Bullion Market Association has disclosed that more than 20 million ounces (567,000 kilograms) of gold are cleared on average per day in the London market.
For countries around the world, the New York and London vaults are closer to payment infrastructure than simple warehouses for storing gold bullion. The New York Fed bundles dollar settlement, securities custody, gold custody, and liquidity operations into a single service for foreign official institutions. In times of crisis, gold stored in these vaults can be immediately converted into liquidity (funds) such as dollars or pounds using it as collateral. In other words, gold custody is not a warehousing business but an official service embedded in a financial system centered on reserve currencies.
This structure began to wobble when the United States and the United Kingdom froze Russia-related asset in 2022. Non-Western central banks, having confirmed that reserve-currency countries can weaponize foreign reserves at any time, made gold a strategic asset. In this process, instead of entrusting all gold bullion to superpowers, they began reorganizing into a multipolar system that disperses bullion by region and political risk, analysts said.
According to the World Gold Council (WGC), central banks around the world scooped up more than 1,000 tons of gold annually for three consecutive years from 2022 to 2024, when Russia's asset was frozen. That is more than double the 2010–2021 average of 473 tons per year. Even in 2024, when gold prices rose the most steeply since the 2000s, central banks bought 1,045 tons. The European Central Bank (ECB) said in a report last June that, as of 2024 official foreign reserves, gold (20%) overtook the euro (16%) to become the No. 2 asset after the U.S. dollar.
Seizing the moment, Hong Kong and Singapore are casting themselves as the top alternative to Western vaults and are going all out to attract funds from China, the Middle East, and the Global South. The Global South is a term that generally refers to developing countries in regions such as Asia, Africa, and Latin America, primarily in the Southern Hemisphere and the lower latitudes of the Northern Hemisphere. John Lee, Hong Kong's chief executive, said at the Asian Financial Forum in January that "you will see Hong Kong emerging as a regional gold holdings hub."
The South China Morning Post (SCMP) in Hong Kong reported on the 18th that, as armed clashes around Iran intensify, demand from Middle Eastern sovereign wealth funds and wealthy Asians who want to keep their distance from the United States and Israel to diversify gold storage is concentrating on Hong Kong. With the large Chinese market behind it and its separate financial and tariff systems, Hong Kong's dual status is seen as attractive to non-Western capital.