Aerdt Houben, Director of Financial Markets for the Dutch Central Bank (DNB), has talked about the value gold could have in a financial collapse scenario. As the bank has been recently increasing its gold holdings, Houben stated that due to its properties, gold might serve as a hedge in the case of a worldwide economic disaster.
DNB Acknowledges Gold’s Importance for Central Banks
Aerdt Houben, Director of Financial Markets for the Dutch Central Bank (DNB), has talked about the rise in gold holdings of the bank and how he believes that gold can be used as a backstop in the case of a financial collapse scenario. In a recent interview, Houben acknowledged that the Netherlands has recently increased its gold holdings, as have other European central banks.
Houben explained that the central bank currently holds 612 tonnes of gold, worth around 35 billion euros ($38.2 billion), and that these holdings were diversified, with the bullion being located in the Federal Reserve, London, Canada, and the Netherlands. This represents 4% of the Netherlands’ Gross Domestic Product (GDP), as the government holds the same percentage as countries like France, Germany, and Italy, ranking seventh in the top ten central bank gold holdings concerning GDP.
Insurance Against Economic Collapse
When asked if he considered that the Netherlands should have more gold as a kind of insurance for the country, Houben answered:
I think it’s more than enough, because if everything collapses, then the value of those gold reserves shoots up, it skyrockets. Secondly, you don’t have to fully cover it.
Houben justified his thoughts on gold, declaring its value resided in its stability, talking about its utility and intrinsic value. “It’s a fungible product. It’s a liquid product, you can buy and sell it almost anywhere in the world. So, it’s really an outstanding commodity [on which] to base an exchange rate system,” he stressed.
For gold market analyst Jan Nieuwenhuijs, European banks piling up gold means that the confidence in the euro is not absolute, as they could be preparing for a possible return to a gold standard. China has been continuously increasing its gold holdings, with its reserves reaching over 2,113 tonnes for July, and the government now hitting 11 months of continued purchases.
Nieuwenhuijs concluded:
Indirectly, DNB encourages people to own gold to be protected from financial shocks, making the transition towards a gold-based monetary system more likely.
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