BNR governor Isarescu: Romania seriously harmed by avalanche of negative news about London gold stash

The avalanche of negative news about Romania's international gold stash in London has seriously harmed the country, has dented the credibility of both Romania and the National Bank, and keeping the entire gold reserve in the country would not bring any benefit, governor of the National Bank of Romania (BNR) Mugur Isarescu said on Friday. 

"The good part is that at least the world has seen and learned that we have 100 tons of gold. Otherwise the question may arise if the gold exists and how we would act in this situation," the central bank governor told the 'Cristian Popisteanu Symposium titled "The BNR Treasure Evacuated to Moscow - a Historiographic Report and a Case Study". 

"A gold reserve is not being kept abroad in order to collect interest. As a rule, interest on gold is low or zero; as a historical average it is about one sixth of the interest on a foreign currency deposit in either euros or dollars. So, historically, it is far less.When we collected some interest on gold, back in 2003, 2004, 2005, dollar deposits carried an interest of 5-6 pct and euro deposits even less. And for gold we collected 1 or 2 percent. Now think about it, if forex interest rates have dropped to 0 or even into the negative, how can somebody who is knowledgeable even dream that after 2007 we could have gained on gold. For us, the National Bank staff who are in the know, such 'information' was nonsense, but despite this it stuck. And the rumors have been circulated for 10 years now and got embedded in the collective mentality. 'The National Bank keeps the gold reserve in London with no gain', as if we were supposed to gain something, 'and on top of that, it also pays rent'. The rent amounts are extremely small, but the media run them with many zeros, possibly also after the decimal point, and this leaves an impression," said Isarescu. 

"As is the case with any international reserve, the big advantage of keeping an international reserve is to give credibility and reduce financing costs. So, instead of footing 6 percent in costs when borrowing from abroad, the cost is just 4 percent, that's roughly what we are paying now. That's the gain, and it's big! The more so as we have a considerable foreign debt," the BNR governor explained, and went on to say that even "big names" have compared the gold sent to Moscow during WW I and the country's London gold stash, but emphasized that the subjects are not in the least comparable.