When the Banque de France announced in late March that it had sold all 129 tonnes of gold held at the New York Federal Reserve, pocketing nearly €13 billion in the process, the official line was reassuringly dull. A technical upgrade. Old bars swapped for new ones meeting modern standards. Nothing political. Move along.

Markets barely flinched. They should have. And Jerusalem should be paying closer attention than anyone.

The option that was always there

Since the late 1920s, France had stored gold at the Federal Reserve Bank of New York, as did most Western nations. The logic was straightforward: Manhattan was safe from the wars that periodically swept Europe. After 1945, the arrangement became embedded in the architecture of dollar hegemony. Your gold sat in American vaults; you held American debt; you traded in American dollars. It was a package deal.

But every custodial arrangement is also an option contract. The depositor holds a put — the right, but not the obligation, to withdraw. For decades, exercising that option carried prohibitive transaction costs: political friction, logistical complexity, and the implicit threat of American displeasure. The option existed, but it was deep out of the money.

Three things moved it into the money. Gold prices surged to historic highs, making old non-standard bars enormously valuable relative to their book cost. The weaponisation of the dollar-based financial system — most dramatically through the freezing of Russia’s central bank reserves in 2022 — demonstrated that foreign custody carries real counterparty risk. And the erosion of institutional norms in........

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