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Happy Friday! September is, statistically, the worst month of the year for stocks. Investors attempt to avoid the September selling by, uh, selling in September.

In-depth: Central banks are pulling their gold reserves out of America.
Newsbites: Non-farm payrolls, UK house prices, and the AGI era.
PensionCraft News: How much you need to retire, building a bond ladder, and the post-tax equity risk premium.

IN-DEPTH

Dutch Courage: The Gold War

In July 1971, Paul Volcker got on a plane to Amsterdam. You probably know him as the Fed chairman who successfully strangled inflation in the 1980s, but back then he was a Treasury under-secretary with a problem. And, like a lot of problems throughout history, it was being made worse by the Dutch.

America had spent the 1960s printing dollars to pay for the Vietnam war and the Great Society. Awkwardly, the Bretton Woods system let foreign central banks exchange those dollars for gold at $35 an ounce, and by 1971 the pile of dollars abroad was worth several times the gold in Fort Knox. The system worked perfectly as long as nobody asked for the gold.

The Dutch asked. They had swapped nearly $600m for gold that year and had just put in a request for $250m more.

Volcker met with Jelle Zijlstra, head of the Dutch central bank, to persuade him to cancel the order. Zijlstra refused. "You are rocking the boat," Volcker told him. If $250m was enough to rock it, Zijlstra replied, the boat had already sunk. Five weeks later Nixon ended the convertibility of dollars into gold and proved him right.

Double Dutch

Fifty-five years on, the Dutch are at it again. This week De Nederlandsche Bank — the Dutch central bank — said it had shifted 86 tonnes of gold out of the New York Fed and the Bank of Canada and into the Bank of England between March and August. New York's share of the Dutch stash has fallen from 31% to 18.5%. (Though only 27 tonnes actually crossed the Atlantic. The rest was sold in New York and bought back in London.)

The official reason is "crisis preparedness" in light of “increasing geopolitical unrest,” with gold in London considered the quickest and easiest to sell. The unofficial reason is the fear that, in a crisis, the Americans might not hand back the bullion. Perhaps you want to keep your emergency fund beyond the reach of a president who made a career out of stiffing creditors and plastering everything in gold leaf.

The Dutch are not alone. The Banque de France recently removed all of its gold from the US, booked an €11bn gain on the trade, and insisted there was nothing political about it.

Germany still keeps 1,236 tonnes — more than a third of its reserves — under Manhattan. Its taxpayers' association, opposition parties and several retired Bundesbank officials have started asking why. Bundesbank president Joachim Nagel says the Fed is a "trustworthy and reliable partner" and the gold doesn’t keep him awake at night.

“The US would hurt itself most if it were to call that legal status into question in any way and thereby put the confidence of financial markets at risk.” — Joachim Nagel, Bundesbank president

Clogging up the system

Moving gold around doesn’t just annoy the Fed. It also annoys statisticians.

Physical gold routinely makes a mess of official numbers. London is a hub for foreign-owned bullion, so gold flows can swamp the UK trade figures. Ed Conway of Sky News once traced a "record" British export year to a bank reclassifying bars that never left the vault. Since 2020 the ONS has published trade numbers with precious metals stripped out so ministers stop celebrating things that didn't happen.

The Americans learned the same lesson in early 2025. So much gold was being shipped from London to New York to front-run tariffs that the US trade deficit blew out. The Atlanta Fed had to launch a "gold-adjusted" GDP tracker to stop its model forecasting a recession.

Ingot we trust

The attraction of gold is that it is arguably the one reserve asset that doesn’t rely on a promise. The dollar is a promise. And America's promises aren't what they used to be.

Since Russia's reserves were frozen in 2022, central banks have bought roughly 1,000 tonnes of gold a year, and last year gold eclipsed US Treasuries as the largest reserve asset for the first time since 1996. (Though the US says it's a somewhat misleading stat, driven by the rapid run up in gold prices rather than a newfound hatred of the dollar.)

Enemies and allies alike are nervous. European central bankers still fume that the US Treasury sold euros to buy yen without the customary phone call to Frankfurt. And the ECB has already asked eurozone banks to model what happens if the Fed's dollar swap lines — the emergency plumbing that kept European banks alive in 2008 and 2020 — are switched off. The Fed insists they won't be. But the Fed doesn't necessarily have the last word if the White House throws a tantrum.

Whether through preparedness or paranoia, a lot of Dutch gold now sits on Threadneedle Street, in the care of a custodian the Dutch central bank considers safe, liquid and reliable. Yep, that's us. The country that sold half its own gold at the bottom of the market, abruptly shut the London gold market for a fortnight in 1968, and when Venezuela asked for its gold back in 2018, said no. You can trust us, honest. Mwahahaha.

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NEWSBITEs

The US economy added 162k jobs in August, beating expectations of 55k. In addition, June and July were revised higher by a total of +55k.

Global bond yields surged to fresh highs. Japan's 10-year hit 3%, a first since 1996, German bunds touched 3.39%—a 15-year high—and the 10-year gilt reached 5.29%, not seen since August 2007. Renewed US–Iran strikes pushed Brent past $95 and markets now price in a 50-50 chance of a Fed hike this month. Gilt by association, again.

Eurozone inflation climbed to 3.3% in August. The flash reading marked an acceleration from July’s 2.9% pace to the highest since September 2023, with energy prices up 14.3% year on year. Core eased slightly to 2.4%, but the market consensus is for a second ECB hike next week. Who knows if the ECB can reach a consensus.

UK house prices rose 0.2% in August. Nationwide's annual growth rate ticked up to 1.6% from 1.4%, leaving the average home at £275,465. Prices still lag inflation and wages, with mortgage approvals falling to 56,100 in July, the fewest since January 2024. With the rate for a two-year fix nearing 5.6%, borrowers have been urged to lock in deals. Ideally yesterday.

Andrew Bailey warned frontier AI threatens financial stability. In a letter to G20 finance ministers, the BoE governor—wearing his other hat as Financial Stability Board chair—said new models could materially alter "the speed, scale and economics of cyber risk" and told institutions to plan for simultaneous disruption across multiple firms. He also flagged leveraged ETFs and private credit as kindling for a disorderly correction. If a strongly worded letter from Andrew Bailey doesn’t make people step back from the brink, nothing will.

OpenAI tentatively claimed its latest model has achieved Artificial General Intelligence (AGI). GPT-6 Astra was trained on over 100,000 GPUs and saturated the ARC-AGI-3 benchmark, achieving a score of 99.9%. OpenAI President Greg Brockman called AGI a "spiritual concept", while CEO Sam Altman had days earlier dismissed it as an “irrelevant marketing term”. Let’s agree it's a kind of spiritual marketing.