The Chess Game of Capital ControlsThe best indicator of a chess players form is his ability to sense the climax of the game. Boris Spassky, World Chess Champion, 1969-1972 Youve likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany. Why would it want to physically move the metal from New York? Its not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits? You may recall that Hugo Chvez did the same thing in late 2011, repatriating much of his countrys gold reserves from London. However, this isnt a third-world dictatorship; Germany is a major ally of the US. So whats going on? Pawn to A3 On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isnt likely to be invading Germany anytime soon one of the original reasons Germany had for storing its gold outside the country the move is only natural and no big deal. But Germanys gold stash represents roughly 10% of the worlds gold reserves, and the cost of moving it is not trivial, so we see greater import in the move. The Bundesbank said the purpose of the move was to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time. Its just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that its nothing more than this, Bundesbank points out that half of Germanys gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%). But this still doesnt capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isnt just a commodity, a day-trading vehicle, or even an investment. Its a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, its something you can use to pay for goods or services when all other means fail. It is precisely those who dont recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.) Second, heres the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a pre-emptive measure in case of a currency crisis. Germanys central bank thinks a currency crisis is really possible. Thats a very sobering fact. Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, its clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average persons standard of living will be greatly reduced. And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a gold run in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite. Checkmate What this means for you and me is that moving gold outside your country especially if youre a US citizen could be banned. Fuel would be added to the fire by blaming gold for the dollars ongoing weakness. Dont think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. Youd have easier access to foreign-held bullion, depending on the country and the specific events. None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction. The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements. Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harms way. The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller. Dont just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you wont be any worse off for having some precious metals stored elsewhere. If youre moved to take action, know that youre not alone. Its critical that you take these first steps now, while you still can. You only have to see the next two moves to win this game. I suggest making those moves now before your government declares checkmate. 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