by mk

"The two most important functions of gold reserves are to build domestic confidence and to ensure the option that the gold can be quickly exchanged into foreign currency," Carl-Ludwig Thiele, a board member of the Bundesbank, told reporters Wednesday.

Thiele said the move had nothing to do with the reliability of Germany's allies in storing the gold. Rather, he said, it was no longer necessary to maintain reserves in Paris now that France and Germany share a common currency, the euro.

I doubt that is the real reason. My guess is that the German government predicts possible instability in both the US and Europe, and feels that the reserves would be safer if kept by themselves. I can't imagine that domestic confidence was affected by the reserve being in NYC, or that exchanging it for foreign currency would really be seriously considered.