Tag Archives: gold storage

The Gold Market – Where Transparency means Secrecy

The following speech, by BullionStar precious metals analyst Ronan Manly, was given to an audience during a Precious Metals Seminar held at BullionStar's shop and showroom premises in Singapore on 19 October 2016.

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Introduction

Good evening ladies and gentlemen, you are all very welcome to this event at BullionStar.

This evening, I will be discussing the topic of transparency versus secrecy in the gold market, and specifically looking at this transparency and secrecy by highlighting a number of areas of the gold market which claim to be transparent but which are in fact very secretive.

Transparency is an important concept in financial markets mainly because it encourages informational and market efficiency. Applied to the gold market for example, this would prevent larger gold traders having an information and trading advantage over the retail gold buying public such as ourselves. So transparency is not just an abstract concept, it has real world implications.

To illustrate this contradiction of transparency versus secrecy, I’ll look at two main sets of gold market participants:

- firstly the central bank or official sector, which includes central banks and organisations such as the International Monetary Fund (IMF) and the Bank for International Settlements (BIS),

- and secondly the wholesale London gold market as represented by the London Bullion Market Association (LBMA) and its bullion bank members.

I have chosen the official sector and the investment sector since together they represent two of the largest areas of gold ownership and gold activity globally, with central banks claiming to hold about 33,000 tonnes of gold, and bullion banks being the largest traders of gold globally.

The London gold market, which is a wholesale gold market dominated by bullion banks, is also arguably the most influential market for gold price discovery. And as Torgny explained just now, these bullion banks are generally defined as the large commercial or investment banks involved in the wholesale gold market.

Central banks and bullion banks also overlap in the gold lending market which is also centred in London, and which is an ultra-secretive market, probably the most secret market on the planet.

The title of my talk actually stems from a recent article that I wrote about the 2010 International Monetary Fund (IMF) gold sales and how those sales were marketed by the IMF as being transparent but which in actual fact were the exact opposite - they were highly secretive, and information about those sales even remains highly classified to this day, six years later.

Transparency

But first, let's quickly define what we mean by transparency. We are talking here about financial market transparency. A Transparent financial market is one in which, simply put, much is known by many.

In a transparent market, the market institutions are also transparent, and importantly, the institutions can be held to account - i.e. accountability.

In a transparent market there is also open exchange of information between all market participants, and accurate information is freely available about price, supply, demand and market transactions.

And one last point, which is very important, is that in a transparent market, the market data of that market is available and open to independent verification by investors and analysts. Which is totally not the case in the gold market as we'll see shortly.

In short, a transparent market is one in which all relevant information is freely and fully available to the public (and to all participants).

Secrecy

The opposite of transparency is obviously secrecy, which comes from the Latin ‘Secretus’ meaning hidden, concealed, and private. Secrecy at the extreme allows collusion to occur between market participants.

So the extent of transparency in a market can be visualised as a spectrum with transparency at one end of the scale and secrecy, or opacity, at the other.

Lack of transparency in market structure also contributes to lack of transparency in the derivation of market prices, in other words lack of transparency stifles price discovery, and also causes associated higher trading costs for market participants than would otherwise be the case.

Market Efficiency

Transparency is also a prerequisite for market efficiency. Simply put, market efficiency is the degree to which financial asset prices reflect or embody all available information.

An efficient market is also informationally efficient. This information efficiency requires competition, low barriers to entry, and very importantly, it requires low costs of information gathering. i.e. 'transparency'.

Some of you might be familiar with the work that Nobel prize-winning financial academic Eugene Fama did on market efficiency. I used to work at Dimensional Fund Advisors (DFA) which is an investment firm that subscribes to market efficiency and which actually has Eugene Fama on its board of directors. So this market efficient view was drilled into me.

But you don’t have to agree with market efficiency theory to see how it's linked to transparency. The more transparent a market is, the more information is available in that market, and therefore the more likely it is to be an efficient market.

The opposite of this is inefficient markets which can allow a situation to develop known as asymmetric information. That’s where some market participants possess far more information than others, who then have an advantage over others in trading and transacting.

Motivations

There are some markets such as the stock market where there is a relatively high degree of transparency since individual companies have to maintain high standards of investor relations, high standards of corporate governance, and proper corporate communication because of the intense scrutiny under which the market puts those companies and also the in-built checks and balances that exist in common equity such as company voting rights.

Similarly in bond markets, be it sovereign bonds or corporate bonds, there is a high level of available market data about those markets, and in-depth information on the mechanics and market mechanisms of those markets.

There is a debate as to whether it’s the army of equity and bond analysts and hedge fund analysts actually scrutinising stock and bond markets that keeps them efficient, or whether those markets are inherently structurally efficient, but whatever the answer, stock and bond markets are generally considered to be quite efficient.

So, when I turned my attention to looking at the gold market a few years ago, it was actually quite a shock, at least when looking at the central bank and London Gold Market segments of the market, that there is little information of real substance available about the workings of these areas of the gold market, and also, and this is a critical point, there is a culture of secrecy in the gold market that I had never witnessed before in other financial markets.

Perhaps as surprisingly, is the fact that the gold and commodity market analysts working in the major investment banks in places like London and New York don't seem to ask the simple questions, at least in public, as to how the central bank and wholesale London gold markets actually work. This lack of scrutiny also extends, in my view, to the London financial media, who as far as I can see, almost never question how the gold market really works or question why the gold market is so secretive. Whatever most of these financial reporters actually do all day, they don't investigate the gold market. That is for sure.

Back in 2011 and 2012, I visited the Bank of England archives in London and the Banque de France archives in Paris a number of times and read and photographed a lot of files about central bank gold operations and transactions that took place between the 1960s and early 1980s, which I then subsequently researched using file copies that I had made.

Those documents made me realise that central banks and the large bullion banks used to regularly discuss the gold market, and also operated within it, and often the discussions and memos were classified and even Top Secret. There are literally hundreds of these files and memos on gold markets in the archives, if not thousands. So, my view is that although 30-40 years has passed since the 1960s - 1980s, and although technology and products have changed, that behind the scenes, the physical gold market is still pretty much the same, and still generates a lot of discussion by central banks and their bullion bank counterparts.

So when I see an opaque contemporary gold market and knowing that central banks and bullion banks used to discuss this gold market in-depth, it motivated me to research this area and try to find out how the contemporary gold market works, how its infrastructure and its transactions work, because I still think that central banks and bullion banks regularly and frequently discuss the market, although never in public.

Transparency claims by Central Banks

There are many examples where central banks claim transparency in their operations and policies, but where these claims don’t stand up to scrutiny when applied to their operations in the gold market. Given this contradiction, the only rationale conclusion is that the central banking sector merely pays lip-service to operating with transparency.

Let’s look at a few examples:.

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We'll start with The Bank of England, one of the largest gold storage custodians in the world, also custodian for the UK's gold reserves, and also heavily involved in the London Gold Market in conjunction with the clearing group London Precious Metals Clearing Limited (LPMCL), and also central to facilitating lending in the London gold lending market. The Bank of England actually established the LBMA in 1987. So what does the Bank of England say about transparency? The Bank of England says:

“A transparent, accountable and well-governed central bank is essential not only for effective policy, but also for democratic legitimacy”

This quote comes from a Bank of England report in 2014 titled  ‘Transparency and Accountability at the Bank of England’.

Next we have the transparency claims made by the European Central Bank.  

“Today, most central banks, including the ECB, consider transparency as crucial.”

This quote actually come from the ECB's web site from a page entirely devoted to describing the ECB's supposed transparency.

Then we have the International Monetary Fund, with a transparency claim that it pronounced in relation to its 2010 IMF gold sales:

“The need for transparency and evenhandedness, which is essential for an international financial institution, argues for providing as much information as possible to the public”

So how do these organisations respond when asked questions related to the gold market? I've asked the Bank of England a number of gold related questions over the years, and their answers are mostly classic deflection, i.e. not answering the question. As an example, the Bank of England is involved in gold clearing in the London gold market, where each of the 5 clearing members of LPMCL maintain gold accounts at the Bank, and where the Bank of England clears the net positions of the 5 clearers (from the AURUM system) each day using book entry transfers (BETs) at the Bank of England. In effect, the Bank of England is the London Gold Market's central clearer.

So I asked the Bank of England to explain its role in this gold clearing? The Bank of England's answer...

"The Bank is not a member of LPMCL and therefore has no links to AURM. The LPMCL website should be able to answer most of your questions."

However, the LPMCL website has zero information about this process. So, as you can see, the Bank of England is engaging in disinformation and deflection. And this is an institution which claims to be gold custodian for 4857 tonnes of gold held in its London vaults.

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The UK Government also claims that all of its departments are transparent and it even launched a 'Public Sector Transparency Board" in 2010 at which time it stated:

We want transparency to become an absolutely core part of every bit of government business.”

However, the UK Treasury doesn't seem to have gotten this message about transparency, since Her Majesty's Treasury (HM Treasury), a UK government department, is even more uncooperative than the Bank of England in relation to gold market related questions. The UK's gold reserves are actually owned by HM Treasury and managed by the Bank of England in an account called the Exchange Equalisation Account (EEA).

I was recently writing an article about central banks that hold both gold bars and gold coins in their gold reserves. The UK holds some gold coins, including gold Sovereigns, in its gold holdings. These holdings of gold Sovereigns are actually mentioned in the UK National Archives files as well as in the Bank of England archives.

So I asked HM Treasury what any reasonable person would consider an innocuous question about HMT's gold coin holdings, and I even included the links to the Archive websites that discuss the HM Treasury gold sovereign holdings:

Can you clarify which gold coins are held as part of the EEA gold holdings, it is gold Sovereigns?"

Not surprisingly, HM Treasury replied:

“Data on the composition of the EEA’s gold is not disclosed due to its market sensitive nature

HM Treasury actually wrote an entire page to me as an answer while deflecting the question and padding it out with irrelevant material which had nothing to do with my question.

What about the ECB, an institution which holds over 500 tonnes of gold reserves. More transparency than the aloof British institutions? Actually, far from it. As preparation for this presentation, I sent a question to the media department of the ECB asking:

"Where is the ECB gold held, how is it audited, and can you send me a weight list?"

Answer? After two weeks, and 2 emails (including a follow-up), there is no answer from the ECB media team, i.e. complete radio silence.

[Note, since this presentation, the ECB responded after I sent additional emails to them. Their response said that the ECB gold is held in 5 locations in London, Paris, New York, Rome and Lisbon. The ECB hold is not physically audited at all since the ECB considers the central banks that hold it to be 'totally reliable, and no surprise, the ECB will not publish a weight list of the gold bars which it claims to hold since it says that "the weight of each gold bar is a technicality" and " does not warrant a publication“. See BullionStar blog "European Central Bank gold reserves held across 5 locations. ECB will not disclose Gold Bar List" for full details.]

Next we come to the Bank for International Settlements (BIS), the central bankers' central bank, based in Basel, Switzerland.

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In a 2007 presentation, the BIS actually had a slide titled the ‘Golden Triangle of central bank autonomy’ where it links the concepts of Transparency, Accountability, and Autonomy and says that transparency is "important for holding central bank to account", while accountability is  the "crucial counterpart of autonomy in open society" as it "makes transparency more credible".

The BIS holds its own gold holdings on its balance sheet, as well as holding gold as a custodian on behalf of other central banks, and it also offers these banks a gold deposit taking service. Altogether these BIS holdings represent over 900 tonnes of gold.

So you may think maybe the BIS takes these transparency claims seriously, for example in the gold market, especially given its fondness for gold with the Golden Triangle analogy. However, unfortunately no.

Quite recently, I asked the BIS about its gold as follows:

:Can you confirm the storage locations of the BIS custody gold and the BIS’ own gold?"

The BIS answered:

'I regret that we cannot be of assistance with your query, as the information that you have requested is not made publicly available.

So it seems that the only gold that the Bank for International Settlements will talk about is the 'gold' in its ‘Golden Triangle’ gimmick of Transparency, Accountability, and Autonomy. In the real world, transparency does not apply to the BIS real gold. Another example of the fiction and deception practiced by central bankers.

IMF gold Sales

IMF Gold Sales

As mentioned earlier, the title of my talk is based on some research I did on the gold sales of the International Monetary Fund which I wrote about recently. Between November 2009 and December 2010, the IMF sold 403.3 tonnes of gold in a series of off-market and on-market sales. The off-market sales were direct sales to a number of central banks: 200 tonnes to India in November 2009, 10 tonnes to Sri Lanka, 2 tonnes to Mauritius, and later on in late 2010, 10 tonnes to Bangladesh.

Then 181.3 tonnes of gold were sold via ‘on-market’ transactions over 10 months between February to December 2010. You might think that "on-market" means that the gold was sold on a well recognised market somewhere, but this was not the case, or at least we don't know what market was used since the entire operation was and is still secret.

When these 'on-market' sales began in February 2010, the IMF came out with a statement saying  “A high degree of transparency will continue during the sales of gold on the market”.

Actually, the well-known gold investor and entrepreneur, Eric Sprott, was starting a gold fund at that time and went to the IMF saying that he was interested in buying the entire 181.3 tonnes of IMF gold, but the IMF quickly told him his money wasn't good with them. The well-known website Business Insider then asked the IMF a series of questions on why Sprott couldn't buy the IMF gold. These questions were also either arrogantly not answered or dismissed by the IMF’s external communications officer.

Last year, when looking at the IMF online archives for a different reason, I stumbled upon 3 IMF reports titled 'Monthly gold sales' which actually covered the first 3 months of these sales in 2010, i.e. Monthly reports on gold sales for February / March 2010, March / April 2010, and April / May 2010. These reports contained some, but not a lot, of information about the sales process and seemed to indicate that the BIS had been used as the sales agent. I wrote about these reports in my blog and you can find all the details on the BullionStar website.

But a footnote in the 3 monthly reports caught my eye since it referenced 2 further IMF papers as follows:

Modalities for Limited Sales of Gold by the Fund (SM/09/243, 9/4/09) and DEC/14425-(09/97), 9/18/09“.

SM stands for "Staff Memorandums" which are classed under the IMF's Executive Board Documents series. DEC stands for ‘Text of Board Decisions’, which are also Executive Board Documents. These 2 document titles looked interesting and relevant, however, when I checked, neither of these 2 documents appeared to be retrievable in the IMF archives. The IMF have a 3 year rule on releasing Executive Board Documents into their archives, so both of these documents should have been available by at least 2013, and definitely by 2015.

So I went to the IMF archives people with 2 sets of questions. Firstly, could they confirm where these 2 missing documents were, the staff memorandum about the IMF gold sales, and the text of the board decision about the same sales.

Secondly, in a separate question, I asked the IMF archives staff where the other 7 monthly gold sales reports that were missing were, since logically, as these gold sales were conducted over 10 months, one would expect 10 monthly reports in the IMF archives, not just 3 reports covering February to the middle of May 2010.

After a large number of email exchanges with the IMF Archives people about the staff memorandum and the text of the Executive Board decision, they ultimately responded and said:

these two documents are still closed because of the information security classification

“The decision communicated back to us is not to declassify these documents because of the sensitivity of the subject matter.

 On the 7 missing monthly gold sales reports, the IMF responded that:

"The reports after May 2010 haven’t been declassified for public access because of the sensitivity of the subject matter."

So as you can see from the slide, there is absolutely nothing transparent about these gold sales when the documents relating to them have not even been declassified due to the supposed "sensitivity of the subject matter".

So the IMF's claims that “The need for transparency and evenhandedness, which is essential for an international financial institution, argues for providing as much information as possible to the public” is actually a complete lie. And this is an institution which still claims to hold 2815 tonnes of gold.

Based on the IMF archive rules, these Executive Board Documents can only be declassified on the authorisation of the IMF Managing Director, who is currently MS Christine Lagarde. I'm not making this up. I did think of maybe sending her an email asking 'Please can you declassify these documents' but then I thought what's the point, it wouldn't be any use.

My personal theory is that some or all of these sales involved the IMF using the BIS to transfer gold to either the Chinese State (People's Bank of China), or else helping to bail out bullion banks by selling IMF gold to a set of bullion banks, or both of these scenarios.

It looks like we'll have to wait a long time to find out the exact answers, but this incident hopefully illustrates to you that in the official sector gold market, Transparency really does mean Secrecy. So, gold is not just a 'Pet Rock', as the Wall Street Journal would have you believe. In the IMF world, gold is a topic whose discussions remain highly classified due to the sensitivity of the subject matter.

The Secrecy of Gold Storage Locations

Last year in 2015 I did some research on which central banks stored gold at the Bank of England's vaults in London, and how much each bank stored there. This required asking a number of central banks, by email, about their gold storage locations. While a few such as the Bank of Korea told me that they store their gold at the Bank of England vaults, many central banks didn't divulge this information. Lets look at a few examples:

The Banca d’Italia, one of the biggest central bank gold holders in the world, which holds 2450 tonnes of gold, half of it in Rome, said “The Banca d'Italia will not be giving information in addition to the website note.

The Bank of Japan, which claims to hold 765 tonnes of gold: “We have nothing to comment on the matter”.

The South Africa Reserve Bank (or SARB), a holder of 125 tonnes of gold: “The SARB cannot divulge that information

The Spanish central bank claims to hold 280 tonnes of gold. They replied to me that: “The only information provided [to the public] on Banco de Espana's gold reserves is total volume [held]”

Between them, these 4 banks claim to hold more than 3,600 tonnes of gold, and they won't even provide a breakdown of where their gold is stored.

Since we happen to be in Singapore at the moment, what about the central banks in the local South east Asian region? Do you think these central banks would be more transparent than some of the examples we've just looked at, or less transparent, or about the same when it comes to gold storage locations?

As it turns out, they're pretty much the same, i.e. not transparent. The Bank of Thailand replied “I could not share that information as requested”.

The Malaysian central bank said “If the information you require is not on our website [which it's not], it may imply that the said information is not meant for public viewing / reference”. Since they knew that this storage information is not on their website (hence the question), this is a particularly lame response from Bank Negara Malaysia.

The Monetary Authority of Singapore, here in Singapore replied that “We are unable to share with you where we store the gold as the information is confidential.

The Bank of Thailand claims to hold 152 tonnes of gold reserves, Singapore 127 tonnes, and Malaysia 36 tonnes, that's 315 tonnes of gold where central banks in the region won't say where its held.

These central banks we've just looked at were actually some of the central banks which did bother to respond to me. Many central banks such as the central banks in Lebanon, Kuwait, Jordan, Morocco, Kazakhstan and Cambodia didn't even respond.

Where are the Central Bank gold bar Weight Lists?

Another huge area for central bank secrecy on gold is the topic of weight lists, or gold bar lists. A gold bar weight list is, as the name suggests, just an itemised list of all the gold bars held within a holding that uniquely identifies each bar. In the wholesale gold market, such as the London Gold Market, there are rules on the data that this list has to contain.

These rules are specified in the LBMA's "Good Delivery Rules", actually in Annex H which is titled "Sample Weight Lists". For each gold bar on a weight list, and these are the large variable weight bars which each roughly weighs 400 ozs, it must include the bar serial number, the refiner name, the gross weight of the bar in troy ounces, the gold purity of the bar and the fine weight of the bar (i.e. the gold content weight). The LBMA also state that "year of manufacture is one of the required ‘marks’ on the bar"

The Good Delivery Rules annex even states that “This Annex shows the form of weight lists that should accompany shipments of GD bars to London vaults”, which confirms that all gold bars entering and exiting the London vaults will be on such a list.

The large gold-backed Exchange Traded Funds (ETFs) such as the SPDR Gold Trust (GLD), which holds nearly 1,000 tonnes of gold, and the iShares Gold Trust (IAU), actually produce and publish weight lists of their gold bar holdings in pdf format each and every trading day. It's not a big deal and it doesn't take long to produce these lists because the process is automated from the vault to the custodian back office all the way to the ETF websites.

For example, here's a line item for an iShares gold bar weight list, where you can see the refiner name PAMP, the bar serial number, the purity, and the bar weight (gross and fine weight). It even says where the bar is stored, in JP Morgan's vault in London.

Brand            Bar No.    Assay    Gross Ozs         Fine Ozs       Vault

PAMP. SA.    TC7490    9998      413.425            413.342         JPM London V

A full weight list is also needed when completing a physical gold bar audit, which is something that the large gold-backed ETFs perform twice per year.

So you would think that since commercial gold-backed ETFs produce gold bar weight lists, then central banks should be able to also? And given that large central banks have large teams of technology staff, and good IT infrastructure, that it will not be a big issue for them to produce such a weight list, in either pdf or Excel format.

However, the reality is that not a single central bank, when asked, will produce and publish such a gold bar weight list.

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Koos Jansen, precious metals analyst at BullionStar, recently asked the Dutch central bank, De Nederlandsche Bank (DNB), to provide a weight list.

 The De Nederlandsche Bank, which holds gold in Amsterdam, London (Bank of England), and New York, replied:

“We do not intend to publish a gold bar list. This serves no additional monetary purpose to our aforementioned transparency policy, however it would incur administrative costs.” 

Frankly, this reply from the Dutch is an absurd and infantile excuse and is implausible since gold-backed ETFs produce pdf versions of their gold bar weight lists on their websites each and every trading day which run into hundreds of pages in length.

In preparation for this presentation, I recently asked the Austrian central bank (the OeNB) the same question, could they provide a weight list. The Austrian central bank holds 280 tonnes of gold, 80% of which is currently stored in London at the Bank of England. The OeNB's response was:

 “We are sorry to inform you that the Oesterreichische Nationalbank (OeNB) does not publish a weight list of the gold reserves.”

Last year in October 2015, the German Bundesbank issued a useless list of its gold bar holdings, useless since the industry standard required refiner brand and bar serial number details were omitted from the weight list. As the Bundesbank, which claims to hold 3,378 tonnes of gold, stated at the time:

“Information on the refiner and year of production are not relevant for storage or accounting purposes and merely provide supplementary information.”

This continual accumulation of evidence that central banks refuse to issue industry standard gold bar weight lists suggests that there seems to be a coordinated campaign between central banks never to release this information into the public domain.

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FOIA: Central Bank of Ireland

The Central Bank of Ireland holds 6 tonnes of gold, the majority of which, according to its annual report, is in the form of “gold bars held at the Bank of England”. In June 2015, I submitted a Freedom of Information Request to the Central Bank of Ireland asking for a weight list / bar list that identifies these bars of gold held on behalf of the Central Bank of Ireland by the Bank of England.

My request was refused by the central bank. The FOIA reply mentioned that the Central Bank of Ireland didn’t have a weight list, and couldn’t find one. Their exact reply was:

the record concerned does not exist or cannot be found after all reasonable steps to ascertain its whereabouts have been taken.

The only documentation the Central Bank of Ireland claimed to have was a statement from the Bank of England dated 2009 which listed a 'total' of the number of bars stored on behalf of the Central Bank of Ireland and an equivalent total in 'fine ounces', but they said that could not provide this statement to me on the basis that it could have “serious, adverse effect on the financial interests of the State”.

I followed up with a phone call to the FOIA officer who had handled my request (as is the procedure) and was told that the Central Bank of Ireland had conducted 2 conference calls with the Bank of England about my request, with the second conference call even including a 'chief security officer' from the Bank of England FOI office, and that the Bank of England told the Central Bank of Ireland that 'you absolutely cannot' send this statement out to this guy with bars total and fine ounces since its 'highly classified'.

While you will note the conflict that arises when a request made under the Freedom of Information Act of one country (Ireland) can allow interference from the central bank of another country (the Bank of England) in determining its outcome, the pertinent point here is that the Bank of England views the topic of gold bars as ‘highly classified’.

Given that the Central Bank of Ireland reports to the Minister of Finance who, as part of the Irish Government, works on behalf of the citizens of Ireland, this refusal shows that the Central Bank of Ireland is not in the least bit transparent or accountable to its citizens, especially about a topic as important as its gold bar holdings.

Fully Opaque - Central Bank Exemptions on Trade and Reporting

There are many other areas of central bank secrecy in the gold market that make a mockery of their transparency claims. The gold that central banks hold on their balance sheets as official reserves alongside major currencies and Special Drawing Rights (SDRs) is conveniently defined as by the IMF as a ‘financial asset’ and so is exempt from international merchandise trade statistics. Therefore, central banks can transport gold between countries and foreign locations and no on will ever know, since customs authorities are prohibited from reporting on these gold movements.

Central Bank accounting of gold holdings is another area of complete secrecy where the reporting does not follow international norms, and where for most central banks, ‘Gold and Gold Receivables' are reported as one line item. This ‘get out clause’ accounting rule for central banks arose from lobbying of the IMF at the BIS in Basel in 1999 by a group of European central banks including the Bank of England, Bundesbank and Banque de France when they forced the IMF to drop plans to split out gold receivables such as gold loans and gold swaps, since, in the words of the bullying central banks, the data was ‘highly market sensitive’.

As you can see, the words ‘highly classified’, ‘sensitivity of the subject matter’, ‘highly market sensitive’, ‘confidential’, and ‘not publicly available’ are all different forms of the same thing, i.e. they reflect a culture of secrecy, where aloof and arrogant central bankers think that they have a mandate to cover up market sensitive information and not allow free markets to operate efficiently nor allow free market price discovery to work.

This arrogant and misguided behavior by central banks is not surprising given their constant meddling and intervention in all things market related. Again, the mainstream financial media will never discuss this, preferring to be invited as ‘embedded reporters’ for freebies at events such as the LBMA conference that we’ve just attended here in Singapore.

LBMA - Issue 6 of Alchemist - 'Towards Transparency'
LBMA - Issue 6 of Alchemist - 'Towards Transparency', January 1997

London Gold Market and the LBMA

We now look at the London Gold Market, its industry representative body, the London Bullion Market Association (LBMA) and its bullion banking members. The LBMA has recently begun to make soundings that it wishes to improve transparency in the London bullion market, a desire which is partially in the context of a UK regulatory Fair and Efficient Markets Review (FEMR).

However, this newly found sense of duty by the LBMA for transparency is hard to believe when you realise that the gold market today is even less transparent than it was 20 years ago.

In January 1997, the LBMA published Issue 6 of its magazine ‘The Alchemist’ and devoted the entire issue to the theme of Transparency, even going so far as to title the cover page “Towards Transparency”. The very title of the publication, ‘Towards Transparency’, conceded that the London Gold Market was not transparent at that time and admitted that the bullion market was secretive and lacking in information and data.

There was an introduction to that issue written by the then chairman of the LBMA, Alan Baker, who worked at Deutsche Bank at the time. I want to share with you just the first few lines of that introduction since its quite eye-opening:

Alan Baker wrote:

The bullion market is often criticised by observers for being secretive and lacking in information and data. Unfortunately, to an extent, this is inevitable given the need for a duty of care to clients which dictates that a high level of discretion is an essential element in so much of the business that takes place in the market, particularly for gold.

While discretion and integrity will always be bywords in the London Bullion Market, the LBMA is nevertheless conscious of the general call for greater transparency. With this in mind we have considered ways in which to enhance transparency in the market while in no way compromising integrity, something perhaps of a delicate balancing act.”

Therefore, we have a situation where the ‘Towards Transparency’ era of January 1997 has not only not improved, but it's actually gone backwards. So if January 1997 was ‘Towards Transparency’ what exactly should 2017 be called, perhaps ‘Still Towards Transparency but quite a way to Go’?

There was also an article in Issue 6 of the Alchemist about GOFO, the Gold Offered Forward Rate (GOFO), which also had a notable quote about what the London gold forward market was like before GOFO was introduced in 1989. The author of that article, Martin Stokes of JP Morgan, quoted Winston Churchill, saying that before 1989, the gold forward market was “a riddle shrouded in mystery wrapped up in an emigma”, and that ‘transparency was non-existent’.

The January 1997 issue of the Alchemist covered 3 developments of the time which the LBMA considered as moves towards transparency:

  1. The launch of clearing statistics for the London gold and silver markets
  2. The publication of trading data from a 1998 survey by the Bank of England
  3. The launch of a London Gold Lease Rate page by the LBMA on the Reuters terminal to compliment the GOFO rates that the LBMA had begun publishing in 1989.

Now, fast forward nearly 20 years from January 1997 to practically January 2017, and what do we have? What we have is:

  1. The same high level practically useless rolled-up London gold and silver market clearing data each month which doesn’t really explain anything since it’s not granular enough, and which baffles people more than anything due to the phenomenally large clearing volumes stated in the data
  2. There was a trading survey in Q1 2011 but nothing since then, nothing in nearly 6 years
  3. GOFO has been discontinued since January 2015

So the question needs to be asked, what happened to this “general call for greater transparency” back in 1997?

silde-2

Looking at the ‘London Gold Market’ in 2016, there is:

  • No trade reporting, physical or otherwise, Monthly Clearing data is practically meaningless
  • No data on the size of unallocated gold positions in the market
  • No confirmation of the identities of central bank & bullion bank customers at the Bank of England
  • Commercial gold vault locations in London are not published by the LBMA
  • No official data about the London Gold Lending Market. Zero!
  • GOFO and Forward Curve submissions were discontinued by January 2015
  • The LBMA ‘Moved the goalposts” – as they altered 2013 refining production figures from 6600 to 4600 tonnes after I had reported on the original numbers, thereby obscuring the fact that a few thousand tonnes of large bar wholesale gold left the London market for Switzerland, where it was melted down into kilobars and shipped to markets in Asia.

This list is just a sample. There are plenty of other areas where there is no transparency in the LBMA controlled London Gold Market.

As mentioned, the LBMA has recently been making soundings that it will improve transparency in the London bullion market, specifically in the context of trade reporting. There was even a slide titled “LBMA’s commitment to enhance transparency” in one of its Singapore conference presentations that addressed trade reporting and the appointment of BOAT Services and Cinnober as the planned provider of a London gold and silver market trade reporting service in the first quarter of 2017.

But this new awareness of transparency seems, in the first instance, to be being undertaken for regulatory reasons and to optimise something called the Net Stable Funding Ratio (NSFR) which is a Basle Committee concept for banking sector stability. So transparency for transparency's sake and for the benefit of the smaller participants in the global bullion market is not the raison d'être.

Furthermore, the LBMA has made it clear that central banks will be exempt from any 'transparency' that may arise out of the planned London bullion market trade reporting project in 2017. In a letter dated January 2015 to the Bank of England Fair and Efficient Markets Review, the LBMA wrote that:

"it is worth noting, that the role of the central banks in the bullion market may preclude ‘total’ transparency, at least at public level, but that transparency could be increased via post-trade anonymised statistical analysis of nominal volumes, provided by the clearing banks."

As to what exactly the role of central banks is in the bullion market, the LBMA did not say, nor did the Bank of England query. But I think we can conclude that this nudge-nudge wink-wink codespeak about central banks' operations in the bullion market is exactly as it appears to be, i.e. nefarious.

So here again we see that central banks are going to be given an exemption from transparency, i.e. central bank trading in the London Gold Market will remain opaque, with the blessing of the LBMA and the banking regulators. The post-trade anonymised statistical analysis unfortunately looks like it will be another stitch up and cop-out, and as useless a set of data as any data that gets deliberately rolled-up and masked.

slide-3

Conclusion

In conclusion, why do central banks refuse to release details of the serial numbers of their gold bars Because after all, If the gold is allocated, then there shouldn't be an issue. This secrecy around weight lists appears to be deliberate.

In my view, the reason for non-publication of central bank weight lists is because of gold lending. If a gold bar serial number turned up in the weight list of an ETF, then it would become clear that the ETF was holding borrowed gold that the central bank still claimed to hold. And the more lent gold that appears in transparent gold holdings such as ETF weight lists, the more the wider gold market knows the extent of the gold lending market. The same would be true of gold for US dollar swaps.

Similarly, if a gold bar turns up in one central bank's list when it was previously in another central bank's holding, this could suggest undisclosed central bank gold sales or alternatively it could suggest a location swap, where gold was swapped between holdings at two different gold depositories / vaults.

Publishing a central gold bar list would forever more also allow those bars to be independently traced with a high accuracy due to the serial number - refiner brand - year of manufacture attributes.

So there appears to be a concerted and coordinated effort by central banks, most likely formulated and imposed by the large gold custodians, to absolutely prevent any central bank gold bar weight list from ever being published anywhere.

However, in my view, there are other reasons for the secrecy. Like major currencies, monetary gold is a reserve asset on the balance sheets of central banks, and like major currencies, gold can be used for international payments, gold swaps, and for interventions into fx and gold markets. Monetary gold is also a strategic asset, what the Bank of England called a ‘war chest’, or the ultimate store of value. The Bank of England also described the rationale for holding gold as an insurance policy against gold making a re-appearance at the centre of the international monetary system

There is also a general culture of secrecy in central banking and an aloofness where central banks don’t feel obliged to justify their policies and decisions due to an entitlement issue with ‘independence’.

Turning to bullion banks, and to put it simply, these large banks are commercial enterprises, and they wish to protect their status quo and also to protect their profit margins. This motivation goes back to asymmetric information, where one party possesses more information than the other.

However, for investment banks, some of the superior knowledge relative to the wider gold market is obtained, not because of superior skill, but because of being able to operate in an environment where secrecy is not just tolerated, but where secrecy is actively protected by the industry body (LBMA) and the regulators (the Financial Conduct Authority and the Bank of England).

Although central banks and large bullion banks often have different motives in the gold market, their motives align in protecting the market’s secrecy. Taken central bank secrecy and bullion bank secrecy together, the phrase ‘A riddle shrouded in mystery wrapped up in an emigma’ is unfortunately still an excellent description for the entire London Gold Market.

Thank You!

Bullion Banking 101 – Speech by BullionStar CEO, Torgny Persson

The following speech, by BullionStar CEO Torgny Persson, was given to an audience during a Precious Metals Seminar held at BullionStar's shop and showroom premises in Singapore on 19 October 2016.

BullionStars CEO Torgny Persson Precious Metals Seminar at BullionStarBullionstar shop during precious metals seminar Precious Metals Seminar at BullionStar

Introduction

What have I got here?

It’s 87 grams of gold.

As many of you know, we have our own bullion vault integrated in BullionStar's bullion centre here in Singapore. What if I told you that every day we sell 6 kgs (6000 grams of gold), meaning that we sell about 1500 kgs gold per year to customers storing with us, but that we actually only keep 87 grams of gold in storage as reserves.

You would call it fraud and have me arrested, right? I’m obviously running a Ponzi scheme with very small fractionalised reserves backing up huge trading of unallocated paper gold.

Now, for clarity, that's not how we conduct business. When you buy and store bullion with BullionStar, your bullion is fully allocated and you can withdraw your metals at any time by just walking into BullionStar's bullion centre. You don’t even have to notify us beforehand.

What I just explained to you is something else - it’s bullion banking per definition - more precisely it’s unallocated gold trading by bullion banks.

As most of you know, the London Bullion Market Association (LBMA) has held its annual Precious Metals Conference in Singapore over the last two days. The LBMA is at the core of the world’s bullion trading system, a system which generates extremely large trading volumes every trading day. To understand the gold market, one has to understand the LBMA system as it is of great significance to both the price of gold and also to the physical movements of gold around the world. I will therefore provide you with an introduction to bullion banking and this LBMA system, and talk about how bullion banking operates.

Bullion Banking - Unallocated Gold

Almost all gold traded in the LBMA system today is in the form of unallocated gold which is accounted for in unallocated accounts. The definition of an unallocated gold account, as we can read on the LMBA’s website, is that the holder of such an account with a LBMA bullion bank does not have any ownership interest in any specific gold bars.

Instead, the account holder is merely an unsecured creditor of the bullion bank and holds a claim on the bullion bank for an amount of gold. At the same time, the bullion bank has a liability to this customer for this same amount of gold. Therefore unallocated gold is essentially paper gold. It is gold that doesn’t exist in the physical realm.

The creation of unallocated gold is in fact very similar to how fiat currency is created in the fractional reserve banking system. The fractional reserve banking system provides a good gateway into understanding bullion banking.

How is Fiat Money Created Today?

Let’s quickly recap on how fiat money is created in the fractional reserve banking system.

Money is created out of thin air. When a bank extends a loan, the money is created out of thin air.

Let’s take an example:

1) Robert plan to buy a house for $1 million.

2) Robert goes to a bank and the bank takes a look at Robert and deems him credible. With today’s low lending standards, it is rather easy for Robert to secure a loan. The bank deposits $1 million into Robert's account.

3) Where does this $1 million come from? The answer is 'nowhere'. It doesn't come from anywhere. The money is created out of thin air when loaned out to Robert.

This is easy to understand but hard to believe for some people. But it is true that this money is created out of thin air and lent into existence. About 92% of our money today is lent into existence in this fashion.

Banks keep a very small amounts of money in reserve to cover withdrawals, but they face liabilities which are far larger in size that their reserves.

The term "loan" as used in banking has been corrupted and twisted by banks. When a bank extends a loan, there is nothing loaned. To loan something you need to be in possession of it first, but when banks make loans, there is no countervailing transaction - The money is just created when the loan is extended.

How is Paper Gold Created?

Now, what about gold? How is gold created? You might say gold can’t be created, it has to be mined, right? Yes, you would be correct, physical gold cannot be created, but gold as an investment product definitely can be created and is created on a massive scale.

When a bullion bank customer goes to the bank and requests to buy gold, the standard procedure is for the bullion bank to create unallocated paper gold and credit this paper gold to the customer’s account. This ’gold’ is simply created out of thin air as a book-keeping entry in the bank’s accounting system.

paper-gold

Similarly, if actual physical gold is deposited into an unallocated account operated by a bullion bank, this deposit of gold is also in fact very similar to a deposit of fiat money. Just as a bank keeps deposited fiat money on its own balance sheet, a bullion bank keeps deposited physical bullion on its own balance sheet.

Bullion banks don’t generally safeguard or segregate gold deposited with them or held by them unless they are specifically instructed to do so if a customer opens an allocated gold account.

This means that depositors of gold into bullion banks' unallocated accounts are no longer the legal owners of the gold that they have deposited. Instead, they are just one of the general creditors to the bank, and they merely hold a claim for gold against the bank.

By depositing gold into an unallocated account at a bullion bank, you therefore lose ownership of your gold in return for a mere claim on gold.

Trading in unallocated gold by the bullion banks is thus based on book-keeping entries denominated in gold. The gold is fractionally reserved. Gold is created out of thin air as book-keeping entries in the banks' ledger systems, and even gold that is deposited into an unallocated account becomes the property of the bank.

LBMA Unallocated Gold Trading Volumes

From the LBMA’s published clearing statistics, which is one of the only transactional statistics that the LBMA does publish, we know that 600 tonnes of gold are "cleared" in the London Gold Market each and every trading day. Cleared means that it’s 600 tonnes of gold that's transferred between participants after netting out all trades between all trading participants.

According to a LBMA gold trading survey conducted in 2011 (the last such survey), the ratio between trading turnover and clearing on the London Gold Market was about 10 to 1. This means that the total amount of gold traded in the LBMA system each day is about the equivalent of 6,000 tonnes!

In other words, almost twice as much gold is traded in the LBMA system in a single trading day than is physically mined globally during an entire year.

LBMA Unallocated Gold Trading Volumes

But what is backing this 6,000 tonnes of unallocated gold traded each day, or 1.5 million tonnes of gold traded each year?

Let’s take a look at the reserve side of bullion banking in the LBMA system.

Bullion Bank Gold Reserves

The LBMA bullion banks' outstanding gold liabilities, and the unallocated trading system in the London Gold Market are ultimately backed by a quantity of 400 oz Good Delivery gold bars.

However, bullion banks don’t really want to hold physical gold. They will buy it if someone forces it on them but bullion banks have no real need for physical gold and are therefore incentivised to keep as little gold as possible in reserve, and lend out the gold they hold in reserve so as not to incur storage fees and handling costs. Banking reserves are looked upon as a dead asset so the banks minimise these reserves and try to make them into live assets by loaning them out.

When a bullion bank receives a gold bar by buying or borrowing it, it either sells, leases or allocates that bar elsewhere.

This sets a bullion bank apart from any other bullion entity because a bullion bank can hold deposits of gold on its balance sheet as assets even if it no longer has, or never had, the actual physical gold in its possession.

How much backing is there for all the unallocated gold traded in the LBMA-system?

We don’t exactly know as there are no reserve figures published but we can make an educated guess.

Vaulted Gold in London

How much gold is actually vaulted in London? The LBMA recently said on its website that there was approximately 6,500 tonnes of gold stored in London, about three-quarters of which was at the Bank of England. The Bank of England recently revealed that it was custodian for 4,734 tonnes of gold in its vaults.

This would leave 1,766 tonnes of gold privately stored in the LBMA vaulting system outside the Bank of England.

BullionStar research recently calculated (30 September 2016) that ETF gold holdings held in London accounted for 1,679 tonnes. This would mean that there are only 1,766 - 1,679 = 87 tonnes of gold in the LBMA system which is not allocated to ETFs!

Therefore, nearly all of the LBMA reserves are allocated to the ETFs with only 87 tonnes of gold left to back up the vast amorphous of unallocated gold trading amounting to 6,000 tonnes per day or 1.5 million tonnes per year!

gold-vaulted-in-london

Chart layout inspired by GoldChartsrus /Nick Laird. Data gathered by Goldchartsrus/BullionStar's Ronan Manly

Physical gold in the LBMA bullion banking system is therefore like physical cash in the monetary system. It is rarely seen!

london-gold-etfs

Double-counted Reserves

LBMA is a banking system that by definition is based on fractional reserve banking.

HSBC, JP Morgan and ICBC Standard Bank are the only LBMA bank custodians with their own precious metals vaults in London. Most of the circa 42 LBMA bullion banks don’t even have their own gold vaults but still keep books denominated in gold ounces. A bullion bank without a gold vaults instead holds its gold reserves with a bullion bank that does have a gold vault.

For example, if Citibank keeps its reserves with a bank with a vault such as JP Morgan, then Citibank merely holds a gold claim for which JP Morgan has a gold liability. These unallocated gold reserves are therefore just pooled with the bullion banks that do have vaults.

The bullion banks without a vault never see or touch the metal they keep in reserves. If a bullion bank stores its gold reserves at another bullion bank’s vault, this means that the reserves are unallocated credits/claims which are standing behind the bank’s own liabilities. So even the reserves are fractionalised. So not only are bullion banks’ liabilities to their customers unallocated, even the reserves are unallocated inter-bank liabilities which are fractionalised.

Paper gold thus stands behind the liabilities of paper gold.

The LBMA system serves as a pool of reserves and uses coordinated reserve management where the different participating bullion banks can loan and lend to each other the few physical reserves that there are in the system so as to meet any demand for physical bullion.

Gold Bank Run

The bullion banks face massive liabilities in the form of unallocated gold credits. Bullion banks are thus, just like normal banks, susceptible to bank runs.

gold-fiat-comparison

The difference between bullion banks and normal commercial banks is that whereas central banks are the ultimate lenders of last resort to commercial banks, most central banks no longer back-stop bullion banks as the lender of last resort because most central banks no longer sell or lease bullion that can be used to prop up bullion banks' reserves.

In case of the LBMA, the central bank is replaced by a private company called London Precious Metal Clearing Limited (LPMCL) which is run by 5 clearing bullion banks and whose clearing system AURUM nets out all gold claims and liabilities in the LBMA system. The clearing system functions as a pooled system in that only net balances are cleared and the bullion banks' gold reserves are essentially pooled and can be leased and double counted whenever necessary.

When they no longer have any physical gold to deliver, the ultimate rescue plan for bullion banks is to use cash settlement instead.

In the same way that banks increasingly promote cashless solutions as a means to reduce cash handling costs, earn credit card fees, reduce the risk of bank runs and lock in customers, LBMA system bullion banks promote gold-less gold transacting.

Just as the banking system inherently incentivises reckless debt behavior, the bullion banking system inherently incentivises the reckless creation of paper gold assets.

LBMA – The Paper Gold Protector

In creating artificial paper gold, bullion banking protects the fiat money system.

If even a small minority of the paper gold traded today was backed up by physical gold, the price of gold would have skyrocketed. A gold price significantly higher than today would point towards the inferiority of the fiat money system, and possibly the collapse or implosion of the current monetary system.

bb-protecting-monetary-system

Bullion banks and gold industry organisations, such as the LBMA and the World Gold Council, which itself has developed and owns securitized gold products, can profit from gold trading volumes that are far higher than they would be if they were limited to the constraints imposed by the availability of physical gold to trade.

The bullion banks and the LBMA work hard to overcome the tangible limitations of physical gold mining. By promoting gold-less gold transacting, the LBMA unallocated system artificially increases the supply of gold, earning the banks higher fees from artificially large trading volumes.

To reiterate, the LBMA unallocated gold trading is a banking system based on fractional reserve banking which is all about exposure to the price of gold but not to gold itself.

The LBMA system is used to coordinate unallocated paper gold trading where ‘gold’ is created out of thin air, and the tiny physical reserves held are pooled and shared out among participants so as to minimise costly reserves and avoid gold bank runs.

When bullion banks need to allocate gold to the ETFs, such as to the SPDR Gold Trust (GLD) in London, they use credits from the same unallocated gold credit system as was previously used to offset other gold liabilities. Even though the ETF may own the gold outright, the gold is still being double counted within the system because its being allocated out of a bullion bank pooled systems of credits.

To summarize what the LBMA is all about, it is a paper gold protector for the bullion banks which allows the bullion banks to earn fees from an artificially high trade turnover while at the same time protecting the fiat currency system.

The Guarded Secret of no Gold

The fractionally-reserved bullion banking system is a fragile system. Many investors and savers holding paper gold believe that the gold they are holding is backed up by real physical gold. But if the bullion banking system implodes, which it will do if the high demand for real physical gold in Asia is sustained at anywhere near today’s levels, these holders of paper gold will at best end up holding paper claims which will be cash-settled, or at worst these paper gold holders will be empty-handed.

Demand for ETF’s and unallocated gold will likely not stress the system systemically since the pooled LBMA gold reserves are used for leasing and double counting. It is the demand for real physical gold, draining bank gold reserves, that stresses the system.

Many gold investors/savers buy various paper gold products as a means of protecting themselves against the fiat currency Ponzi scheme. It may therefore come as a surprise to some holders that these investments are no safer or even less safe than the fiat currency against from which they are seeking to protect themselves. Bullion banks give the impression that these investors into unallocated gold are actually holding gold, whereas in reality they are just unsecured creditors holding paper gold, gold that is created out of thin air, in a fractionally-reserved Ponzi scheme.

As long as everyone is happy to buy and sell ledger entries/book-keeping entries, this fragile system can continue to balance on a thin thread. The systemic problem arises when larger entities start to demand physical delivery, a trend which has been happening in the last few years, most notably in Asia and Russia. There is therefore an imminent risk of the bullion banking system collapsing in the next few years.

vault

This is an accident waiting to happen, because when enough holders of paper gold ask for delivery, the default that will follow will trigger the biggest bank run for gold in history, which due to gold’s significance as a monetary proxy, will shake the entire monetary system.

When there is no longer any physical metal to deliver, the ensuing shortage will result in a disconnect between prices, in which paper gold will become worthless while the price of real physical gold will be revalued at a much higher level based on the market equilibrium for physical supply and demand of gold.

Thank you!

The World’s largest Precious Metals Refineries

There are many precious metals refineries throughout the world, some local to their domestic markets, and some international, even global in scale. Many, but by no means all, of these refineries are on the Good Delivery Lists of gold and/or silver. These lists are maintained by the London Bullion Market Association (LBMA) and they identify accredited refineries of large (wholesale) gold and silver bars that continue to meet rigorous proficient standards of refining and assaying, and that are, at the same time, financial viable and stable companies. Currently, there are 71 refiners on the LBMA’s gold Good Delivery List and 81 refiners on its silver Good Delivery List, or which just over 50 of these refineries are accredited to both the LBMA’s gold and silver lists.

But within the top echelons of the world’s precious metals refineries, a number of names stand out due to their sheer scale and pedigree, as well as their global brand recognition in the production of a wide range of investment grade gold and silver bullion bars. These names include PAMP, Argor-Heraeus, Metalor Technologies, Heraeus, Valcambi, Tanaka Kikinzoku Kogyo, and Rand Refinery.

5000 Tonnes of Gold

Together these seven refinery groups have a combined gold refining capacity approaching a mammoth 5000 tonnes per year. And that’s not even taking into account their refining capacity for other precious metals such as silver and platinum. Valcambi has a gold refining capacity of 1600 tonnes per annum, Metalor 800 tonnes, Heraeus 400 to 500 tonnes, PAMP over 450 tonnes, Argor-Heraeus over 400 tonnes, Tanaka 500 tonnes, and Rand Refinery 600 tonnes.

Notably four of these refineries are based in the gold refining powerhouse of Switzerland, of which three, PAMP, Valcambi and Argor-Heraeus, are clustered literally within a few kilometres from each other in the golden triangle of Swiss refineries centred within the very south of the Swiss canton of Ticino near the Swiss-Italian border. Metalor Technologies is the exception, as its Swiss headquarters facility is based in Neuchâtel, in the north-west of Switzerland. Of the non-Swiss refineries, Heraeus, Tanaka and Rand Refinery, these are headquartered in Germany, Japan and South Africa, respectively.

crucible
Gold Refineries, Heraeus, PAMP, Valcambi, Metalor, Argor-Heraeus, Tanaka, Rand Refinery

International in Scale and Ownership

Although three of the four giant Swiss refineries have historically each been owned by a Swiss bank, and although groups such as Heraeus and Tanaka are still privately owned and controlled by founding shareholders, its important to note that none of these giant refineries are purely local concerns, so their headquarters locations are to some extent a secondary concern. From operating facilities, to metal supplier networks, to customer bases, all of these refineries are now absolutely global in nature.

For example, Metalor operates four precious metals refineries globally, in Switzerland, Hong Kong, Singapore and Massachusetts (US). Heraeus runs gold refining and gold bar production facilities in Hanau (Germany), Hong Kong, and Newark (US). In addition to its Swiss refinery, PAMP, part of the Geneva-based MKS PAMP group, runs a joint venture refinery in New Delhi, in conjunction with MMTC, a large state-owned Indian trading company.

In many cases, the ownership of these refineries is international and cross-border in nature, and increasingly so over the last few years. Agor-Heraeus is owned by the Austrian Mint and two German entities Commerzbank and Hereaus. In 2015, Valcambi was acquired by Indian jewellery producer Rajesh Exports, with one of the selling shareholders being US-based gold mining giant Newmont. Indeed, just last month, Tanaka announced the acquisition of Metalor Technologies, a development which has initiated an upcoming major Japanese - Swiss precious metals refinery combination. Metalor was already international in ownership, as its controlling shareholders are French and Belgian private equity companies. While Rand Refinery of South Africa is  exclusively owned by five of the largest South African gold mining companies, some of these owners, such as Anglogold Ashanti and Goldfields, are vast international concerns. Rand Refinery has also increasingly had to cast its new wider for sourcing gold to process in its refinery as South African gold mining output has declined. Rand Refinery now refines over 75% of the gold mined on the African continent (excluding South Africa), and is also increasingly tapping into gold mining output from the US and Asia.

The World's Refinery Referees

Another indicator of the esteem within which these select refineries are held is their membership of the exclusively small panels of good delivery list referees which have been appointed to run the LBMA’s good delivery lists, and similar good delivery lists maintained by the London Platinum and Palladium Market (LPPM) for platinum and palladium bars.

The LBMA’s good delivery referee panel is a five refinery member panel made up of Argor-Heraeus, Metalor Technologies, PAMP, Rand Refinery and Tanaka Kikinzoku Kogyo. The LPPM’s referee panel also comprises five refiner members, namely Metalor Technologies, PAMP, Valcambi, Tanaka Kikinzoku Kogyo and platinum specialist Johnson Matthey. So not only are these refineries listed on these LBMA and LPPM good delivery lists, they actually help run the entire set of good delivery standards and processes. With the upcoming acquisition of Metalor by Tanaka, these LBMA and LPPM referee lists may need some adjustment, since Tanaka and Metalor are members of both referee panels.

Overwhelmingly, the gold and silver bars of these refiners are all also accepted as good delivery for the COMEX gold 100 oz and gold kilo futures contracts, the gold contracts of the Tokyo Commodity Exchange (TOCOM), the Dubai Good Delivery gold list maintained by the Dubai Multi Commodities Centre (DMCC), and the good delivery standards of the Shanghai Gold Exchange.

Investment bullion bars

Although all of these precious metals refineries, to various extents, supply semi-fabricated precious metals, alloys and industrial precious metals suppliers to a diverse set of industrial and jewellery sector clients, it is perhaps the investment grade bullion products of these giant refiners that they are best known to a global audience.

PAMP fabricates a vast range of cast and minted gold and silver bars which are extremely popular across Asia and the Middle East, in fact, the premier brand in those regions. Valcambi manufactures a wide range of gold, silver and platinum / palladium investment bars, as well as precious metal coins and medals, and has become well-known as the international supplier of Combibars. Heraeus, Metalor and Argor-Heraeus produce a wide selection of gold and silver bars ranging from large wholesale (good delivery) bars through to smaller cast and minted gold and silver bars. Tanaka’s gold bars dominate the Japanese market and notably, Tanaka is also the sole distributor in Japan of gold and silver bullion Maple Leafs coins from the Royal Canadian Mint and gold and platinum Philharmonic coins from the Austrian Mint. Tanaka's acquisition of Metalor will be interesting in terms of how the combined group markets and distributes its investment bullion products going forward.

It's also not widely appreciated that Rand Refinery has refined over 50,000 tonnes of gold since it first opened in 1921, which is a staggering nearly one-third of all the gold ever mined. Rand Refinery large gold bars are held widely by central banks across the world. Rand Refinery’s flagship gold bullion Krugerrand coin is also held very widely, with over 60 million Krugerrands minted since 1967.

This article has not touched on the Perth Mint, Royal Canadian Mint or Royal Mint, which its important to remember, each operates its own precious metals refinery facilities in addition to being a sovereign national mint.

In summary, the seven refineries featured above are truly giants of the industry, and their longevity and customer trust attest to the authenticity and quality of their investment bullion products.

To learn more about the world's top precious metals refineries featured in this article, please see the full refinery profiles which have now been published on BullionStar's Gold University pages:

Heraeus: https://www.bullionstar.com/gold-university/heraeus-refinery

PAMP: https://www.bullionstar.com/gold-university/pamp-refinery

Valcambi: https://www.bullionstar.com/gold-university/valcambi-refinery

Metalor: https://www.bullionstar.com/gold-university/metalor-refinery

Argor-Heraeus: https://www.bullionstar.com/gold-university/argor-heraeus-refinery

Tanaka Kikinzoku Kogyo: https://www.bullionstar.com/gold-university/tanaka-refinery

Rand Refinery: https://www.bullionstar.com/gold-university/rand-refinery

In addition, the refining activities of the Royal Mint, Royal Canadian Mint and Perth Mint can be consulted in their respective profiles, also on BullionStar's Gold University pages:

Royal Mint: https://www.bullionstar.com/gold-university/the-royal-mint

Perth Mint: https://www.bullionstar.com/gold-university/perth-mint

Royal Canadian Mint: https://www.bullionstar.com/gold-university/royal-canadian-mint

 

“How Safe is your Gold?” – Transcript of Speech by BullionStar CEO

The following is the transcript of a presentation made by BullionStar's CEO Torgny Persson on 14 July 2016 to an audience at the FreedomFest conference in Las Vegas, USA:

Liberty is Prevailing

Freedom, ladies and gentleman.

Freedom is the right to think, speak and act the way that we want.

I think I speak for a lot of us here today in saying that we no longer believe in the imposed concept of a government taking care of us from cradle to grave.

I love the principles on which this country was founded.

Freedom of Speech,
Freedom of Thought,
Freedom of Movement,
Capitalism,
and Property Rights

But a lot has changed since. Authoritarian tyrants have kidnapped free society. But make no mistake, people across the globe are waking up. The tyrants are losing.

We can see clearly that the tide has turned. Political correctness is crumbling.

We had Brexit in the UK a couple of weeks ago. The end of the world according to mainstream media. We have the rise of Donald Trump here in the US. Love him or hate him but he’s breaking political correctness. He’s saying the unsayable.

It is starting to dawn on the tyrants that it’s all over.

More speech is always better than less speech.

So people are rising up, finally, people are rising up.

Liberty is prevailing! Liberty will always prevail. Freedom is a powerful concept. Freedom to think, say, read and do what you want.

We don’t need to be instructed how to live our lives. We have been oppressed by the government and lied to by the media long enough. Freedom is a force that can’t be stopped.

We don’t need anyone’s authority to govern our own lives. Freedom, think about it, is simply the concept of living your life the way you desire.

Introduction

My name is Torgny. I’m an economist by training. I’m the founder of 3 different precious metals dealers worldwide. Being Swedish by origin, I first started the Swedish bullion dealer LibertySilver.se in 2008. Liberty because if you own precious metals, you can gain independence and liberty from the oppressive financial system as you’re not locked in to the fraudulent banking system.

I have a Master’s Degree in Economics. If you ever get the chance to study economics, don’t do it. Economics is upside down. Instead of modelling what is actually happening in the real world, economics is a product of professors peer reviewing each other, holding each other’s hands, coming up with obscure models that they try to push onto the world.

I subsequently started Liberty Silver in Estonia in 2011, and most importantly BullionStar in Singapore in 2012. Today I’m looking to cover three different topics.

First, I will cover what is happening on the gold market by looking at the most important gold trends of 2016. What’s happening in the gold market and what can we expect ahead?

Then I will talk about Singapore because Singapore is the very best place in the world for wealth preservation and asset protection and it’s the best place in the world to buy and store precious metals.

And I will conclude by talking about how I have set up BullionStar with the purpose of servicing offshore bullion protection. I moved to Singapore with my family 3 years ago to establish BullionStar in Singapore simply because it is the best country in the world from which to offer precious metals services for international diversification, and asset and wealth protection.

Global Economy 2016

To understand the gold market, we have to understand what is happening in the global economy - and the relative ‘health’ of the global economy today.

Stock and bond markets have been performing well over the last years but the underlying economies are struggling. Record low interest rates, sub-zero in many countries, and massive money printing have’t triggered any real economic or trade growth.

We can even see that the viability of innovating, of creating new products, of selling products for a profit has become secondary to the goal of just having a corporate presence on the public investment markets. Today, it’s more important for company managers to list their company on the stock exchange than it is to actually create an innovative product that makes money.

So we have an economic system that incentivizes reckless debt behaviour, which leads to asset bubbles, boom-bust cycles, massive debt, mal-investment and inflation.

But how has this monster of debt and inflation been created? What’s at the core of our current economic system?

Today’s Monetary System

It’s the monetary system that allows government to steal through taxation and inflation. Taxation is of course the same as theft. They just had to invent another world of it. Income tax of 30% sounds a hell of a lot better than income theft of 30%. Everyone agrees that it would be wrong for me to go up to someone in this room with $100 and steal $30.

Just because a group of people get together and call themselves the government, it doesn’t change the immorality in stealing.

The monetary system, of course, also redistributes wealth via inflation. Inflation is also theft but in a discreet way as it happens slowly without the general population being aware of it. What did a gallon of milk cost when you were young? What did an ice cream cost?

Inflation is a redistribution of wealth from late receivers of newly printed money i.e. you and I, normal people, to the early receivers. i.e. the government, the central banks and the commercial banks.

Dollar 99

The US Dollar is important in this context because the US Dollar is the reserve currency of the world. As we can see from this chart, the US Dollar actually did pretty well until the beginning of the 20th century. But what happened in the beginning of the 20th century?

The Federal Reserve was created in 1913 and the world went off the gold standard.

Since then the world’s currencies have lost 99% or more of their value.

We have been indoctrinated into believing that the world’s current monetary system is a natural system, but nothing is further from the truth. We should have moved on from it a long time ago as this monetary system really is the root cause of the financial debt disease that we are seeing today.

How is Money Created Today?

Today more and more people are becoming aware of the Federal Reserve’s counterfeiting of money through Quantitative Easing (QE). However, it’s still a mystery to many how most of our money is created today.

Most of today’s money is created not by central banks, but by normal commercial banks. It’s just created out of thin air when the commercial bank extends a loan. There’s nothing backing this money creation, there’s nothing tangible to it.

Let’s illustrate how it works with an example. We have Robert who is in the market for a 1 million dollar house. Robert’s career choice is as a fast food restaurant worker, part-time, on minimum wage. But Robert knows he has to look credit worthy when meeting his bankster so he dusts off his tie for the occasion.

The bankster takes a quick look at Robert and judges him as credible. No problem. You’ll get the mortgage. Now, where did the USD 1 million that the bank lent Robert come from?

Nowhere.

It was created out of thin air when the bank extended the loan to Robert. It was just created as a book-keeping entry in the bank’s accounting system out of thin air.

This is how approximately 92% of US money supply is created today. It’s created by banks out of thin air when lending. It’s easy to understand, but for some people hard to believe as it’s just too absurd.

92% Electronic Currency

Only 8% of the US Dollar money supply today exists in physical form and even this 8% are just worthless pieces of paper that only have a value as long as people can be brainwashed into believing they have a value.

Some people actually still think that the US Dollar is gold backed. As a thought experiment, let’s calculate what the price of gold would have to be for the US Dollar to be backed by gold.

The Federal Reserve claims to hold, and note that I say claims to hold because there has never been any independent proper audit of the US Treasury vault holdings, 8133 metric tons of gold. At the same time there’s about 17 trillion of US Dollars in circulation. The price of gold is currently about USD 1300 per troy ounce. The US gold reserves as valued in US Dollars would therefore be worth about 340 billion dollars. This means that the price of gold would have to rise 50-fold for all outstanding US Dollars to be backed by gold today. 50-fold. This is how much the value of our currencies have been eroded.

What is Money?

We can thus see that the world’s current money system isn’t serving us the people. But what is money in the true sense?

For something to emerge as money on a free market, it needs to serve three purposes.

  • Medium of Exchange – Money is the intermediary in the exchange of goods and services. If we don’t have money, we’re back to barter systems of medieval times which is very impractical.
  • Unit of Account – Money is supposed to serve as a measuring stick that everyone understands. Money is a frame of reference. And sure, if I tell you that something costs $100 you have a pretty good idea how much that is, but the problem is that it takes $100 today to buy something that cost $1 a hundred years ago.
  • Store of Value – Money is supposed to keep its purchasing power over time, to keep its value.

Let’s now compare paper currency and gold to see which has the best monetary characteristics.

Durability – Money is not supposed to corrode, oxidize or burn. Well, paper money burns easily whereas gold melts under heat but isn’t destroyed.

Portability: Paper money and gold can both be moved. Electronic currency can be moved very easily but can also be deleted by the stroke of a key.

Divisibility – Let’s do an experiment. I have here a 10 dollar note and a 1 gram gold bar. Now what happens if a split this 10 dollar note, what does it become? Does it become two 5 dollar notes? No it doesn’t, it becomes two worthless pieces of paper. Now what if I instead split this 1 gram gold bar into two equally sized pieces, what does it become? It becomes 2 bars of 0.5 grams each which together is still what I had at the beginning i.e. 1 gram! This tells us a lot about the worthlessness of our paper money.

Fungibility – Fungibility means that each and every unit is indistinguishable from the other

Intrinsic Value – Gold has a high value because of its metallic characteristics. It has high density, it’s soft but still strong, and it’s what’s called malleable, meaning that it can be stretched without breaking. A 1 oz gold coin can actually be stretched out 50 miles without breaking. That’s 6 times all the way up and down the Las Vegas strip!

Imbalances from Using Dishonest Money

By using dishonest money as the world is doing today, we get huge global imbalances.

The US is running a massive trade deficit. There’s much more stuff coming into the US than there is leaving. How are the excess imports paid for? The answer is that it’s paid for by newly created money.

It’s interesting to note that it’s only possible to run trade deficits to this enormous extent if you issue the currency that is used as reserve currency. This is thus only possible in the US, as the US Dollar is used as the world’s reserve currency. In any other, non-US country, it wouldn’t have been possible because the currency would depreciate when there’s a continuous trade deficit.

When the currency is depreciating, it becomes more expensive to import goods and it becomes cheaper for others to buy exported goods. Trade is therefore rebalancing.

This is not happening in the US though and the reason for it is that the US Dollar itself is demanded as reserve currency around the world.

There’s a lot of finger-pointing towards the US because of this, blaming the US for living beyond its means. I don’t agree with that though as it is the rest of the world, i.e. non-US countries, that is demanding US Dollar as reserves which they don’t necessarily have to do. So this is what’s called an exorbitant privilege.

China & US Debt

Things are changing rapidly though as structural changes to the system are long overdue. The system we have today is in no way sustainable. The US Dollar is losing structural support from surplus countries, most notably from China.

Foreign countries are no longer increasing their reserves of US Dollars. China is no longer increasing its holdings of US Treasuries. They stopped buying them. So the system of the US Dollar acting as a reserve currency is very fragile and is only holding together based on the premise of more bribes. Private investors, especially in countries where the markets and currencies are failing such as in South America, buy bonds but they only do so on the promise of more and more easy money to come. People have been conditioned for many decades to run to the US Dollar as a safe haven although I predict that to soon change.

Foreign governments and particularly China are not interested in owning anymore US debt though. The question is when will the private support for the US Dollar stop, because then there’s no one to support US debt anymore except the Fed itself. When will it happen? Timing wise I’m not sure. When I started Liberty Silver in 2008, I thought it would happen much sooner that it has. Sooner or later, it’s going to happen though. We will first get a strong deflationary pressure, we are basically in that phase already. Credit will default but this will not be accepted by the governments, who will buy up debt at all costs, eventually leading to a crisis of confidence and then we’re in big trouble because then people will start to spend their savings quickly leading to hyperinflation. And when that happens, debt and credit is not a good store of value.

And who best understands this situation today? China still has a big surplus though so what do they buy instead?

Chinese Gold Rush

They are buying tangible assets. Gold is one such asset but China is also a major foreign direct investor in all sorts of projects from mining in Africa to infrastructure in central Asia.

The Chinese understand that the days of the US Dollar are numbered.

Chinese rush

Whereas Westerners have mostly been shunning gold for the latter part of this decade, the Chinese have been vacuuming the world’s vaults for physical gold. This chart shows that the Chinese, including both the government and private sector, are holding at least 16,000 tonnes of gold.

Chinese AU 16000

The Chinese government even runs adverts on national TV encouraging everyone to buy gold. Just imagine the US government running adverts on national TV encouraging people to buy gold.

Why do the Chinese do this? The simple answer is that they understand that gold is a stable savings asset, but they also understand that the days of the US Dollar as the reserve currency of the world are numbered, and they understand that gold is a much better safeguard against inflation and currency destruction than anything else.

This trend of gold flowing from the West to the East is the same as a flow of power from the West to the East. It has huge geopolitical implications because whoever has the gold in the end has the power. In my opinion, the Chinese are buying as much gold as they possibly can without breaking the neck of the market.

Western vs. Eastern Gold Mentality

I’m in a fortunate position because I’m running 3 bullion dealers across the world, both in the west and in the east. I have two businesses in Europe and one in Singapore in Asia so I’m fortunate to be able to compare eastern and western gold mentality.

What I see is that when the price of gold is going up, westerners buy. In the west, most people are looking to get a return on their investment. That’s how we’ve been conditioned because if we don’t get a return, inflation will eat up the value of the money.

But when the price of gold is dropping, there are a lot of Asians buying. We get queues outside our shop. Easterners are not looking for a return on their investment. What I see is that easterners don’t view gold as an investment vehicle. They view gold as real wealth, they view it as a safeguard against inflation and currency destruction. They view it as savings which provides independence.

In the west, we see the opposite. When the gold price is dropping, Westerners give up. It’s not good for my investments so I need to chase some other investment. So in the West, people instead buy when the price goes up, due to being trend seekers, as we’ve also witnessed this year.

But in my opinion, we can learn a lot from the Eastern mentality because the Eastern mentality is that gold is savings. There’s no counterparty risk for gold. You don’t have to trust any government, central bank or commercial bank when you buy and hold gold. You don’t need to trust anyone because you hold your wealth yourself so you’re in control.

Simply put, in the East, people are value buyers and buy for generational wealth, whereas in the West people mostly buy gold for the lure of currency profits.

How can Westerners piggyback this successful strategy to save/invest in gold outside the reach of intrusive governments?

Singapore’s Story

Let’s take a look at Singapore. I’ve been living in Singapore for about 3 years. I relocated with my family 3 years ago from Sweden, the worst socialist country in the world. And the country with the most political correctness by far anywhere. You think it’s bad in the US, check out Sweden. Socialism is cancer. I’m not going back there.

I moved to Singapore simply because it’s the best country in the world for precious metals, it’s as easy as that. Whether my kids agree, I don’t know but they like to play with silver coins and actually understand the intrinsic value of precious metals much better than most people in their 40’s and 50’s.

Singapore is the new Switzerland for asset protection. It’s the best and safest country in the world for wealth preservation.

Singapore is unique. Let me tell you my story about when I first went to Singapore. My business partner and I first visited Singapore on an exploratory trip researching whether to establish BullionStar in Singapore after we discovered that the Singaporean government was abolishing the sales tax on precious metals in Singapore in 2012. This is interesting because how many countries today are deregulating anything let alone precious metals? In other countries the rulebook just gets bigger and bigger. I know there’s many absurd examples from the US. From Sweden where I originate, the guidance on the sales tax that all companies must know and follow is 3,000 pages long. That’s insane. The rulebook of absurdity is just growing. Singapore may be the only country that is taking the opposite route of actually removing rules.

In Singapore, the government wants to create a trading, transit and storage hub for precious metals so they actually removed the major hindrance to that, the sales tax (GST / VAT as it’s called in some countries), which is rather unique.

So on my first trip to Singapore together with my business partner, we went to one of the suppliers in Singapore to discuss business opportunities. We had a general business discussion and they said, have you talked to the government yet? So I’m from Sweden where if you send a question to a government authority, in best chance you may get a reply after a few months if you’re lucky and they’ll most likely harass you with an inspection or audit while they’re at it.

We’ve been through a lot of that in Sweden even though we’re following all the rules meticulously.

The Singapore supplier told us that we can indeed contact the governmental trade agency in Singapore so I said why not and I sent the government contact person an e-mail 11 pm. I get a reply in three minutes saying that we’re welcome to meet them the next morning at their office.

Baffled, I replied that we will show up so we rock up to their office at 9 am in the morning. There are two guys meeting us. They are in their 20’s - 30’s and we discuss business opportunities with them. They tell us that we are welcome in Singapore, and that they want us here, and they encourage us to get started, and facilitate the introductions to different stakeholders and suppliers.

I met many bureaucrats in my life but that has never happened before, because bureaucrats  are normally just interested in growing their reach, killing anything productive around them. Whereas in this case, they wanted to help us and even came up with their own private business ideas. And this is the Government! Where else would that happen, would it happen in the US? ‘

We were quite amazed and we went for it and established BullionStar in Singapore four years ago.

Singapore Story

So in general terms, the Singaporean government is keen to incentivize productivity and they understand that the private economy is the backbone of the economy.

Singapore was actually literally kicked out of the Malaysian Federation 51 years ago. With nothing going for them and with no natural resources, the journey since has been a tremendous one. In a mere 50 years, which isn’t a very long time when it comes to building a country, they’ve established the premier financial center of the world. They have done this with a very strong rule of law where there’s a lot of freedom within a set framework. You have a lot of freedom as long as you keep within that framework and you especially have good business freedom.

Now, if you bring in guns or drugs, you’ll be put away for a long time if not forever. I’m a libertarian so I don’t really agree ideologically but I can see how this has been serving Singapore very well as a city-state, as there’s no shootings whatsoever and very little drugs.

Singapore is the most business friendly country in the world. Hands down. The Singaporean government runs Singapore like it was a company.

They focus on productivity and innovation and luckily they are a too important as a country to be listed on any grey or black list because of their low tax regime and financial protection. They are also very good diplomats. A few years ago, OECD put pressure on Singapore to start signing Tax Information Exchange Agreements. The Singaporean government said, yes we will start signing these agreements. To date more than five years later, they have signed one such agreement with…Berumda…Strengthening Singaporean-Bermudian ties to ensure that the OECD doesn’t bother them.

Compare this to Sweden is day and night. Sweden is often perceived as some sort of mellow well-working ideal. Bernie Sanders is touting Scandinavia as some sort of socialistic dream. Let me tell you, he’s got no clue what he’s talking about. Sweden’s been going downhill severely in the last decades. Crime is rampant. Due to the migration crisis, Sweden tops all countries for sexual violence. In 2015 alone, 163,000 asylum seekers predominantly from Syria and Afghanistan, arriving into a country with a population of only 9 million. Everything is totally breaking down. You could never run a storefront precious metals dealership in Sweden like we do in Singapore.

Sweden is also practically cashless. Cash is rare as a payment mechanism, and oftentimes no longer accepted. I was very concerned about my family while we still lived in Sweden even though my Swedish bullion dealer business, Liberty Silver, didn’t have a physical shop but just sent parcel deliveries via insured registered mail.

In Singapore, you can see currency exchangers exchanging tens of thousands of dollars without any security glass or any protection whatsoever and it’s completely normal. A couple of months after I moved to Singapore, I walked past Raffles Place, in the Central Business District, and there was a currency exchanger in the process of counting cash in a counter, standing outside his booth with a currency counting machine. Just when I walked past, there was a gust of wind and a pile of bills were taken by the wind and this was on the busiest street of Singapore with lots of people walking by. The exchanger calmly walked around and picked up the 100 dollar notes like nothing had happened. I had to veer to the side not to step on any of them.

What does that tell you about the security in Singapore? It’s incredibly secure. No one would dream of doing anything. It’s a combination of no social exclusion and harsh penalties. There’s no unemployment whatsoever in Singapore. Every shop you walk into has a sign: “we are hiring”. There’s a shortage of labor. Social standards are thus good. At the same time, the punishments for violent crimes are extremely harsh and includes caning.

Michael Fay, a US citizen, was actually sentenced to six strokes of the cane in 1993 after vandalising cars. The US protested loudly that caning was excessive for a teenager who committed a non-violent crime. The US embassy pointed out that the damage to the cars he vandalised wasn’t permanent but the scars from the caning would leave permanent scars on the US citizen. Bill Clinton pressured Singapore to grand Mr. Fay clemency but Singapore stood its ground and carried out the sentence although reduced to four strokes. It’s a rather harsh punishment. Your buttocks are bared and after three stokes, deep cuts are usually opening with blood squirting out. The enforcer must use the full force of his arm.

So this is an example of the rule of law in Singapore and whether you like it or not, it seems to serve as a deterrent.

Defend your bullion from confiscation risks

Bullion in Singapore

Singapore is the very best country in the world for buying and storing precious metals.

There are no taxes on bullion whatsoever in Singapore. The Singaporean government has actually deregulated the precious metals market. There is no sales tax, no capital gains tax, no import or export taxes, no tariffs or restrictions, no inheritance tax, no gift tax, no dividend tax. Before 2012, there used to be GST (sales tax) on physical bullion, but as I mentioned they abolished that tax in 2012 as they want to encourage bullion dealers to establish in the country.

As we all know, Western countries introduce numerous invasive laws targeting privacy and that place the right to buy and store bullion confidentially under attack.

Importantly, there are no reporting requirements, whether domestically or internationally, when someone buys or stores precious metals in Singapore. Your bullion is your private business and we are under no obligation to report your holdings to anyone. If you buy and store bullion with us, we don’t report it to anyone. You can hold bullion completely confidentially in Singapore and that also applies to FATCA. There’s no FATCA reporting for BullionStar because we are not defined as a financial institution. We are keen on helping you defend your right to buy and store bullion confidentially without your local authorities prying into your bullion ownership.

The Singaporean government has chosen precious metals as a growth industry. Singapore is keen on creating a trade, transit and storage hub for precious metals in Singapore.

As regards safety, you can confidently walk into our storefront bullion retail store in central Singapore and buy bullion with cash, then hand carry your bullion out without being hassled due to the zero crime rate. This has the advantage that the insurance cost for bullion in Singapore is low. By the way, the sentence for robbery in Singapore is up to 20 years in prison and a minimum of six strokes of the cane.

In Singapore, property ownership rights are also very strong. Singapore doesn’t allow frivolous litigation. Remember that it’s less than 100 years since the US outlawed gold ownership. Western governments have a long history of stealing. It seems they can’t help themselves when it comes to stealing. Singapore has no history of any confiscations, seizures or anything like that.

So, storing bullion in Singapore is an insurance policy against government intervention, wealth confiscation and frivolous litigation.

What makes BullionStar unique is that we combine online usability with physical accessibility.

BullionStar.com is our website where you can buy, sell and store physically allocated and segregated bullion.

Buy & Store Bullion in Singapore

It’s very easy to get started with us. Other bullion dealers also say that it’s easy but then they nonetheless slap you with 7 steps and require you to send in documentation. Signing up for an account with us is a one page registration form. It takes less than a minute. Much easier than signing up for a Gmail account or booking a flight online.

There are no documentation requirements. We don’t force you to send us any documentation at all. You input an e-mail address, password, your address and select a PIN number. It takes, if you’re quick on the keyboard, 30 seconds, and placing an order takes another 20 seconds. You select the items to buy, you go to the checkout and submit your order. One page checkout. I think I speak for many of us in how unnecessarily complicated everyone makes their online interfaces. PayPal, booking a flight ticket, government agencies, banks. They try to trick you into different things you don’t want. Add insurance, add car rental etc.

It should be easy to buy and store gold. A lot of customers are genuinely surprised about how easy we make it. We get good feedback on how easy it is to deal and transact with us, and we have over 600 genuine Google reviews with an average of 4.8.

You can handle everything online 24/7. You can buy, sell, store, order physical withdrawal of your metals online and even audit your metals online.

Trust is very important in the bullion industry. If you trust as with your hard-earned savings, you have to be able to trust us. What I tell our customers is, don’t trust us. Do your own due diligence. Don’t take my word for it. Read up on us. Google us and do your own due diligence.

BullionStar Vault Storage

If you choose to buy and store bullion with us, it’s important to know that we have five different auditing methods. We employ the LBMA-approved auditor Bureau Veritas to do third-party audits on all customer holdings bi-annually. We have something called the Live Audit Report where everyone can anonymously check on their own and all other customers’ bullion holdings. Furthermore, we allow and encourage customers to walk-in to our bullion center in Singapore and do their own auditing of their own metal. If you choose to go to Singapore to audit your metals, you don’t even have to notify us beforehand. You can just show up and ask to audit your metals, and we facilitate this on the spot. We will bring out your metals from the vault to the meeting room. You can go through everything and compare your bars and coins against your records and have a look at your own metals. This auditing program it thus very comprehensive.

We also take photos of your bullion and upload these images to your account. As soon as you have settled your payment, we process the metals into vault storage and take pictures of the actual bullion so that you can compare the bar serial numbers with your invoice. If you then come to our bullion center to do a physical audit yourself, you can again check on the serial bar numbers and if you physically withdraw your bars, those are the exact bars you receive.

With us, you own specific products. Your bars are allocated with you holding the direct legal title to the physical metal.

You can of course have your products shipped to you at any time fully insured. Even though Singapore is the safest country in the world, we have full insurance protection with the largest specie underwriter in the world, XL Insurance, for all risks at full replacement value. You can download the insurance document online. What’s good is that as there’s virtually no crime in Singapore, it makes the storage premiums low. We charge 0.39% of the average value per annum for gold and 0.59% for silver which includes full insurance for all risks, and all handling and online access for your segregated and allocated gold, which is very competitive.

Just like you can physically audit your metals, you can also come in to our shop to physically withdraw your metals without any prior notification. You show up, present your ID and tell us that you want the metals now and we simply hand over the metals to you.

Walk-in Bullion Center in Singapore

We can do this as our vault is actually integrated into the same venue as our shop.

Our bullion center consists of a retail bullion shop, showroom and vault in one and the same venue truly making it a one-stop-shop for everything precious metals. Our shop used to be a bank branch and has an old style bank vault built into it. The vault was built several decades ago and I believe the reason why the vault is still there is because of its sheer impenetrability. It’s 30 inches thick, constructed from concrete and full of steel bars in the walls.

This is a unique shop. Nowhere else in the world do you have the flexibility of buying, selling, storing, depositing, valuing, physically auditing and physically withdrawing metals in one and the same storefront place without any prior notification.

You can just walk in, we have 20 showcase displays full of precious metals. So unlike many other dealers, we don’t hide online on the internet and we believe this combination is quite unique.

Singapore is a long way from the US and you don’t need to visit us to buy and store bullion with us. You can handle everything online. But if you ever go to Asia, I highly recommend that you pay us a visit to have a look. Whether you’re a customer or not as it’s a pretty cool concept.

BullionStar cash on account

BullionStar Cash & Bullion Account

Another unique feature that we offer is our BullionStar account. If you’re considering opening an offshore account, we have the ideal solution for that. It’s becoming more and more difficult to open bank accounts abroad. This is true generally but especially true for US customers.

With a BullionStar account, you can hold not only bullion on your account but also cash. You can hold US Dollars, Euros and Singapore Dollars on the account. It works like a bank account but we are not a bank. This is what is called a stored value facility and is under the same regulations as e.g. how PayPal holds client money.

As we don’t operate under the risky fractionally reserved banking system, this is much safer than a bank account.

It makes it very easy to trade physical bullion, and makes it easy to average in or out of positions.

Funds can be held indefinitely on the account and can be used towards purchasing bullion at any time or you can withdraw your funds at any time.

BullionStar Gold & Silver Bars

BullionStar Gold & Silver Bars are the world’s first and only gold & silver bar traded without any spread without the buy and sell price. This means that at any given point in time, the buy price is the same as the sell price.

What’s the hook you might ask. Well, the initial price premium is slightly higher compared to the spot price of the metal than for other bars of comparable price, but instead there is no spread so you don’t have trading cost whatsoever thereafter.

The bars are also very aesthetically attractive and if you haven’t been yet, come by our booth 425 to check them out.

The BullionStar gold bar is produced by the Swiss refiner Argor-Heraeus and there’s an inscription on the back side of the bar stating “Money since 4,000 B.C.” matching our ideological belief that gold is money.

The BullionStar silver bar is produced by the renowned German refiner Heraeus.

These bars have become tremendously popular as they eliminate the often large spreads faced by physical silver investors.

BullionStar Offshore Bullion Solutions in Summary

BullionStar was set up for the purpose of international diversification, and to provide confidential offshore bullion storage while being very accessible and transparent for the customer him/herself.

Even though we have a lot of local Singaporean customers given our local shop, it was, to a large degree, set up to cater to offshore bullion protection specifically.

There are no taxes on bullion in Singapore and there are no reporting requirements whether locally or internationally. We treat your holdings with full confidentiality although we are very transparent to our customers.

BullionStar is unique in that we combine online usability with ease of registration and ease of online trading coupled with the accessibility of a physical bullion shop and vault in central Singapore. It’s a one-minute process to sign up and place your first order with us.

With your BullionStar account, you can hold both bullion and cash funds in US Dollars, Euros and Singapore dollars on the same account, which is very convenient as it takes out the banks as the middle man between you and us.

When you hold metal with us, it’s your metal – fully allocated and segregated. We deal with physical metals only. With us, you specifically choose which items you buy. You place an order on e.g. a 1 oz PAMP gold bar. We upload pictures of the specific gold bar that you own to your account. We input the serial bar numbers on your invoice. We store that specific bar for you specifically and you have the legal title to that gold bar.

You can then follow your holdings online in real-time and when you prefer, you can sell or physically withdraw (or audit) your 1 oz gold bar. When you audit or withdraw your gold bar, you are given the exact same gold bar with the exact same serial number as you were allocated when you bought it.

By introducing the BullionStar Gold & Silver Bars which can be traded without a spread between the buy and sell price, we’ve solved the problem of large premiums that physical bullion investors and savers were facing.

And we have the most competitive storage fees in the industry.

But don’t take my word for it, check us out online and while Singapore is a long way from here, if you’re ever around in Southeast Asia, come and visit us at 45 New Bridge Road in Singapore. Our booth number is 425 where we have some awesome metal on display and also a very cool video game, the QE defender, where the objective is to obstruct the Fed, ECB and Bank of Japan from dropping money into banks.

Thank you!

Wrap-Up of BullionStar’s visit to FreedomFest 2016 in Las Vegas

Saturday July 16 wrapped up BullionStar's attendance at its first FreedomFest conference and convention in Las Vegas, Nevada. During the event from Wednesday July 13 through to the Saturday afternoon, the BullionStar team interacted with a wide-range of interesting event attendees, discussing topics ranging from the role of precious metals in investors portfolios, to the safety and security of having offshore storage of investment gold and silver at BullionStar's vault facility in Singapore.

Prospective US customers were interested in the fact that there are no sales or other taxes on bullion in Singapore, no reporting requirements on bullion, and that Singapore is a safe and stable political jurisdiction which upholds property ownership rights and where the Singaporean government actively supports the gold sector. On the topic of specific vaulting infrastructure, potential customers learned that BullionStar's "My Vault" facility provides secure, insured, allocated and segregated bullion storage with 24/7 on-line access to your holdings, using multiple levels of auditing, and that you can hold both bullion and cash on your BullionStar account, thereby using your BullionStar account as a real alternative to a bank account in Singapore.

BullionStar Grand Prize Draw - Silver Bars

Throughout the 3 day convention, attendees could enter a draw at the BullionStar stand for a chance to win one of three substantial silver bar prizes. Additionally, everyone who entered the draw received a free 1/10 troy oz silver coin of .999 purity produced by Golden State Mint, a coin with a design based on the Walking Liberty silver half-dollar historically issued by the US Mint.

The prize draw for the BullionStar silver bars took place on Saturday afternoon as the conference was wrapping up. First prize in the competition was a BullionStar 1 kg silver bar worth nearly US $800. BullionStar silver bars are 99.99% pure silver bars with a high-lustre finish produced by German refinery Heraeus on behalf of BullionStar. Second price was a 10 troy oz Heraeus minted silver bar, produced by Heraeus at its refinery in Hanau, Germany, while third prize was a 5 troy oz Heraeus minted silver bar.

Luke Chua, BullionStar COO and Torgny Persson, BullionStar CEO sum up their impressions of FreedomFest 2016

One of the major themes resonating at this year's FreedomFest event appeared to be that the founding principles of the US such as property ownership rights, personal liberty, and freedom of speech are being eroded, and that the government is encroaching on personal privacy. These themes were also picked up by Rand Paul's keynote speech noted in a previous BullionStar dispatch. A common talking point for people who came to the BullionStar stand during FreedomFest was the worldwide banking reporting obligations imposed on banks by the US Foreign Account Tax Compliance Act (FATCA) rules and regulations.

Beyond the Frozen Monopoly - Third Party Candidates

Given the current media focus on Republican and Democratic candidates in the upcoming 2016 US presidential election, US and international media often forget that there are other parties’ candidate nominees running in the US presidential race such as Gary Johnson of the Libertarian Party and Jill Stein of the Green Party. And so FreedomFest was eye-opening in that it was a reminder that other political parties do exist in the US apart from these two powerful incumbent parties, and that there is plenty of political thinking in the US outside the mainstream media's narrowly defined consensus.

In a Reason.TV interview conducted at FreedomFest with Johnson, former governor of New Mexico, and his running mate for vice-president, William Weld, former Governor of Massachusetts, Weld opened the interview with the interesting perspective that there is a “frozen monopoly of the two parties that has frozen a lot of people's thinking in place,… And they think, 'I have to be a right-winger,' or, 'I have to be a left-winger.' They're not thinking, 'What do I think?”

Steve Forbes - Gold Keeps its Intrinsic Value

During another interview at the convention, Steve Forbes, editor-in-chief of Forbes Magazine, posed a very timely and interesting question, asking not which way the Fed will move on interest rates but “Why is the Federal Reserve manipulating interest rates in the first place?”. Forbes highlighted that interest rates are the cost of borrowing money and rewarding lenders, and that “by manipulating interest rates, the Fed has deformed credit markets”.

On the subject of gold, Forbes said that “gold is an insurance policy against turmoil and against government’s mis-behaviour towards the currency” and he underscored that it was important to remember that "gold keeps its intrinsic value", and that the price changes in gold are just people’s changing perceptions of the value of currencies. No doubt most BullionStar readers would tend to agree with these sentiments.

That wraps up our coverage of the FreedomFest 2016 event. We hope that these insights have been helpful, and we look forward to providing readers with updates at future events around the world that BullionStar may attend.

How Safe is your Gold?” – BullionStar CEO’s speech at FreedomFest

The first full day of the FreedomFest conference took place 14 July in Las Vegas, USA, an event at which BullionStar is attending and exhibiting. Conference proceedings took the form of general speaker and panel sessions in a large auditorium in the morning, and multiple breakout sessions of speakers and panel discussions in the afternoon. Morning events included the well-attended "The Big Bull vs Bear Debate", a panel session of well-known investment commentators such as Alexander Green and Peter Schiff. Lunchtime speeches included a keynote speech by former supreme court judge and constitutional expert Andrew Napolitano who discussed the topic 'Do We still have a Constitution?".

How Safe is Your Gold?

In an afternoon speakers session, BullionStar CEO Torgny Persson presented on and discussed the topic 'How Safe is Your Gold?".

Defend your bullion from confiscation risks

In his presentation, the BullionStar CEO gave the audience an insightful introduction into how the current global monetary system is based on the fraudulent concept of central banks monetizing debt and debasing currencies, and how commercial banks dilute money supply even more than central banks by creating money out of thin air via their lending practices. Mr Persson highlighted how a fully gold backed US Dollar would require a gold price multiple times higher than the current trading price, and the exorbitant privilege that the US Dollar, for now, retains as global reserve currency. He then illustrated and discussed the purposes and characteristics of money, and the degree to which fiat paper currency and gold fulfill these characteristics.

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BullionStar CEO Torgny Persson speaking on the topic "How Safe is Your Gold?"

The discussion then focused on how Singapore is the world's safest place in which to store bullion, due to a number of factors such as the Singaporean government's support for the bullion industry,  the economic and political stability of the city-state, and the near zero crime rate. Further advantages of storing precious metals in Singapore include the lack of sales and other taxes, the fact that there are no reporting requirements to report bullion transactions or holdings to any authorities either in Singapore or worldwide.

The discussion wrapped up with a Q & A from the audience covering topics such as how to transfer in existing bullion holdings from the US to Singapore, generational wealth transfers of bullion holdings, how Singapore would fare off if the US Dollar collapsed, and storage costs of gold and silver using BullionStar's vault storage services.

Exhibition Stand

BullionStar's stand in the exhibition area of FreedomFest near the entrance to the conference auditoriums proved popular with attendees throughout the day, especially in the breaks between speaker and panel debate sessions. BullionStar staff manned the booth, fielding questions on a wide spectrum of bullion and bullion storage related topics from a diverse selection of attendees. BullionStar's decision that all staff members would wear tailored gold suits (see below) proved a popular talking point among attendees. During some downtime we got to chat with fellow exhibitors and media exhibitors in the hall such as Kitco's Daniela Cambone and GoldMoney's Josh Crumb.

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Luke Chua, BullionStar COO and Torgny Persson, BullionStar CEO prepare for interview camera

The FreedomFest conference continues on 15 July with its 2nd full day or speakers and presentations. Check back at the Inside BullionStar blog for further updates.

BullionStar exhibiting at FreedomFest in Las Vegas

This week BullionStar is attending and exhibiting at a unique conference called FreedomFest in Las Vegas, Nevada. FreedomFest is the largest pro-liberty conference in the world and it has taken place annually in Las Vegas since 2002. The event was founded and is still organized by Mark Skousen. This year's FreedomFest event runs from Wednesday 13 July to Saturday July 16 at the Planet Hollywood Resort and Casino in Las Vegas, and is expected to attract a few thousand attendees.

FreedomFest is grounded in the Libertarian philosophy and the celebration of free thinking, and the event hosts a huge range of high-profile speakers as well as debates, panel discussions and a film festival. Attendees include representatives of free market think-tanks, those involved in the fields of politics and economics, the investment sector, the media, and the publishing industry. Themes celebrated in the conference include liberty, limited government, economic freedom and free market capitalism.

FreedomFest

Topics covered in FreedomFest range from economics, philosophy, technology, finance and investing, to law, geo-politics, art and literature, public policy, science and religion. In the run-up to FreedomFest, an associated event called the Atlas Summit has just wrapped up which focused on the Ayn Rand philosophy of Objectivism – the pursuit of happiness and productive achievement. The film festival integrated within FreedomFest is a libertarian film festival called Anthem Film Festival.

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FreedomFest reception area, Planet Hollywood, Las Vegas

The speaker list at FreedomFest this year is large and varied and includes such well-known names as Senator Rand Paul,  Steve Forbes, Judge Andrew Napolitano and George Foreman.

BullionStar's CEO, Torgny Persson, CEO of BullionStar will also be speaking at the FreedomFest conference on Thursday afternoon, 14 July, at 4:20pm local time on the topic of 'How Safe is your Gold?"

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Unpacking crates into the exhibition space at FreedomFest, Planet Hollywood

There is an extensive exhibition at FreedomFest and BullionStar is exhibiting from today Wednesday 14 July, to Saturday 16 July. Initial tasks for the BullionStar team last night and this morning involved setting up the display booth on the exhibition floor complete with display cases and audio-visual monitor equipment which had been shipped in for the event.

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Assembling the AV monitors and display stands

The BullionStar booth contains product displays and a unique and timely interactive game highlighting the perils of the quantitative easing currently being pursued by the world's largest central banks.

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Linking up the AV monitors as the layout of the booth takes shape

BullionStar will be providing regular updates during the FreedomFest conference via this blog, which will highlight interesting speakers, visitors to our booth, and any other topics which we find noteworthy from the conference. So please check back for updates. If you happen to be at the conference, please drop by the BullionStar exhibition booth to meet us, and to find out why Singapore is the best place in the world for storing precious metals. Likewise, if you are in the Las Vegas area, why not drop into the conference or exhibition area to meet us.

Infographic: COMEX Gold Futures Market

This COMEX Gold Futures Market infographic guides you through the largest gold futures market in the world, COMEX.

Did you for example know that only 1 in 2500 contracts on COMEX goes to physical delivery whereas the other 2499 contracts are cash-settled? This corresponds to a delivery percentage of 0.04% of all gold contracts.

The US government claims to hold a fair bit of gold in reserves but how much is it really holding?

In this infographic you will learn more about the COMEX gold futures market considering

  • COMEX Trading Volumes
  • Fractionally Reserved Futures Trading
  • Cash-settlement of COMEX Gold Futures Contracts
  • Eligible and Registered Gold on COMEX
  • US Treasury Gold Reserves
  • Location of US Treasury Gold Reserves
  • Foreign Gold at the Federal Bank of New York
  • US Gold Mining

You can learn more about the US Gold Market at the BullionStar Gold University.

COMEX Gold Futures Market Infographic

Infographic on COMEX gold futures market, the world's largest gold futures market

To embed this infographic on your site, copy and paste the code below

Gold Vault Profiles

Many topics in the world of gold are opaque and secretive, none more so than the famed gold vaults of the world’s major central banks and their bullion banking counterparts. BullionStar Gold University is now bringing transparency to this intriguing yet under-reported area by profiling the largest and most important of these gold vaults.

According to the vault owners and the information that they divulge, these gold vaults officially store over 16,500 tonnes of gold, which is approximately half of all reported central bank gold reserve holdings. That’s also nearly 10% of all the gold ever mined in the world. This in itself makes knowledge of these vaults important.

From the labyrinthine Bank of England gold vaults storing nearly 5,000 tonnes of gold in custody for over 70 central bank customers, to the Federal Reserve Bank of New York's subterranean gold vaults housing nearly 6,000 tonnes of gold on behalf of 36 foreign central banks and the US Treasury, this BullionStar series brings together information about these vaults that has never before been documented in one place.

Where are the vaults located? Who are their customers? What type of gold bars are stored there? How are the vaults laid out? When were they constructed? These are just some of the questions covered in BullionStar’s Gold Vault series. Only on rare occasions have reporters, camera crews or other observers been allowed to access these vaults and document their layouts and contents. We have included a media section in the profiles where possible to point you to these sources.

Witnessing such large quantities of gold bars stored in one single place seems to create a profound and similar impact on the observers regardless of which vault they have visited.

“I’m speechless when exploring the Sacristy, , … you don’t see this every day” - Alberto Angel, reporter RAI, Italy

It’s quite extraordinary” - Professor Martyn Poliakoff, visiting the Bank of England vaults

you never get sick of the gold… it even puts a smile on our faces when we’re down there working with it” - Fed Vault Custodian, New York

from a purely human perspective, we could see with our own eyes a quantity of precious metal that goes beyond an ordinary perception … I must say that it arouses feelings that are difficult to explain” -   Senator Giuseppe Vacciano, Italy

Why the observers have these powerful reactions to seeing such vast quantities of gold, we can’t say for sure, perhaps it’s because gold is money par excellence and the ultimate store of wealth, and that being close to this powerful and aesthetically pleasing element invokes a timeless sense of respect and wonder.

The BullionStar Gold University vault profiles series also covers the deep underground Banque de France gold vaults in Paris. Known as ‘La Souterraine’, home to over 90% of France’s 2,435 tonnes of gold, the Paris vaults also store gold bars on behalf of the Bundesbank and the International Monetary Fund. The series also visits the Banca d’Italia’s gold vaults, "La Sacrestia Oro", under the Banca d'Italia's Palazzo Koch headquarters in Rome which hold 1,200 tonnes, or approximately half of Italy’s gold.

BullionStar Gold University also profiles the commercial gold vaults backing the London Gold Market, the London gold clearing system and the London Bullion Market Association (LBMA) system. These vaults also house the gold behind the largest Gold ETFs in the world. Learn about JP Morgan’s gold vault deep underneath a JP Morgan Chase building off Fleet Street in the City of London, as well as the massive HSBC gold vault that at one stage stored over 1,300 tonnes of gold on behalf of the SPDR Gold Trust. Is this HSBC vault in the City of London between 2 former HSBC buildings, underneath a road leading to Southwark Bridge? London’s commercial vaults also include the Malca Amit gold vault storage facility adjacent to Heathrow Airport, and the G4S gold vault, built for Deutsche Bank but now said to be leased by Chinese bank ICBC Standard Bank, following Deutsche Bank's withdrawal from the London Gold Market.

A knowledge of where these central bank and commercial vaults are located and their operating details is also critical, since, if there was ever a physical gold shortage or a crisis in the gold market, these central bank and LBMA bullion bank institutions owe it to the global financial community to prove that they are storing the gold they claim to store, in the locations they profess to store it in.