Koos Jansen
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Koos Jansen
Posted on 18 Jun 2015 by

Bank Of England Custodian Gold Drops 351t

The Bank Of England (BOE) has recently released its annual report in which it’s disclosed the gold held in custody for a range of customers was 5,134 metric tonnes on February 28, 2015, down 351 tonnes (6 %) form the previous year. 

The data on gold in custody at the BOE is disclosed in billions of Great British Pounds. The annual report states the BOE’s custodian gold was worth £130 billion on February 28, 2015. Because the data is disclosed in round numbers the derived tonnage is an estimate.

BOE custodian gold
Exhibit 1.

The BOE isn’t a member of the LBMA, but members of the LBMA hold gold in custody accounts with the BOE – next to foreign central banks and international financial institutions.

Let’s throw in some more numbers that are publicly available to get a bette handle on gold stored in London and to see if we can figure out how much gold is left in London:

Since January 2015 the LBMA website claims the total gold stored in London is 7,500 tonnes of which three quarters is stored at the BOE vaults. We’ll use 5,625 tonnes as an estimate for gold held in custody at the BOE on February 28, 2015.

From the Internet Archive it can be seen the same website claimed in April 2014 there was 9,000 tonnes in London of which two thirds was stored at the BOE. We’ll use 6,000 tonnes as an estimate for gold held in custody at the BOE in custody on February 28, 2014.

Gold from the GLD ETF is also stored in the LBMA system, at an HSBC vault located within the M25 London Orbital Ringway (typically LBMA vaults are within M25 to limit transportation and security costs), but this is all outside the BOE vaults.

The BOE could be a subcustodian for HSBC, as can be read in the GLD prospectus:

Gold bars may be held by one or more subcustodians appointed by the Custodian [HSBC], or employed by the subcustodians appointed by the Custodian, until it is transported to the Custodian’s London vault premises [the HSBC vault].

However, it’s likely in February there was nil GLD gold held by a subcustodian. From the prospectus:

As at March 31, 2015, the Custodian [HSBC] held 23,702,920 ounces of gold on behalf of the Trust [GLD] in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $28,135,365,641 (cost — $29,341,051,196) based on the LBMA Gold Price PM on March 31, 2015. Subcustodians held nil ounces of gold in their vaults on behalf of the Trust. 

GLD was holding 771 tonnes on February 28, 2015, and 804 tonnes on February, 28, 2014.

Next is an overview of the estimates we just talked about:

LBMA system estimates Feb 2015
Exhibit 2.
  • ‘tonnes at BOE’ is the data from the BOE annual reports
  • ‘LBMA’ is the data from the LBMA website
  • ‘LBMA gold at BOE’ is derived from the data from the LBMA website
  • ‘LBMA gold outside BOE’ is ‘LBMA’ minus ‘LBMA gold at BOE’
  • ‘LBMA gold outside BOE minus GLD’ is exactly what is says it is

What can be seen is that ‘tonnes at the BOE’ and ‘LBMA gold at BOE’ roughly corresponds. It can be that, ‘LBMA gold at the BOE’ includes foreign central bank gold, or put differently; foreign central bank gold at the BOE is maybe counted as gold in the LBMA system. I will further investigate this possibility.

It’s hard to say how much gold foreign central banks store at the BOE, but according to my estimates it is at least 2,000 tonnes – based on data from the central bank of the Netherlands (123t), Austria (230t), Germany (441t), Australia (80t), Switzerland (208t), Sweden (61t), Finland (25t), Belgium (±200t) and India (±250t) in addition to the IMF (±450t).

Let us assume foreign central banks store 3,000 tonnes at the BOE. This means the floating supply of London Good Delivery bars at the BOE is:

5,134 (annual report) – 3,000 (foreign central banks) = 2,134 tonnes

‘LBMA gold outside BOE minus GLD’ (exhibit 2) = 1,104 tonnes

Summed up, there is an estimated 3,238 tonnes of floating supply in London. This excludes GLD and gold stored by foreign central banks at the BOE.

LBMA estimates Feb 2015
Exhibit 3.

This post will be continued.

Koos Jansen
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  • jwr_47

    Typing error in the specified year:
    GLD was holding 771 tonnes on February 28, 2015, and 804 tonnes on February, 28, 2015.
    should be
    GLD was holding 771 tonnes on February 28, 2015, and 804 tonnes on February, 28, 2014.

    Thanks for the good work!

    • JanNieuwenhuijs


  • sb

    A few points

    1) 7500mt is from some point in time in 2014, similar 9000mt is a number from 2013, likely to be beginning of the year because the change (-1500mt) is a big and roughly matches the UK net exports in 2013 (-1420mt).

    You also get better match between what BOE and LBMA claims how much gold is at the BOE vault

    year 2014 BOE 5485 LBMA 5625
    year 2013 BOE 6200 LBMA 6000

    2) I am reading the LBMA claim more as their estimate of all gold in London (not only LBMA gold).

    That is my estimates based on this assumption, using BOE reports and UK net exports and LBMA 2014 and 2013 data to calibrate total gold level in London

    Year, BOE vault, other vaults, total

    2015 5134 1943 7077
    2014 5466 2035 7501
    2013 6218 2703 8921
    2012 5502 2568 8069
    2011 5565 2424 7989
    2010 5089 2454 7543
    2009 4719 1760 6479
    2008 4564 1528 6092
    2007 3932 1700 5633
    2006 3509 1471 4980
    2005 3960 1200 5160

    3) If you take BOE change 2014-2015 -332mt and add GLD 2014 change -86mt you get a number very close to the UK net exports in 2014 -424mt.

    This is a comparison of the net UK exports with BOE and GLD changes

    Year, BOE change, GLD change, export, export – BOE change – GLD change

    2014 -332 -86 -424 -6
    2013 -752 -568 -1420 -100
    2012 716 103 851 32
    2011 -63 -22 80 165
    2010 476 155 446 -185
    2009 370 362 1064 332
    2008 155 157 387 75
    2007 632 178 460 -351

    If you sum residual (export – BOE – GLD) over years you get a number close to zero, which means that between 2007-2015 net exports were almost equal to BOE vault and GLD changes

    • JanNieuwenhuijs

      Thanks sb,

      Let me first take a few steps back and I hope we can get into details afterwards.

      1) I do think the LBMA states on its website how much gold is in the LBMA system, as this can be very precisely tracked. The LBMA has a chain of integrity, its easy to keep track of how much gold is added and leaves. Why would they track what others (non LBMA players) are accumulating in/around London?

      2) According to my timeline the LBMA changed its London holdings from 9,000t to 7,500t in late 2014/early 2015


      This means the LBMA system did not exactly lost 1,500t over 2013 (although that was roughly net exported over that period, but it could have been non-LBMA gold).

      3) According to my Eurostat numbers the UK net exported 165t over Mar 2014 – Feb 2015, where you have 424t. I’m testing other datasets as we speak and I’m also talking to UK customs to eliminate anomalies. I hope we can all agree on UK gold trade in a few days.

      4) according to my numbers:

      • sb

        1) LBMA states “In total it is estimated that there are approximately 7,500 tonnes of gold held in London vaults, of which about three quarters is stored in the Bank of England. “. It is possible that they mean only LBMA gold but I think this interpretation is less likely as

        a) they use terms “it is estimated” and “in London vaults”, why would they do this if they know the precise number? They rather give impression that they are guessing all gold in London vaults

        b) gold in BOE vaults implied by LBMA website matches relatively well BOE data if you assume that LBMA website means all gold, not only LBMA.

        year 2014 BOE 5485 LBMA 5625
        year 2013 BOE 6200 LBMA 6000

        interpretation that they mean only LBMA would imply that all gold in BOE vault is LBMA gold, which is not true. There is a few thousand tonnes of monetary gold there.

        2) We don’t know as of what date LBMA quotes their data

        we know only that

        7500mt was as of some date before early 2015

        9000mt was as of some date before early 2014 (I quoted this number in a comment at your blog at that time)

        It is then possible that 7500mt is as of Jan 2014, 9000mt is as of Jan 2013. We simply don’t know but I wouldn’t exclude this. The website seems to be updated once a year and it can use some many months old data.

        3) My UK net export data and GLD changes are Jan/Jan. That’s why they don’t match yours.

        There is a mismatch in my data between BOE data, which are Mar/Mar, and export and GLD data, but this error shouldn’t be significant if your observer changes over many years e.g. from 2007 to 2014

        I think we should have the following relationship

        net export NonMonetary + net export Monetary = change of BOE vault + change of GLD + change of other gold

        unfortunately we don’t have net export Monetary and change of other gold

        from data we have between 2007 and 2014 roughly

        net export NonMonetary = change of BOE vault + change of GLD

        which implies that

        net export Monetary = change of other gold

        My guess would be that net export Monetary is not bigger that a few hundred tonnes, which implies that gold not in BOE vault and not in GLD has changed only by this amount.

        • JanNieuwenhuijs

          I sent a email to the LBMA to ask if they meant the 7,500 t is in the LBMA system or in London in general.

          Isn’t it possible the monetary gold at the BOE is counted as LBMA gold. When do LGD bars leave the chain of integrality (the LBMA system)? If private buyers choose to store it outside of the LBMA system? If CBs buy and choose to store it at the BOE?

          • sb

            I guess it depends how you define “LBMA gold”. Is it
            a) gold owned by LBMA members directly or on behalf of its clients
            b) gold in Good Delivery bars
            c) gold in all vaults LBMA members use

            b and c are probably close, a < b and c e.g. BOE is not a LBMA member and it stores gold for other CBs

            For me an import question is who accumulated gold in BOE vaults, it is 1200mt of gold since 2005, BOE vaults are currently at levels from beginning of 2010, in comparison other vaults are at levels from the middle of 2008. Apparently storing gold at BOE vaults is not cheap, why would you do this if you are not a CB? Was that gold mostly bought by CBs? I am not aware of any big CB buying that could be stored in BOE vault.

          • rowingboat

            Substantially more silver than gold was imported into the UK in terms of tonnage. Pure speculation on my part but could the bank vaults have been filled with silver, so gold went to BOE?

    • rowingboat

      I concur.
      Present day total stocks in London would now be around 7000mt, split roughly 3500 central banks (Feb 2006 BOE number) and 3500 investors.

  • http://argentofisico.org/ Er

    I’m sorry, You say gold from the other central banks is +- 2000 tons .. than why do you subtract 3000 in the final count?

    Do you think there can be an additional 1000 tons from other central banks? Which ones these should be?

    thank you

    • JanNieuwenhuijs

      The BOE stores gold for roughy 80 foreign CBs in total, hence the 3,000 t estimate.

      • http://argentofisico.org/ Er

        ah, ok, thank You.

  • Michael J. Malawski

    I’ve consistently said that lines have been drawn in the sand …

    Those being the group of western governments and the associate bankers who have for years successfully suppressed the true value of gold to find its unhindered levels in order to make their paper appear valuable after printings untold amounts of product 24/7 and those simply wanting to see its true value .

    This ongoing fight will not end peaceably for it continues as I write simply indicating when those that sell the standard 100 ounce contracts using those same vaults to fulfill those contracts cant for lack of supply you won’t see an incremental rise but something a tad more substantial and that day is coming.

    • rowingboat

      Government interference is exaggerated by conspiracy peddlers and permabull gold promoters. In particular, the idea that central banks have been feeding a ‘supply gap’ has been completely discredited by examination of bullion trade data that has become available. Unsurprisingly, you won’t hear about this from the fat-mouth conspiracy fringe.

      So take a look at the Swiss import/export data yourself. Demand for gold in the 1980/90s was greatest from countries like Italy, the Middle East (mainly UAE & Saudi Arabia), Japan and Turkey, collectively importing 15,000mt on a net basis from 1982-2005. During the early years of the bull market however, their demand reduced and, from 2006, have been supplying the market… that’s right, on an overall basis these counties that were the greatest sources of demand a few years earlier are collectively exporting gold to Switzerland in the last 10 years. Japan for instance has exported 800mt net to Switzerland, UK and HK since the mid 2000s.

      So why aren’t we reading about this? Answer: because it’s bearish. Second question: why did the gold price rise so much when Chinese demand didn’t really start until after the gold price peaked?

      For that, consider who mines the stuff. Gold flows like a river from Western mining companies directly to the UK and Switzerland, or indirectly via other Western hubs/ tributaries: America, Canada, Australia, and South Africa. The London Bullion Market acts like the Hoover Dam on the mighty Colorado, regulating the downstream flow. During the bull market supply was cut-off as investors hoarded gold in London vaults by the thousands of tonnes. Other Western nations were hoarding gold too, particularly in the QE years, and the East was helping to supply it to them.

      With the introduction of China it is interesting to see some of the tributary flow dry up as flow is diverted. Australia now exports most of its gold to HK and India instead of the UK, and very similar is happening from South Africa. America’s local gold consumption is being met by existing above-ground stocks in the country and so the US is currently exporting all of its imports and local gold production. When net imports to the US need to rise again, there will be less available flow to UK/Switzerland.

  • mark

    I must be missing something, it looks like there is not enough Gold held at the BOE to even cover the LBMA amount. I know the conversion is like 1 metric ton to 1.1 ton. What am I missing?

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