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Sweden’s Gold Reserves: 10,000 gold bars shrouded in Official Secrecy

In early February 2017 while preparing for a presentation in Gothenburg about central bank gold, I emailed Sweden’s central bank, the Riksbank,  enquiring whether the bank physically audits Sweden’s gold and whether it would provide me with a gold bar weight list of Sweden’s gold reserves (gold bar holdings). The Swedish official gold reserves are significant and amount to 125.7 tonnes, making the Swedish nation the world’s 28th largest official gold holder.

Before looking at the questions put to the Riksbank and the Riksbank’s responses, some background information is useful. Sweden’s central bank, Sveriges Riksbank aka Riksbanken or Riksbank, has the distinction of being the world’s oldest central bank (founded in 1668). The bank is responsible for the administration of Swedish monetary policy and the issuance of the Swedish currency, the Krona.

Since Sweden is a member of the EU, the Riksbank is a member of the European System of Central Banks (ESCB), but since Sweden does not use the Euro, the Riksbank is not a central bank member of the European Central Bank (ECB). Therefore the Riksbank has a degree of independence that ECB member central banks lack, but still finds itself under the umbrella of the ESCB. Since it issues its own currency, the Riksbank is responsible for the management of the Swedish Krona exchange rate against other currencies, a task which should be borne in mind while reading the below.

On 28 October 2013, the Riksbank for the first time revealed the storage locations of its gold reserves via publication of the following list of five storage locations (four of these locations are outside Sweden) and the percentage and gold tonnage stored at each location:

  • Bank of England               61.4 tonnes (48.8%)
  • Bank of Canada               33.2 tonnes (26.4%)
  • Federal Reserve Bank   13.2 tonnes (10.5%)
  • Swiss National Bank        2.8 tonnes (2.2%)
  • Sveriges Riksbank         15.1 tonnes (12.0%)

The storage locations of Sweden’s official Gold Reserves: Total 125.7 tonnes

Nearly half of Sweden’s gold is stored at the Bank of England in London. Another quarter of the Swedish gold is supposedly stored with the Bank of Canada. The Bank of Canada’s gold vault was located under it’s headquarters building on Wellington Street in Ottawa. However, this Bank of Canada building has undergone a complete renovation and has been completely empty for a number of years, so wherever Sweden’s gold is in Ottawa, it has not been in the Bank of Canada’s gold vault for the last number of years.

The Swedish gold in Canada (along with gold holdings of the central banks of Switzerland, the Netherlands and Belgium) could, however, have been moved to the Royal Canadian Mint’s vault which is also in Ottawa. Bank of Canada staff are now moving back into the Wellington Street building this year. But is the Swedish gold moving back also or does it even exist? The location of the Swedish gold in Ottawa is a critical question which the Swedish population should be asking their elected representatives at this time, and also asking the Riksbank the same question.

Just over 10% of the Swedish gold is supposedly in the famous (infamous) Manhattan gold vault of the Federal Reserve under the 33 Liberty building. Given the complete lack of cooperation of the Federal Reserve Bank of New York (FRBNY) in answering any questions about foreign gold holdings in this vault, then good luck to Swedish citizens in trying to ascertain that gold’s whereabouts or convincing the Riksbank to possibly repatriate that gold.

A very tiny 2% of Swedish gold is also listed as being held with the Swiss National Bank (SNB). The SNB gold vault is in Berne under its headquarters building on Bundesplatz.

The Riksbank also claims to hold 15.1 tonnes of its gold (12%) in its own storage, i.e. stored domestically in Sweden. Interestingly, on 30 October 2013, just two days after the Riksbank released details of its gold storage locations, Finland’s central bank in neighbouring Helsinki, the Bank of Finland, also released the storage locations of its 49 tonnes gold reserves. The Bank of Finland claims its 49 tonnes of gold is spread out as follows: 51% at the Bank of England, 20% at the Riksbank in Sweden, 18% at the Federal Reserve Bank of New York, 7% in Switzerland at the Swiss National Bank and 4% held in Finland by the Bank of Finland. This means that not only is the Riksbank storing 15.1 tonnes of Swedish gold, it also apparently is also storing 9.8 tonnes of Finland’s gold, making a grand total of 24.9 tonnes of gold stored with the Riksbank. The storage location of this 24.9 tonnes gold is unknown, but one possibility suggested by the Swedish blogger Cornucopia (Lars Wilderäng) is that this gold is being stored in the recently built Riksbank cash management building beside Stockholm’s Arlanda International Airport, a building which was completed in 2012.

On its website, the Riksbank states that its 125.7 tonnes of gold “is equivalent to around 10,000 gold bars”. A rough rule of thumb is that 1 tonne of gold consists of 80 Good Delivery Bars. These Good Delivery Gold gold bars are wholesale market gold bars which, although they are variable weight bars, usually each weigh in the region of 400 troy ounces or 12.5 kilograms. Hence 125.7 tonnes is roughly equal to 125.7 * 80 bars = 10,056 bars, which explains where the Riksbank gets its 10,000 gold bar total figure from.


Using Gold for Foreign Exchange Interventions

On another page on its web site titled ‘Gold and Foreign Currency Reserve’, the Riksbank is surprisingly open about the uses to which it puts its gold holdings, uses such as foreign exchange interventions and emergency liquidity:

“The gold and foreign currency reserve can primarily be used to provide emergency liquidity assistance to banks, to fulfil Sweden’s share of the international lending of the International Monetary Fund (IMF) and to intervene on the foreign exchange market, if need be.”

This is not a misprint and is not a statement that somehow only applies to the ‘foreign currency reserve’ component of the reserves, since the same web page goes on to specifically say that:

The gold can be used to fund emergency liquidity assistance or foreign exchange interventions, among other things.”

Therefore, the Riksbank is conceding that at least some of its gold is actively used in central bank operations and that this gold does not merely sit in quiet unencumbered storage. On the contrary, this gold at times has additional claims and titles attached to it due to being loaned or swapped.

When the Riksbank revealed its gold storage locations back in October 2013, this news was covered by a number of Swedish media outlets, one of which was the Stockholm-based financial newspaper Dagens Industri, commonly known as DI. DI’s article on the topic, published in Swedish with a title translated as “Here is the Swedish Gold“,  also featured a series of questions and answers from personnel from the Riksbank asset management department. Some of these answers are worth highlighting here as they touch on the active management of the Swedish gold and also the shockingly poor auditing of the Swedish gold.

In the DI article, Göran Robertsson, Deputy Head of Riksbank’s asset management department, noted that historically the Swedish gold was stored at geographically diversified locations for security reasons, but that this same geographic distribution is now primarily aimed at facilitating the rapid exchange of Swedish gold for major foreign currencies, hence the reason that nearly half of the Swedish gold is held in the Bank of England gold vaults – since the Bank of England London vaults are where gold swaps and gold loans take place.

Robertsson noted that over the 2008-2009 period, 50 tonnes of gold Swedish gold located at the Bank of England was exchanged for US dollars: 

“London is the dominant international marketplace for gold. We used the gold 2008-2009 during the financial crisis when we switched it to the dollar we then lent to Swedish banks”

One of these Riskbank gold-US Dollar swap transaction was also referenced in a 2011 World Gold Council report on gold market liquidity. This report stated that in 2008 following the Lehman collapse:

“In order to be able to provide liquidity to the Scandinavian banking system, the Swedish Riksbank utilised its gold reserves by swapping some of its gold to obtain dollar liquidity before it was able to gain access to the US dollar swap facilities with the Federal Reserve.” 

In the October 2013 DI interview, Göran Robertsson also noted that at some point following this gold – dollar exchange, “the size of the reserve was restored“, which presumably means that the Riksbank received back 50 tonnes of gold. As to whether the restoration of the gold holdings was the exact same 50 tonnes of gold as had been previously held (the same  gold bars) is not clear.

Sophie Degenne, Head of the Riksbank’s asset management department, also noted that:

“The main purpose of the gold and foreign exchange reserves is to use it when needed, as in the financial crisis”

Auditing of the Swedish Gold

On the subject of so-called transparency and auditing of the gold, Sophie Degenne said the following in the same DI interview:

“Why do you reveal at which central banks the gold is located?
It is a part of the Riksbank endeavours to be as transparent as we can. We have engaged in dialogue with the relevant central banks”

How do you verify that the gold is really where it should be?
“We have our own listings of where it is. We reconcile these against extracts that we receive once a year. From now on, we will also start with our own inspections.”

Therefore, the Riksbank gold auditing procedure at that time was one of merely comparing one piece of paper to another piece of paper and in no way involved physically auditing the gold bars in any of the foreign locations. These weak audit methods of the Swedish gold were first highlighted by Liberty Silver CEO, Mikael From in Stockholm-based news daily Aftonbladet’s coverage of the Swedish gold storage locations in an article in early November 2013 titled “Questions about Sweden’s gold reserves persist“.

In Aftonbladet’s article, Mikael From stated that while it was welcome that the Riksbank was at that point signalling an ambition to inspect the Swedish gold reserves, it was not clear that the Riksbank would be conducting a proper audit of the gold reserves at the time of inspection, although such a proper audit would be highly desirable. Mikael stated that without such a proper audit, and without witnessing the gold with their own eyes, the Riksbank and the Swedish State could not be certain that the Swedish gold actually existed.

He also called for the Riksbank to provide information proving that the Swedish gold actually exists in its claimed storage locations. This was particulaly important due to a portion of the Swedish gold supposedly being stored at the gold vault of the Federal Reserve Bank of New York (NYFED), a storage location which had in the past been non-cooperative and problematic for the German Federal Court of Auditors when they tried to examine the NYFED’s storage arrangements in 2011/2012.

Questions to the Swedish Riksbank – February 2017

Turning now to the questions which I posed to the Swedish Riksbank in early February 2017 about its gold reserves. I asked the Riskbank two basic and simple questions as follows:

“I am undertaking research into central bank gold reserves, including the gold reserves held by the Riksbank at its 5 storage facilities. 

1. Are the gold bars held by the Riksbank in its foreign storage facilities physically audited by the Riksbank (i.e. stored at Bank of England, Bank of Canada, Federal Reserve New York and Swiss National Bank)? In other words, does the Riksbank have a physical audit program for this gold?

2. Secondly, would the Riksbank be able to send me a gold bar weight list which shows the gold bar holdings details for the 125.7 tonnes of gold held by the Riksbank. A weight list being the industry standard list showing bar brand (refiner), serial number, gross weight, fineness, fine weight etc.

A few days after I submitted my questions, the Presschef/Chief Press Officer of the Riksbank responded as follows. On the subject of auditing:

“Answer 1: Yes, the Riksbank performs regularly physical audits of its gold.

In response to the question about a gold bar weight list, the Chief Press Officer said:

Answer 2: The Riksbank publishes information about where the gold is stored and how much in tonnes is at each place. See table (same distribution table as above). However, the Riksbank does not publish weight lists or other details of the gold holdings.

So here we have the Riksbank claiming that it personally now performs physical audits of its gold on a regular basis. This is the first time in the public domain, as far as I know, that the Riksbank is claiming to have undertaken physical gold audits of its gold holdings, and it goes beyond the 2013 statement from the Riksbank’s Sophie Degenne when she said “we will also start with our own inspections“.

But critically ,there was zero proof offered by the Riksbank to me, or on its website, that it has undertaken any physical gold audits. There is no documentation or evidence whatsoever that any physical audits have ever been conducted on any of the 10,000 gold bars in any of the 5 supposed storage locations that the Riksbank claims to store gold bars at. Contrast this to the bi-annual physical audits which are carried out on the gold bars in the SPDR Gold Trust (GLD) which are published on the GLD website.

In any other industry, there would be an outcry and court cases and litigation if an entity claimed it had conducted audits while offering no proof of said audits. However, in the world of central banking, perversely, this secrecy is allowed to persist. This is outrageous to say the least and Swedish citizens should be very concerned about this lack of transparency of the Swedish gold reserves. 

Official Secrecy about Swedish Gold Reserves

Given the brief and not very useful Riksbank responses to my 2 questions above, I sent a follow on email to the Riksbank asking why the Swedish central bank did not publish a gold bar weight list. My question was as follows:

Is there any specific reason why the Riksbank does not publish a gold bar weight list in the way, for example, that a gold-backed ETF does publish such a weight list every trading day?

i.e. Why is the Riksbank not transparent about its gold bar holdings?”

This second email was answered by the Riksbank Head of Communications, as follows:

“This kind of information is covered by secrecy relating to foreign affairs, as well as security secrecy and surveillance secrecy in accordance with the relevant provisions in the Swedish Public Access to Information and Secrecy Act.

As far as we are aware of, the Riksbank is among the most transparent central banks, being public with information about the storage locations and volumes, but do let us know if any other central banks are offering the level of transparency you are asking for (except for Germany of course, which we are aware about).”

So here you can see here that gold, which in the words of the Wall Street Journal is just a ‘Pet Rock’, is covered by some very strong secrecy laws in Sweden. Why would a pet rock need ultra strong secrecy laws?

An explanatory document on Sweden’s “Public Access to Information and Secrecy Act” can be accessed here. In Sweden, the rules governing public access to official documents are covered by the Freedom of the Press Act. While its beyond topic to go into the details of Swedish secrecy laws right now, there is a short section in the document titled “What official documents may be kept secret?” (Section 2.2) which includes the following:

“The Freedom of the Press Act lists the interests that may be protected by keeping official documents secret:

  • National security or Sweden’s relations with a foreign state or an international organisation;
  • The central financial policy, the monetary policy, or the national foreign exchange policy;
  • Inspection, control or other supervisory activities of a public authority;
  • The interest of preventing or prosecuting crime;
  • The public economic interest;
  • The protection of the personal or economic circumstances of private subjects; or
  • The preservation of animal or plant species.

Given that the Riksbank stated that the information in its gold bar weight lists was “covered by secrecy relating to foreign affairs, as well as security secrecy and surveillance secrecy”, I would hazard a guess that the Riksbank would try to reject Freedom of Information requests in this area by pointing to central bank gold storage and gold operations as falling under points 1 or 2, i.e. falling under national security or relations with a foreign state or international organisation, or else monetary policy / foreign exchange policy (especially given that the Riksbank uses gold reserves in its foreign currency interventions). Perhaps the Riksbank would also try to twist point 5 as an excuse, i.e. that it wouldn’t be in the public economic interest to release the Swedish gold bar details.

As to why the Riksbank and nearly all other central banks are ultra secretive about gold bar weight lists and even physical auditing of gold bar holdings usually boils down to the fact that, like the Riksbank, these gold bar holdings are actively managed and are often used in gold loans, gold swaps and even gold location swaps. If identifiable details of the gold bars of such central banks were in the public domain, given that these bars are involved in loans, currency swaps and location swaps, these gold bar details could begin to show up in the gold bar lists of other central banks or of the gold bar lists of publicly listed gold-backed Exchange Traded Funds. This would then blow the cover of the central banks which continue to maintain the fiction that their loaned and swapped gold is still held in unencumbered custody on their balance sheets, and would blow a hole in their contrived and corrupt accounting policies.

A Proposal to the Oldest Central Bank in the World

Since the Riksbank happened to ask me were there any central banks “offering the level of transparency [I was] asking for” i.e. providing gold bar weight lists, I decided to send a final response back to the Riksbank in early March highlighting the central banks that I am aware of that have published such gold bar weight lists, and I also took the opportunity of proposing that the Riksbank should follow suit in publishing its gold bar weight list. My letter to the Riksbank was as follows:

“You had asked which central banks offered a level of transparency on their gold holdings that include publication of a gold bar weight list. Apart from the Deutsche Bundesbank, which you know about, I can think of 3 central banks which have released weight lists of their gold bar holdings.

The 3 examples below (together with the Bundesbank) show that some of the most important central banks and monetary authorities in the world have now deemed it acceptable to include the release of gold bar weight lists as part of their gold communication transparency strategies. 

The 4 sets of weight lists below include gold bar holdings at the Bank of England (stored by Mexico, Australia, Germany), and at the Federal Reserve Bank of New York (stored by the US Treasury and Bundesbank). Together these two storage locations account for 60% of the Riksbank’s gold holdings (74.6 tonnes).

The Riksbank is the world’s oldest central bank and has a long track record of being progressive and transparent. By releasing the Riksbank’s gold bar weight lists for the gold bars stored over the 5 storage locations (London, New York, Ottawa, Berne and in Sweden), the Swedish central bank would be joining an elite group of central banks and monetary institutions that could be considered the early stage adopters of much needed transparency in this area.”

1. Bank of Mexico

Most recently in 2017, Bank of Mexico has released a weight list of its earmarked gold bars stored at the Bank of England. This list in pdf format can be downloaded here – >

The Mexican list details 7265 gold bars held (about 90 tonnes), and includes bank of England internal sequence number, refiner brand, gross weight, assay (fineness), and fine weight.

See also

 2. Reserve Bank of Australia

In July 2014, the Reserve Bank of Australia (RBA) released a weight list of 6313 gold bars (about 79 tonnes) that it has stored at the bank of England in London. See

The weight list in Excel format can be downloaded here

The RBA list includes refiner brand, gross weight, assay (fineness), and fine weight, as well as bank of England account number.

3. US Treasury

In 2011, the US Treasury’s full detailed schedules of gold bars was published by the US House Committee on Financial Services as part of submissions for its hearing titled “Investigating the Gold: H.R. 1495, the Gold Reserve Transparency Act of 2011 and the Oversight of United States Gold Holdings”.

These US Treasury weight lists are as follows, and are downloadable from the financial services section of the “” web site.

  • Weight list of all Treasury gold held at Fort Knox, Denver and West Point – 699,515 bars  – pdf format

  • Weight list of all Treasury gold held at Fort Knox, Denver and West Point – 699,515 bars – xlsformat

Deutsche Bundesbank

The Bundesbank weight list which you know about. The most recent version of this list was published on 23rd February 2017 and can be downloaded here

The Bundesbank list show all the German gold bars held at the Bank of England, NY fed and Banque de France as well as in Frankfurt.”


As of now, the Swedish Riksbank has a) not published a gold bar weight list of any of its gold bar holdings and b) not acknowledged my follow up email where I listed the central banks that have produced such lists and suggested that the Riksbank do likewise.

The Swedish Riksbank claims to hold 10,000 large Good Delivery gold bars in 5 locations across the world and now claims to have conducted physical gold audits of this gold. Yet it has never published any physical gold audit results of any of these gold bars nor published any of the serial numbers of any of the 10,000 gold bars it claims to have in storage. For a so-called progressive democracy this is shocking, although not surprising given the arrogant and unaccountable company that central bankers keep with each other.

If someone with time on their hands, ideally a Swedish citizen, has an interest in this area, it would be worthwhile for them to research the rules of the Swedish Freedom of Information Act, and then craft a few carefully worded Freedom of Information requests to the Riksbank requesting physical audit documents and gold bar weight lists of Sweden’s 125.7 tonnes of gold that is supposedly held in London, New York, Ottawa, Berne and in Sweden, possibly in or around Stockholm or beside Arlanda airport. 

While these Freedom of Information requests would probably get rejected due to some spurious secrecy excuse and thrown back at the applicant in short order, at least its worth trying, and might make a good story for one of the Swedish financial newspapers to cover.

Death Spiral for the LBMA Gold and Silver auctions?

In a bizarre series of events that have had limited coverage but which are sure to have far-reaching consequences for benchmark pricing in the precious metals markets, the LBMA Gold Price and LBMA Silver Price auctions both experienced embarrassing trading glitches over consecutive trading days on Monday 10 April and Tuesday 11 April. At the outset, its worth remembering that both of these London-based benchmarks are Regulated Benchmarks, regulated by the UK’s Financial Conduct Authority (FCA).

In both cases, the trading glitches had real impact on the benchmark prices being derived in the respective auctions, with the auction prices deviating noticeably from the respective spot prices during the auctions. It’s also worth remembering that the LBMA Gold Price and LBMA Silver Price reference prices that are ‘discovered’ each day in the daily auctions are used to value everything from gold-backed and silver-backed Exchange Traded Funds (ETFs) to precious metals interest rate swaps, and are also used widely as reference prices by thousands of precious metals market participants, such as wholesalers, refineries, and bullion retailers, to value their own bi-lateral transactions.

Although the gold and silver auctions are separately administered, they both suffer from limited direct participation due to the LBMA only authorising a handful of banks to directly take part. Only 7 banks are allowed to participate directly in the Silver auction while the gold auction is only currently open to 14 entities, all of which are banks. Limited participation can in theory cause a lack of trading liquidity. Added to the mix, a central clearing option was introduced to the LBMA Gold Price auction on Monday 10 April, a day before Tuesday’s gold auction screw-up. The introduction of this central clearing process change saw four of the direct participants suspended from the auction since they had not made the necessary system changes in time to process central clearing. This in itself could have caused a drop in liquidity within Tuesday’s gold auction as it reduced the number of possible participants.

Other theories have been put forward to explain the price divergences, such as the banks being unwilling to hedge or arbitrage auction trades due to the advent of more stringent regulatory changes to prevent price manipulation. While this may sound logical in theory, no one, as far as I know, has presented empirical trade evidence to back up this theory. There is also the possibility of deliberate price manipulation of the auction prices by a participant(s) or their clients, a scenario that needs to be addressed and either ruled out or confirmed.

ICE Benchmark Administration (IBA), the administrator of the LBMA Gold Price, also introduced a price calculation Algorithm into the gold auction in mid-March 2017, a change which should also be considered by those seeking to find a valid explanation for the gold auction price divergence where the opening price kept falling through multiple auctions rounds whilst the spot price remained far higher. Could the algorithm have screwed up on 11 April?

Whatever the explanations for the price divergences, these incidents again raise the question as to whether these particular precious metals auctions are fit for purpose, and why they were designed (and allowed to be designed) at the outset to explicitly block direct participation by nearly every precious metals trading entity on the planet except for a limited number of London-based bullion bank members of the LBMA.

LBMA Silver Price fiasco

First up, on Monday 10 April,  buried at the end of a Reuters News precious metals market daily news wrap was a very brief snippet of news referring to an incident which dogged the LBMA Silver Price during Monday’s daily auction (an auction which starts at midday London time). According to Reuters:

“silver prices slipped after the LBMA silver price benchmark auction was paused for 17 minutes after a circuit breaker was triggered when the auction price moved outside of the spot range, the CME said in a statement.”

What exactly the CME meant is unclear because whatever statement Reuters was referring to has not been released on the CME Group website or elsewhere, and Reuters did not write a separate news article about the incident.

To recap, the LBMA Silver Price is administered by Thomson Reuters on a calculation platform run by the CME Group, and operated on a contract basis on behalf of the London Bullion Market Association (LBMA). However, there is nothing anywhere on the CME’s LBMA Silver Price web page, or on the Thomson Reuters LBMA Silver Price web page, or on the LBMA website, in the form of a statement, comment or otherwise, referring to this ‘circuit breaker’ that persisted for ’17 minutes’ in the LBMA Silver Price auction during which time the ‘auction price moved outside of the spot range

On its calculation platform, CME makes use of a pricing algorithm to automatically calculate a price for each round of the LBMA Silver Price auction (excluding the first auction round). From page 8 of its LBMA Silver Price Methodology Guide:

“3.7 Starting Price

The initial auction price value is determined by the auction platform operator by comparing multiple Market Data sources prior to the auction opening to form a consensus price based on the individual sources of Market Data. The auction platform operator enters the initial auction price before the first round of the auction begins….”

“3.4 End of Round Comparison

If the difference between the total buy and sell quantity is greater than the tolerance value, the auction platform determines that the auction is not balanced, automatically cancels orders entered in the auction round by all participants, calculates a new price, and starts a new round with the new price.”

There is also a manual price override facility which can be invoked if needed:

3.8 Manual Price Override

In exceptional circumstances, CME Benchmark Europe Ltd can overrule the automated new price of the next auction round in cases when more significant or finer changes are required. When doing so, the auction platform operator will refer to a composition of live Market Data sources while the auction is in progress.”

As to why the “auction platform operator” did not invoke these manual override powers and seek market data sources during the time in which the silver auction was ‘stuck’ for 17 minutes is unclear. A 17 minute pause would presumably be, in the CME’s words, ‘exceptional circumstances’.

Unfortunately, neither the CME website, the Thomson Reuters website, or the LBMA website provides intra-round pricing data for the LBMA Silver Price, so anyone who doesn’t have a subscription to the live data of the auction is well and truly left in the dark as to what actually happened on Monday 10 April. Unlike the LBMA Gold Price auction which at least provides an ‘Auction Transparency Report’ for each auction (see below), the LBMA Silver Price auction is sorely lacking in any public transparency whatsoever.

But what is clear from the Reuters information snippet is that the LBMA Silver Price auction on Monday 10 April suffered a serious trading glitch, that saw the prices that were being formed in the auction deviate from where the silver spot price was trading during that time. This price deviation suggests a lack of trading liquidity in the auction and/or an inability of the participants to hedge their trades in other trading venues. As to whether the final LBMA Silver Price that was derived and published as the daily benchmark price on 10 March was outside the spot range (and above or below spot) is not mentioned in the Reuters report.

The complete opacity about this incident is concerning but not really surprising since nearly everything in the London precious metals markets is shrouded in secrecy, and corporate communication in this area is truly abysmal.

Recalling that Thomson Reuters and CME announced in early March that they are abruptly pulling out of the contract for administrating and calculating the LBMA Silver Price, this latest fiasco is unwelcome news for the LBMA – CME – Thomson Reuters triumvirate, and raises further questions for the FCA as to whether this Silver auction and benchmark should even be allowed to continue in its present or similar form.


LBMA Gold Price fiasco

Turning to the London gold auction, on the afternoon of Tuesday 11 April, the LBMA Gold Price auction (which starts at 3:00pm London time) experienced what can only be described as a shocking and serious trading fiasco which has real world consequences for all trading entities that use the LBMA Gold Price Benchmark reference price (and there are many that do so). As a reminder, ICE benchmark Administration (IBA) administers the daily LBMA Gold Price auctions on behalf of the LBMA.

Again it was Reuters that broke the gold auction news. In a short article titled ‘London gold benchmark fixes $12/oz off spot price‘, Reuters said the following:

London’s gold price benchmark fixed some $12 below the spot price on Tuesday afternoon as the auction appeared to become locked in a downward spiral. From an initial $1,265.75, close to the spot price at the time, the auction price ratcheted steadily lower before fixing at $1,252.90 in the ninth round. From the fifth round to the eighth the bid and offer volumes remained frozen, unable to match.

This came a day after ICE introduced clearing for the LBMA Gold Price auction”

Reuters concludes its article by noting that the ICE clearing was introduced:“before several participating banks had the necessary systems in place.”

“As a result, China Construction Bank, Societe Generale, Standard Chartered and UBS  are yet to confirm a date for their participation in the cleared auction.. ICE declined to comment. The LBMA, which owns the intellectual property rights to the auction, was not immediately available to comment.”

This forced reduction in the number of participants in the auction seems to be relevant to the issue and therefore requires further scrutiny.

ICE Central Clearing – Foisted on the LBMA Gold Price auction?

In mid-October 2016 during the LBMA precious metals conference in Singapore, ICE Benchmark Administration announced that it would introduce central clearing into the London Gold Price by utilizing a series of daily futures contracts which it planned to launch in February 2017. The introduction of central clearing into the auction was initially planned for March 2017.

The LBMA Gold Price Oversight Committee meeting minutes for 4 November 2016 specify the March 2017 launch date and make clear that all banks ‘wanted to move‘ to use the clearing route, and that ICE Benchmark Administration ‘wish to keep running a healthy auction‘ (whatever that means). The minutes stated:

“IBA gave a central clearing update to the Committee, notifying them that the cleared instrument would be launched in January 2017 and the auction trades could be routed there from March 2017. The Committee were informed that IBA had spoken to every bank and every bank wanted to move. Discussion moved to the technical implications for this new model and IBA’s primary wish to keep running a healthy auction.”

Up until at least the end of February, ICE’s LBMA Gold Price page stated the following:

From March 2017, subject to regulatory review, centrally cleared settlement will be available for transactions which originate from IBA’s gold auction underlying the LBMA Gold Price.

This will give firms the choice of settling their trades bilaterally against each counterparty (as they currently do), or submitting their trades to clearing and settling versus the clearing house. This mechanism removes the requirement for firms to have bilateral credit lines in place with all of the other Direct Participants in the auction.

Central clearing opens the auction to a broader cross-section of the market. It also facilitates greater volume in the auction.

By the end of March 2017, the above statement had been altered from March 2017 to “Q2 2017″ with ICE pushing back the launch date for the introduction of central clearing:

From Q2 2017, subject to regulatory review, centrally cleared settlement will be available for transactions which originate from IBAs gold auction underlying the LBMA Gold Price….”

Reuters again covered these ICE clearing delays in a series of articles during March, highlighting the fact that 4 of the 13 banks that are direct participants in the LBMA Gold Price auction were not ready for the introduction of central clearing due to delays in making unspecified changes to their internal IT systems that would allow such central clearing processing. So anybody who had been reading these Reuters articles would have been aware that there were risks on the horizon in terms of some of the LBMA Gold Price auction participants being slow in being ready for the changes.

In a 15 March article titled ‘London gold rush - ICE to launch clearing before banks are ready‘, Reuters said that ICE would introduce central clearing to the auction on 3 April and that:

“U.S.-based exchange operator ICE has already pushed back the launch of its service by several weeks to allow the banks and brokers who participate in the auction to adapt their IT systems, four sources with direct knowledge of the matter told Reuters.”

 “Sources at many participant banks said that they were unhappy with the speed at which ICE was seeking to introduce clearing, which require investment in IT processes and back office systems and raise complex compliance issues.

 “However, at least four of the 14 banks and brokers who participate in the LBMA Gold Price auction will still not be ready to use the new system

Banks that are not ready would be suspended from the auction until they have the necessary IT infrastructure in place or would have to participate through other players who could clear deals, according to the sources. 

ICE’s readiness to provoke such disruption illustrates how much it wants to avoid further delays that could torpedo its ambitions to become the dominant exchange in London’s vast bullion market, market sources said”

Reuters picked up this theme again on 21 March with an article titled “ICE delays launch of clearing for London gold benchmark: sources“, in which it said that the 3 April start date had again been pushed back and that:

“two sources told Reuters that ICE had again delayed and there was now no set start date.”

“Sources earlier told Reuters that Societe Generale, Standard Chartered, ICBC Standard Bank and China Construction Bank would not be ready to clear the LBMA auction in time for April 3.”

Again interestingly, ICE’s desire to promote its own gold futures contracts was seen as a primary driver for trying to rush through the introduction of central clearing for the gold auction, as doing so would add volume to ICE’s daily gold futures contracts:

“market sources say ICE plans to use clearing of the LBMA Gold Price auction, which it administers, to funnel business to its contracts and give it a head start over rivals.”

As a reminder, ICE and CME have both recently launched gold futures contracts connected to the London market, and the London Metal Exchange (LME) plans to launch its own suite of London gold futures contracts in early June.

Central clearing uses exchange for physical (EFP) transactions in the daily futures contracts which are then cleared at ICE Clear US. The futures have daily settlement each day between 3:00 pm and 3:05 pm London time. But how the whole process ties together is still quite puzzling. An email to the IBA CEO asking for details of how the futures are linked to the auction went unanswered.

Both the ICE and CME contracts had a damp squib start, experiencing weeks of zero trading volumes. See BullionStar article from 8 February 2017 titled “Lukewarm start for new London Gold Futures Contracts”.

On 30 March, Bloomberg announced on Twitter that central clearing in the LBMA Gold Price auction would start on Monday 10 April.


Downward Spiral

So what was this downward spiral that the LBMA Gold Price auction experienced on the afternoon of Tuesday 11 April when it became, in the words of Reuters, locked in a downward spiral?

Let’s look at the ICE Auction Transparency Reports for the few days before and during the 11 April afternoon fiasco. These reports show the number of auction rounds, the number of participants,and the bid and offer volumes for each round as well as the price at the end of each round.

Fourteen entities are now authorized to be direct participants in the LBMA Gold Price auction, 13 of which are banks, the other being new participant INTL FCStone since early April. INTL FCStone is a financial services company that has a slant towards commodities. The 13 banks are:

  • Bank of China
  • Bank of Communications
  • China Construction Bank
  • Industrial and Commercial Bank of China (ICBC)
  • Goldman Sachs
  • HSBC Bank USA
  • JPMorgan Chase Bank (London Branch)
  • Morgan Stanley
  • Société Générale
  • Standard Chartered
  • The Bank of Nova Scotia – ScotiaMocatta
  • Toronto-Dominion Bank
  • UBS

Unlike the old London Gold Fixing which had 5 member banks that were obliged to always turn up (and since 2004 dial in) for every auction, this LBMA Gold Price auction does not require all the authorized participants to dial-in. Most of the time, far fewer than the full contingent turn up. For example on Friday 7 April, 8 banks turned up at the morning auction while only 7 banks turned up at the afternoon auction (i.e only a 50% turnout). However, Friday 7 April is also relevant since that was the last day before ICE introduced central clearing to the gold auction.

7 April AM
LBMA Gold Price auction – 7 April – morning – click to enlarge
7 april PM
LBMA Gold Price auction – 7 April – afternoon – click to enlarge

Fast forwarding to the morning gold auction on Monday 10 April when ICE first introduced central clearing, you can see from the below auction report that only 5 banks participated. This is the same small number that took part in the former London Gold Fixing which was run by the infamous and scandal ridden London Gold Market Fixing Limited and which consisted of Deutsche Bank, Barclays, HSBC, Scotiabank and Société Générale.

The reason the turnouts after the introduction of central clearing are so low is that 4 of the direct participant banks have been excluded from the auction due to not being ready to implement central clearing  – a fact predicted by Reuters News in March. This means that the usual number of between 7-10 banks participating in the auction has now been reduced by 4, as four banks cannot take part. As Reuters said on 21 March “Banks that are not ready would be suspended from the auction until they have the necessary IT infrastructure in place”.

The irony of this debacle is that the participating banks all already have bilateral credit limits with each other and so don’t need to do central clearing in the auction. Only new /future direct participants which do not have bilateral credit lines technically need to utilize the clearing solution.

Central clearing is supposed to make it easier for a far wider range and number of participants to take part. But if this entails enhancements to IT systems that some of the most sophisticated investment banks on the planet are struggling with, what hope is there for other precious metals trading entities to participate.

But some reason – probably to try to kickstart the trading volume in its daily gold futures contracts – ICE has made it mandatory for all existing direct participants (the bullion banks) to open clearing accounts and get their IT systems in shape to use clearing.

The ICE website now states:

“Central clearing  for the auction is enabled by effecting  Exchange for Physical (“EFP”) transactions into the new physically settled, loco London gold daily futures contract which is traded on ICE Futures U.S. The EFPs establish positions in the futures contract which are cleared and can be physically delivered at ICE Clear U.S

and Direct participants (DPs) “must establish a clearing account with an ICE Clear U.S. Clearing member” so as to be able to use this account to clear auction trades.

However, “DPs may still maintain credit lines to settle bilaterally against other DPs” and “DPs can elect, for each counterparty, to clear or settle their auction transactions bilaterally.” If this is so, then why the need to force these banks to open a clearing account and push through complex IT changes?

The ICE LBMA Gold Price web page now includes a double asterisk next to the names of the culprit banks that are not ready for central clearing. These banks are China Construction Bank, Société Générale, Standard Chartered, and UBS. the double asterisk states that “** Date of participating in the cleared auction to be determined.

So now, more than 2 years after the LBMA Gold Price has been introduced, we are back to a situation where only 5 large bullion banks are participating in a daily gold price auction, an auction which has huge ramifications for the reference pricing of gold across myriad gold markets around the world.

Both of the auctions on 10 April finished within the first round, with buy volume and sell volume in balance, so there was no need for subsequent auction rounds.

10 April AM
LBMA Gold Price auction – 10 April – morning – click to enlarge
10 April PM
LBMA Gold Price auction – 10 April – afternoon – click to enlarge

Turning to the morning auction of Tuesday 11 April, only a measly 4 banks took part in the first round of the auction, and 5 participants took part in rounds 2 and 3. The bid and ask volumes were not that much out of balance, and the auction finished after 3 rounds.

11 April AM
LBMA Gold Price auction – 11 April – morning

Turning to the afternoon auction of 11 April, the price action commentary provided by Reuters was as follows:

from an initial $1,265.75, close to the spot price at the time, the auction price ratcheted steadily lower before fixing at $1,252.90 in the ninth round. From the fifth round to the eighth the bid and offer volumes remained frozen, unable to match.

Below you can see visually see what happened round by round from the first round price of $1,265.75 where there was zero bid volume and 125,217 ozs (nearly 4 tonnes) of ask volume, through the fifth to (actually) the ninth rounds where bid volume was an unchanging 92,873 ozs and ask volume was an unchanging 107,090 ozs, but still the price fell from $1,260.50 to fix in round 9 at $1,252.90, i,e, the price fell $7.60 in 2 minutes while the volumes didn’t budge. And most critically, the fixing price was $1252.90 while the spot price was trading at $1267 at that time.

LBMA Gold Price auction - afternoon 11 April 2017
LBMA Gold Price auction – 11 March afternoon – Click to enlarge

As Kitco News said in its coverage of the LBMA Gold Price fiasco:

“the benchmark ended up being set almost $15 dollars below where spot prices were trading at the time. The PM Gold Price showed a benchmark at $1,252.90 an ounce; however at the time, spot gold prices were trading around $1,267 an ounce, with prices heading towards a new five-month high.”

How could this happen? How could the auction price diverge so much from the spot price at that time and how could the auction go through round after round lowering the price while the bid and ask volumes did not change and while the spot price was actually far higher than any of the prices in the auction?

Kitco’s explanation, which is mostly based on the view of one person, Jeff Christian of the CPM Group, put the problem down to “poorly conceived regulations and a faulty price discovery mechanism“, i.e. a lack of liquidity due to banks being scared off by tightening regulations, and that this “sharp reduction in liquidity during the auction process” is causing “a large discrepancy in prices“. Christian also said that “because of regulations, banks and other financial institutions are backing away from becoming market makers.

But this reasoning of backing away due to regulations is not backed up by the facts for the simple reason that banks have continued to join the LBMA Gold Price auction at a rapid rate over the last 2 years, i.e. there is a trend of ever more banks applying to be authorized to participate in the auction. For example, since the auction was launched on 20 March 2015 with 6 banks, 9 more banks have signed up JP Morgan, Morgan Stanley, Standard Chartered, Bank of China, ICBC, China Construction Bank, Bank of Communications, Toronto Dominion Bank, and INTL FCStone. Note that Barclays was one of the original six banks in the auction but dropped out after it downscaled its the precious metals business in London. There are also the same number of LBMA Market Makers now as there were two years ago, in both cases 13 LBMA Market Makers.

Kitco’s article also fails to mention the central clearing implementation fiasco brought about by ICE’s rush to channel activity into its gold futures contracts and Kitco even fails to realize that 4 banks were suspended from the auction due to this central clearing issue.

daily AUD gold futures ICE 11 April
ICE Daily Gold Futures report for 11 April – See Volume and Open Interest – Click to Enlarge

Another factor relevant to the screwed up afternoon auction on 11 April that should be considered is the fact that in mid-March 2017, ICE Benchmark Administration introduced a price algorithm into the LBMA Gold Price auction. This fact has been totally ignored by the financial media.

From a human Chairperson to an automated Algorithm

Up until mid March 2017, the LBMA Gold Price auction used a human ‘independent chairperson’ to choose the opening price in the auction and also the auction price in each subsequent round. The identities of these independent chairpersons have never been divulged by ICE nor the LBMA.

Critically, sometime during the 3rd week of March 2017, ICE Benchmark Administration (IBA) introduced a pricing algorithm into the LBMA Gold Price auction. This change in procedure (moving from an auction chairperson to an auction pricing algorithm) was not actively highlighted by either ICE or the LBMA but is clear from looking at Internet Archive imprints of the ICE LBMA Gold Price webpage.

In an imprint of the LBMA Gold Price webpage from 9 March 2017, the methodology section states that:

“The auction process has an independent chairperson, appointed by IBA to determine the price for each round and ensure that the price responds appropriately to market conditions.”

See screenshot below for the same statement –  taken from the same webpage:

methodology 9 march 2017
LBMA Gold Price webpage – Methodology section 9 March 2017

Bullet point 1 of the Auction Process for the 9 March version of the webpage also refers to the chairperson as being responsible for setting the starting price and the price of each subsequent round “in line with current market conditions and the activity in the auction.

process 9 march 2017
LBMA Gold Price webpage – 9 March

But by 16 March, when the next imprint of the LBMA Gold Price page was made by the Internet Archive, the reference in the methodology section to an independent chairperson had been fully deleted, and bullet point 1 had been changed from mentioning a chairperson to discussing an algorithm, specifically changed to “IBA sets the starting price and the price for each round using an algorithm that takes into account current market conditions and the activity in the auction.

See screenshot below for the same statement –  taken from the same webpage:

process 16 march 2017
LBMA Gold Price webpage – 16 March

So if there is an algorithm that is taking into account current market conditions in addition to activity in the auction, why did this algorithm not take the current spot prices into account over rounds 4 – 9 of the LBMA Gold Price auction on the afternoon of Tuesday 11 April?

Furthermore, for such a major change to the methodology and auction process in an auction whose benchmark price is widely used in the gold world, it’s very surprising that neither ICE, nor the LBMA, nor the London financial media mentioned this substantial algorithmic change.

In early December 2016, ICE published an LBMA GOLD PRICE Methodology Consultation in which one of the consultation’s proposed changes was “the introduction of an algorithm to determine the price for each auction round“.

The December 2016 document noted that:

“IBA’s auction process is currently that the auction chair sets the price for each Round in line with current market conditions and the activity in the auction”

“IBA currently has a panel of auction chairs who are independent of any firm associated with the auction, including Direct Participants. The chairs are externally sourced but work with IBA to deliver a robust process for determination of the LBMA Gold Price.

The chairs use their extensive market experience to set the round prices based on a pricing framework agreed with IBA. IBA chose to operate the auction using human chairs to make sure that the price could respond appropriately to market conditions from the outset.

IBA’s feedback from the market was that, at least in the early stages, the professional judgement of a human chairman was needed.

“After operating the auction for more than a year, IBA started to develop an algorithm to set the auction’s starting price and subsequent round prices. IBA has now been testing and refining the algorithm over a number of months

As per the proposal, the algorithm would replace the human chair, after which:

Each auction will continue to be supervised by IBA’s analysts, and, if for any reason an auction did not progress as expected, IBA’s existing safeguards would be deployed to protect the integrity of the auction and the LBMA Gold Price benchmark

These safeguards were stated as being three, namely:

- Pause the auction and restart, to give Participants an opportunity to contact clients or re-evaluate their positions

- Increase the imbalance threshold, if it appears that the auction will otherwise not finish

- Cancel an order, if it is compromising the integrity of the process and the relevant participant cannot be reached. 

The proposals were pencilled in for implementation in Quarter 1, 2017.

Following the consultation, a “Methodology Consultation Feedback” document was published on the ICE Benchmark Administration website. One feedback respondent was concerned about who would be overseeing the daily auctions in the absence of a human chairperson, to which ICE answered:

“IBA can confirm that the auction will always be supervised by at least two IBA analysts. This approach is consistent with how we operate our other benchmarks.

Our aim is to put the auction on auto-pilot, not to make it driverless.

Unfortunately, from the wider gold market’s perspective, the LBMA Gold Price auction on the afternoon of Tuesday 11 April does indeed appear to have been ‘driverless‘ as it “did not progress as expected“, so it is now up to the LBMA and ICE to establish what the ‘IBA analysts’ were up to behind the driving wheel that day.

On its website, ICE states that the LBMA Gold Price methodology is “reviewed by the LBMA Gold Price Oversight Committee as documented in its Terms of Reference.” This Oversight Committee should also explain to the gold world what actually happened on the afternoon of 11 April.

Additionally, I find no explanation on ICE’s LBMA Gold Price webpage as to how exactly the automated algorithm works, what its logic rules are, how it was programmed etc.


The trading glitch with the LBMA Silver Price on Monday 10 April seems to have been completely missed by London’s financial media except for the brief reference by Reuters. The fact that there is no information on the CME, Thomson Reuters and LBMA websites about the issue should raise concern for users of this benchmark and for the UK’s regulator, the FCA. In an ideal world, there should be a full ‘outage’ report published on each of the 3 websites explaining what happened, but this will not happen in the shadowy and secretive London Silver Market.

Perhaps the auction price divergence in the LBMA Silver Price stems from a lack of liquidity brought on by the limited presence of auction participants, or due to the inability or unwillingness of participants to hedge or arbitrage their auction trades against the London OTC spot or other trading venues? The simple thing to do would be for CME, Thomson Reuters and the LBMA to explain themselves since this would minimize guesswork and to provide global silver market entities with clarity. Anything short of a full explanation by the parties concerned is irresponsible.

For the LBMA Gold Price auction, ICE Benchmark Administration needs to release a full ‘outage’ report and explanation on what exactly happened in the afternoon auction on 11 April and explain to the global gold market whether the introduction of central clearing was in any way responsible for the price divergence, and whether there are any conflicts of interest in trying to get banks to use its daily gold futures contracts. While they are at it, ICE should fully explain how the recent introduction of a pricing algorithm impacts the gold auction and whether this too had an impact on the auction price entering a downward spiral.

As the LBMA Silver Price and LBMA Gold Price are both Regulated Benchmarks, the FCA regulator needs to step up to the plate and for once show that it is on the side of the users of these benchmarks and not the powerful London banks.

Both of these auctions require full transparency and ease of direct participation by the full spectrum of the world’s gold and silver trading entities. Currently, they fall far short of these goals.

German and Swiss Precious Metals Refiners join forces as Heraeus acquires Argor-Heraeus

German precious metals group Heraeus Precious Metals (HPM), part of the Heraeus industrial group, has just announced the full acquisition of Swiss precious metals refining group Argor-Heraeus. Heraeus is headquartered in Hanau, just outside Frankfurt. Argor-Heraeus is headquartered in Mendrisio in the Swiss Canton of Ticino, beside the Italian border.

The Heraeus takeover announcement, on 3 April 2017, continues a noticeable acquisition trend in the Swiss precious metals refining sector and follows the July 2016 acquisition of Neuchâtel based Metalor Technologies by Japanese Tanaka Precious Metals, and the takeover of Ticino-based Swiss gold and silver refiner Valcambi by Indian group Rajesh Exports in July 2015. The Heraeus press release from Monday 3 April can be read here in English.


A Deal Telegraphed in November

In early November 2016, BullionStar was among the first to report that Swiss Argor-Heraeus was indeed an acquisition target. At the time, market sources had indicated that the most likely acquirer was a private equity company Capinvest, with other suitors said to be Japanese group Asahi and Swiss based MKS-PAMP.

In late 2016, S&P Global Platts reported that Swiss private equity company “Capvis” was in talks to acquire Argor-Heraeus, with one of Platts sources quoting a purchase price in the region of €200 million with completion in Q1 2017, while another source said €200 million was too high a figure. At the end of the day, a Capvis takeover did not materialise and earlier this year market sources said that Argor-Heraeus was no longer for sale (externally). In hindsight, it was probably at this stage that Heraeus decided to make its move. Alternatively, the discussions with external buyers may have just been conducted so as to gauge sentiment and establish a series of potential valuations for the Swiss refiner.

As a reminder, Argor-Hereaus had an unusual ownership structure in that it was jointly owned by 4 shareholders, namely German group Heraeus, German bank Commerzbank, the Austrian Mint, and Argor-Heraeus management. Prior to the takeover, Heraeus was the largest shareholder holding 33% of Argor-Heraeus shares, with Commerzbank holding a further 32.7% of the equity, the Austrian Mint holding another 30%, and Argor-Heraeus’s management holding the balance of shares.

As an existing shareholder and board member of Argor-Heraeus, the Heraeus group would have been privy to all of Argor-Heraeus’s financial and operational details, and so would have been in an advantageous position to negotiate purchase price details with Commerzbank and the Austrian Mint, which would have been a natural advantage relative to external potential acquirers.

Purchase Price

However, the exact purchase price Argor-Heraeus is not known, since, according to the Heraeus press release “the parties have agreed not to disclose financial details of the deal”. Notwithstanding this, German newspaper Handelsblatt is claiming that the Heraeus takeover values Argor-Heraeus at “half a billion Swiss Francs“, since according to Handelsblatt’s sources, Heraeus paid “few hundred million euros for the remaining Argor shares“. With CHF 500 million equal to approximately €468 million, the Handelsblatt claim would mean that Heraeus may have paid €313 million for the 67% of Argor-Heraeus that it did not own. This would be far higher than the €200 million figure that S&P Platts mentioned in December.


Motivations for Acquisition

According to Heraeus, one of its motivations in acquiring Argor-Heraeus is to strengthen its capabilities in gold and silver refining by tapping “Argor’s expertise and processing capacity for gold and silver”, since Heraeus considers itself strongest in platinum group metals. Heraeus states that another driver of the acquisition is geographical diversification given that Argor-Heraeus has facilities on the ground in Chile, as well as in Italy, Germany and of course Switzerland, while Heraeus has a strong presence in Asia, North America and India in addition to Germany.

BullionStar Bars by Heraeus and Argor-Heraeus

BullionStar is very familiar with both Heraeus and Argor-Heraeus and has a good working relationship with both refinery groups. In fact, the popular BullionStar 1 kg silver bars are produced by Heraeus on behalf of BullionStar, while BullionStar’s own branded 100 gram gold bars are minted by Argor-Heraeus on behalf of  BullionStar. See bar images above. Argor-Heraeus is one of the five refineries appointed to the LBMA’s Good Delivery List referee panel for Gold and Silver. In addition, BullionStar carries a wide range of other Heraeus silver bars, Heraeus gold bars, and Argor-Heraeus gold bars.


With 3 of the 4 giant Swiss precious metals refineries having now been acquired by new owners within less than 2 years of each other, this leaves the PAMP refinery, owned by MKS PAMP, as the only one of the “Big 4″ Swiss refineries to have bypassed this recent flurry of corporate control activity. As to whether MKS PAMP will itself become a takeover target is debatable, but it would be surprising if MKS isn’t thinking about this very question right now.

Further information

For more information on the Heraeus group and its precious metals activities, see BullionStar Gold University profile of Heraeus

For a full overview of Swiss refiner Argor-Heraeus, please see BullionStar Gold University profile of Argor-Heraeus

For more information on the Tanaka acquisition of Metalor Technologies, see specific section of Metalor profile on BullionStar Gold University

For more information on the acquisition of Swiss Valcambi by Rajesh Exports, see BullionStar blog

For analysis of initial news (last November) about Argor-Heraeus being acquired, see BullionStar blog

Mexico’s Earmarked Gold Bars at the Bank of England vaults

Guillermo Barba, the Mexican financial and economic journalist, has recently published an article on his website confirming that through an information request that he had made to Mexico’s central bank, Banco de México (Banxico), the central bank has now released what amounts to a relatively comprehensive list of Mexico’s gold bars held in storage at the Bank of England gold vaults in London.

Mexico’s list is an inventory of wholesale market gold bars that Banixco owns and stores in custody at the Bank of England vaults in London. In the contemporary parlance of the gold market, most people would call this type of holding an allocated gold holding, but more historically in the Bank of England world, it has been known as an “earmarked gold” holding or a “set-aside gold” holding because the specific bars are set-aside for a specific central bank, in other words the central bank has its name attached to those particular bars (earmarked).

Wholesale gold bars are also known as London Good Delivery gold bars or variable weight gold bars, and each weighs in the region of 400 troy ounces ( ~ 12.5 kilos). On the Banixco list, there are 7,265 wholesale gold bars listed. This new list is one of the very few detailed central bank gold bars lists (weight lists) which exists in the public domain, and it could be useful for a number of purposes (see below).

Barba has done persistent and diligent work over the last 6 years, by patiently obtaining more and more information from the Mexican central bank about its gold reserves via various Freedom of Information Requests (FOIA), and shedding some light on this usually opaque area of gold and central banking.

Bank of Mexico

2011: Gold Reserves Skyrocket, Central Bank Secrecy

Before we examine this newly published list from the Banco de México, a little background is useful. As of February 2017, Mexico held about 120.7 tonnes of gold in its official gold reserves, which puts the country at the tail-end of the world’s Top 30 official/country gold holders.

All through the 2000s, Banixco only held a few tonnes of gold in its official reserves, ranging from about 4 tonnes and 9 tonnes. This situation changed in early 2011 when the Mexican central bank purchased just over 93 tonnes of gold in March 2011 (first reported by the FT in early May 2011). This brought Mexico’s gold holdings up from 7.1 tonnes to about 100.2 tonnes by the end of Q1 2011. The country’s official gold holdings were boosted further to about 125.2 tonnes by Q2 2012 when Banixco bought more than 16 tonnes in March 2012. See World Gold Council quarterly changes of central bank gold holdings for the underlying data.

After Mexico made these sizeable gold purchases in early 2011, Guillermo Barba submitted various FOIAs to the Mexican central bank about the country’s newly acquired gold stash. Unfortunately, most of these information requests received weak responses from the Bank. For example, the question:

“How many bars of gold make up the recent acquisition of 93 tonnes of gold made by Banxico en the first quarter of 2011”

received a response from Banixco of:

“…we inform you that the information that you request is classified as reserved”

The Mexican central bank also added that:

“due to the variability of the content of gold in the bars, it is not possible to specify with certainty the exact number of bars purchased.”

We later learned that the Bank of England purchased this “gold” on behalf of Mexico. On the surface, Banixco saying that it could not “specify with certainty the exact number of bars purchased” seems to suggest that at least some of the Mexican gold at that time in 2011 was held on a unallocated basis and possibly out on loan to bullion banks in the London gold lending market.

If Mexico bought actual gold bars at the outset in Q1 2011, the gold bought for Mexico was probably already sitting in the Bank of England vaults. Some of it may then have been lent out to bullion banks immediately. Alternatively, at the outset in Q1 2011, the Bank of England could have ‘sold’ to Mexico a fine ounce claim on a number of gold ounces, that could then be allocated to actual gold bars on a future date. Without seeing the purchase invoices of the Mexican gold transactions, it’s hard to say what the initial purchase transactions referred to.

Another question Barba put to Banixco in 2011 was:

“In what country or countries is the gold that forms part of the International Reserves of Mexico physically located?”

Banixco responded:

access to the requested information will not be granted, since it is classified as reserved”

Barba’s article addressing his questions in 2011 and Banixco’s responses, which was published in September 2011, can be read here.

118 Tonnes at the Bank of England

In October 2012, Barba received responses to further information requests that he had made to Banixco, with Banixco confirming that:

“At month’s end, April 2012, Banco de Mexico maintained a position in fine gold of 4,034,802 ounces, of which only 194,539 ounces are located in the territory of the United Mexican States.

countries where these reserves are located are ‘United States of America, England and Mexico.

the acquisitions of gold during March and April 2012 are under custody in England’.”

[the gold is stored in] “the city of London, England, where more than 99% of the  gold which the Bank of Mexico maintains outside the country is presently under custody…”

With 4,034,802 ounces (125.5 tonnes) held in total, and 194,539 ounces (6.05 tonnes) held in Mexico, there were 3,840,263 ounces (119.44 tonnes) held outside Mexico, which was 95.2% of Mexico’s total gold holdings. With 99% of the foreign gold in London, this equated to about 3.8 million ounces (118 tonnes) held in London, and about 38,000 ounces (1.2 tonnes) held in the US with the Federal Reserve Bank (FRB).

Mexican Federal Auditors not happy with Banixco

In February 2013, Guillermo Barba also highlighted that the Mexican Federal Audit Office (Auditoría Superior de la Federación or ‘ASF’) Report for the Year 2011 was highly critical of Banixco’s relaxed approach to its gold purchases at the Bank of England.

The ASF reprimanded Banixco, saying that it:

has not conducted physical inspections to gold to verify compliance with the terms of acquisition and the conditions regarding its storage, in order to be certain of the physical custody of this asset”

According to the ASF, Banixco only held documents about the “Terms and Conditions” of the gold holdings contract with the Bank of England, with records of “the dates of the transactions” and also some “payment vouchers”.

ASF also recommended that the Mexican central bank:

make a physical inspection with the counterparty [Bank of England]  that has the gold under its custody, in order to be able to verify and validate its physical wholeness.”

February 2017: Partial Glimpse of Bar List

Fast forward to 17 February 2017, and Barba published another article confirming that following some further information requests to the Mexican central bank, Banixco had clarified the following facts about its gold holdings:

“Of the 3.881 million ounces of gold that the Bank of Mexico has at the close of October 2016, 98.95% are held in the United Kingdom, 0.0004% in the Federal Reserve Bank of the United States and the remaining 1.05 % In Mexico.”

“The Bank of Mexico has the serial number of each ingot protected in accounts assigned abroad. From these accounts, the number of ingots rises to 7,265. It should be noted that for unallocated accounts there is no specific serial number and therefore the number of ingots cannot be determined.”

“Assigned accounts are those that are owned on specific ingots with serial numbers, and segregated from the rest.“ 

Therefore, for each gold ingot held in a foreign domiciled allocated gold account, Bank of Mexico is in possession of the bar serial numbers. This was the first information from Banixco that specifically addressed the number of gold bars held by the Mexican central bank at the Bank of England.

As of October 2016, with 3,881,000 ounces of gold held by Mexico in total, 98.95% of which was held at the Bank of England in London, that would infer that 3,840,250 ounces of gold (119.4 tonnes) were held in London,  with only about 1,550 ounces (0.0004%) held at the FRB in New York.

Assuming each gold bar contains 400 oz troy ounces of gold, then 7,265 bars would contain 2.906 million troy ounces. It would also mean that about 934,000 troy ounces (29 tonnes) of Mexico’s gold are held unallocated accounts (where the gold is not unassigned as specific gold bars). The existence of unallocated gold accounts is revealing since it proves that the Bank of England doesn’t just offer its central bank customers the traditional custody facility of earmarked / set-aside / allocated gold bars. It also offers what either amounts to gold accounts that are denominated on a fine ounces basis but are fully backed by a pool of gold, or alternatively these unallocated accounts may not be fully backed (i.e. fractionally-backed).

To facilitate gold lending in the London Gold Market between central banks (the lenders) and commercial bullion banks (the borrowers), the Bank of England would have to operate account facilities for its customers that were in a sense dematerialised because when a central bank lends gold bars to a bullion bank, it does not necessarily (and probably doesn’t) receive back the same gold bars, because those bars have either been sold in the market or onward lent in the market. Therefore an account convention with specific bars earmarked to a customer would not facilitate this process. Only an account where the unit is a balance of fine troy ounces of gold would allow these transfers to occur. In this scenario, the central bank still insists it has a fine troy ounce gold holding, even though its gold has been lent out to a bullion bank.

The other alternative is that the Bank of England is selling its central bank customers a gold account service where, for example,  Central Bank A pays dollar cash upfront for 100 tonnes of gold, and the Bank of England signs a piece of paper saying “We the Bank of England have a liability to Central Bank A for 100 tonnes of gold“, but that gold is not necessarily in the Bank of England vaults or anywhere else. The Bank of England just has to be able to allocated the claim to real physical gold bars if Central Bank A ever decides that its 100 tonne gold asset be converted to allocated gold bars.

Without seeing the “Terms and Conditions” of these “unassigned gold” contracts with the Bank of England, its hard to say how exactly the “unassigned gold” is backed up, and to what extent it’s backed up.

Historically, the Bank of England only ever offered earmarked gold accounts to its central bank customers, and on a few occasions in the 1950s and 1970s it actually pushed back on plans to offer customers fine gold ounce balance accounts (and got legal advice on this), because the Bank did not want to go down the road of ending up with one pool of gold backing multiple central bank customer accounts, as this went against the concept of custody of assets and title to specific gold, and furthermore the Bank was afraid of the legal implications of central banks depositing specific bars but getting back different bars which might not be of the same quality etc.

March 2017: Banixco Releases Detailed Bar List

Initially, as per his 17 February article, Banixco only provided Barba with a list of the 7,265 gold bars showing two columns of data, the first column listing internal Bar-IDs from the Bank of England’s gold bar database, and the second column listing the refiner brand names of the bars. This first list can be seen here, but it’s not really that important, because a few weeks later, Banixco agreed to provide Barba with a second, much more comprehensive list. This second list is featured in Barba’s article dated 7 March 2017.

The latter Banixco gold bar list file can be downloaded here. For each of the 7,265 gold bars listed (in 7265 Rows), the list contains 7 columns or variables of data, namely:

  • Sequence Number from 1 to 7265
  • “Serial Number” (which is an internal Bank of England sequence number)
  • Brand Code (an 8-digit code)
  • Gross Weight (troy ounces to 2 decimal places)
  • Assay (gold Fineness)
  • Fine Weight (troy ounces to 3 decimal places)
  • Refiner Brand

Although the Banixco list does not include the real serial numbers that each gold refiner stamps on its own gold bars, the combination of columns “refiner brand – gross weight – assay – fine weight” in the list should be adequate to uniquely identify each bar, because don’t forget, these are variable weight bars and each bar for a given refiner will have a different fine weight when expressed to 3 decimal places. The start of the list looks as per the below screenshot:

Banixco gold bar list - List of wholesale gold bars held by the Bank of Mexico in the Bank of England gold vaults in London
Banixco gold bar list – List of wholesale gold bars held by the Bank of Mexico in the Bank of England gold vaults in London

Overall, the 7265 gold bars weigh 2,919,911.55 troy ounces and contain a total of 2,912,000 fine troy ounces of gold.The list provided by Banixco is sorted by ‘Brand Code’ which is an 8-digit Bank of England database table field that consists of refiner code (digits 1-4), refiner location (digits 5-6) and sequence number (digits 7-8). For example, Valcambi is VALCCH01 i.e. VALC, CH = Switzerland, and 01.

The 2nd column in the list is a Bank of England internal ID bar number which is either 6 or 7 digits. On Mexico’s list, the highest number is 1047712 and the lowest number is 704989, but the numbers present on the list run in short and broken sequential ranges of, for example, 1039142-1039221 or  880338-880446. If this is a sequential internal series of numbers that started at 000001, it would suggest that more than 1 million individual Good Delivery Bars have passed through the Bank of England’s 10 gold vaults since the numbering series was initiated. The series may not be fully sequential at all, and could possibly also include some part of the number signifying vault location, although this is doubtful.

Rand Refinery

The Refiner Bar Names on Mexico’s Gold Bar List

There are 24 ‘Brand Codes’ listed on the Mexico’s gold bar list, including such refiners as South Africa’s Rand Refinery, Australia’s Perth Mint, Switzerland’s Valcambi, Argor-Heraeus and Metalor, the Royal Canadian Mint, Germany’s Heraeus, Johnson Matthey, the US Assay Office, the State Refinery (Moscow), the Central Bank of the Philippines Gold Refinery, and N.M. Rothschild. Many of these brands held at the Bank of England are the same refiner brands which are trusted and popular in the retail investment gold bar market,  and carried by BullionStar, such as Perth MintArgor-Heraeus, Heraeus, Royal Canadian Mint, and Johnson Matthey.

Some refiners have, or have had over time, refinery operations in multiple geographic locations, so some refiners have multiple Brand Codes listed in the Bank of England gold bar database. One example is Johnson Matthey, which on the Banixco list is listed as 4 separate entities, namely Johnson Matthey Salt Lake City USA, Johnson Matthey and Co Ltd [GB], Johnson Matthey & Mallory Ltd. Toronto,  and Johnson Matthey Hong Kong Ltd. Another example is Metalor, which is present on the Banixco list in 3 guises, namely Metalor Hong Kong, Metalor USA, and Metalor Technologies SA (Switzerland).

Other long-standing refiners have gone through various mergers over time and their historic parts are now all part of a larger refining group. This applies to “Perth Mint” bars, which on the Banixco list are represented by Western Australia Mint (Trading as AGR) , AGR Joint Venture Melbourne and the Royal Mint (Perth).

On an individual Brand Code basis, the below table shows these refinery brand names, and the number of gold bars of each brand name that show up on Mexico’s gold bar weight list.

Central Bank of Mexico - Refinery brands of the 1765 gold bars held in custody at the Bank of England gold vaults in London
Central Bank of Mexico – Refinery brand names of the 7265 large gold bars held in custody for Mexico at the Bank of England gold vaults in London

First up is the Rand Refinery, with Banixco holding 1735 rand Refinery gold bars. Nearly a quarter of Banixco’s earmarked bars are Rand Refinery bars. It’s not surprising that on a refiner name basis, Banixco holds more Rand Refinery gold bars than any other bar brand. After all, Rand Refinery of South Africa is said to have refined over 50,000 tonnes of gold since it was established in 1921, which is about 30% of all the gold that has ever been mined. A lot of Rand Refinery bars were also historically sold in the London Gold Market and held within the bank of England vaults. This is probably still the case.

For example, according to the Bank of England archives, most of the gold held by the  International Monetary Fund (IMF) at the Bank of England was (as of the late 1970s) in the form of Rand Refinery gold bars. Whether this is still the case is unclear, as the IMF is ultra secretive about its remaining gold reserves and never reports facts such as gold bar weight lists.

Perth Mint

Second up is AGR Joint Venture, which is now technically part of the Perth Mint, with the Bank of Mexico holding 1519 of these bars. Together with the Rand refinery bars, these two brands makeup 45% of Banixco’s total holdings. Adding in the bars of Johnson Matthey Toronto and Valcambi Switzerland, nearly 70% of Mexico’s bars are from just 4 bar brands.

Grouping refiner names where appropriate such as all Johnson Matthey names and all Perth Mint related names, results in a slightly different ranking, with Perth Mint taking pole position with 1892 bars held by Banixco, and with Rand Refinery and Johnson matthey in exact joint second place with 1736 bars a piece in the Mexican holdings.

Central Bank of Mexico – Refinery brand names of the 7265 large gold bars held in custody for Mexico at the Bank of England gold vaults in London

Under this grouping approach, 74% of Mexico’s gold bars have been manufactured by just 3 refinery groups, rising to nearly 85% if Valcambi bars are included.

One of the reasons for highlighting this, is that it could be useful for extrapolating the frequency of gold bar brands that might be held across gold accounts generally at the Bank of England. While this extrapolation might be flawed, it does suggest that there are certain refinery bars brands that are more common than others within the Bank of England vault network.

The Bank of England did not just go and transfer newly refined gold bars into the Banixco account. It populated the Banixco allocated gold holding (in 2011 or after) with a selection of bars from lots of different eras. Hence the presence of NM Rothschild bars, US Assay Office bars, old Royal Mint (Perth) bars, as well as AGR Joint venture bars. Its also possible that a bullion bank or bullion banks executed the order on behalf of Mexico with gold that these banks store at the Bank of England (bullion banks also store gold at the bank of England for those who were not aware of this fact).

AGR Joint Venture bars were only produced until 2003. See here for details of AGR’s history. NM Rothschild bars have not been produced since 1967. Royal Mint (Perth) bars are extremely old and have not been produced under this name for a very long time. LBMA Good Delivery records don’t even specify when Royal Mint (Perth) bars ceased to be produced. The last Johnson Matthey bars produced in England were in 2005. US Assay Office bars (from the New York Assay Office) haven’t been produced since 1997 at the latest, and mostly well before that. Therefore, even though the Banixco gold bar list doesn’t list year of manufacture for each bar, some inferences can be made to show that a lot of the bars allocated to the Mexican gold account at the Bank of England are old bars that are no longer in production. But that’s not surprising because gold is a store of wealth and has been for 1000s of years, so an old bar is as good as a newer bar.

The bar list is also interesting in that it shows that when the Bank of England (or a bullion bank with a gold holding at the Bank of England) either buys physical gold bars on behalf of a central bank customer, or allocates specific bars to a central bank gold account for a gold balance that was previously in a unallocated account, it is either transferring gold from a Bank of England inventory holding, or by buying gold from another central bank  that’s already in its vaults, or else buying gold from a bullion bank that probably also has gold stored at the Bank of England, part of which may be gold that has flowed out of gold-backed Exchange Traded Funds that store their gold in the London vaults.


Which brings us to some critical points. Using the “refiner brand – gross weight – assay – fine weight” combination for bars on the Banixco list, it should be possible to cross reference these bars against records of gold bars that have been held over time in gold-backed ETFs such as GLD and IAU. Various gold researchers such as Warren James maintain databases with records of all gold bars that are in and that have ever been in gold-backed ETFs. If a bar on the Banixco list has a match in those database tables, then it proves that the Bank of England sources gold for its central bank customers that was at one time held in one of the ETFs. And this probably happens, since the bullion banks such as HSBC and JP Morgan are active in allocating and deallocating gold in and out of  ETFs, and they hold gold accounts at the Bank of England and are active in the gold lending market.

More importantly, if in the future, a gold-backed ETF flags up one or more gold bars that were among the 7265 gold bars on the Banixco list, and Banixco hasn’t reported selling any gold, then it will prove that Banixco either lent or swapped some of ts gold while still accounting for it under ‘gold and gold receivables’ in its balance sheet, and it will prove that central bank gold is being double counted while on loan, i.e. claimed to be held by a central bank, while really being held in a gold-backed ETF.

More Bad News for the LBMA Silver Price, but an Opportunity for Overhaul

On Friday 3 March 2017, in a surprise announcement with implications for the global silver market, the London Bullion Market Association (LBMA) informed its members that the current administrator and calculation agent of its recently launched LBMA Silver Price auction, Thomson Reuters and the CME Group respectively, will be pulling out of providing their services to the problematic London-based silver price benchmark within the near future. Thomson Reuters and the CME Group issued identical statements.

This is surprising because Thomson Reuters and the CME Group only began administering / calculating the LBMA Silver Price auction two and a half years ago in August 2014, when, amid much hubris, the duo were awarded the contract after a long-drawn-out and high-profile tender process. Notably, the Thomson Reuters  / CME contract with the LBMA was for a 5-year term running up to and into 2019. So the duo are now pulling out mid-way through a contract cycle.

More surprisingly, in their statements of 3 March, the LBMA / Thomson Reuters and CME allude to the European Benchmark Regulation being in some way responsible for the hasty departure. However, given that the units of CME and Thomson Reuters that are parties to the LBMA contract are their specialist benchmark units “CME Benchmark Europe Limited” and “Thomson Reuters Benchmark Services Limited”, which specialise in administering and calculating benchmarks, this excuse makes no sense.

In essence, this development is an embarrassment for all concerned and could lead to further reputational damage for the parties involved. It also now re-focuses market scrutiny on an area which the LBMA and its associates could well wish to forget, i.e. the former London silver fixing run by the infamous London Silver Market Fixing Limited, a company which itself is still one of the defendants, along with HSBC, Bank of Nova Scotia and Deutsche Bank, in a live New York class action suit that is scrutinizing the manipulation of the London silver price.

LBMA Silver Price: A Regulated Benchmark

Note that the LBMA Silver Price benchmark is now a “Regulated Benchmark” under United Kingdom HM Treasury Legislation, and is one of 8 financial market benchmarks regulated by the UK’s Financial Conduct Authority (FCA). So this is not some backwater obscure benchmark that we are talking about here. This is a benchmark with far-reaching effects on the global precious metals markets and a sister of the LBMA Gold Price benchmark. The reference prices from these benchmarks are used from everything from valuing Exchange Traded Funds (ETFs) to being the price reference points in ISDA swaps and bullion bank structured products such as barrier options.

According to the LBMA’s usual public relations mouthpiece Reuters, which relayed the news to the broader market on 3 March, the LBMA will be:

“looking to identify a new provider in the summer, and have the new platform up and running in the autumn”

This dramatic “exit stage right” by Thomson Reuters and the CME Group is a far cry from their initial and continued corporate spin of being committed to the silver price auction, which they claimed both at auction launch in August 2014, and also as recently as 2016 when they grovelled with promises of process improvement and wider participation in the auction in the wake of the silver price manipulation fiasco in the LBMA Silver Price auction on 28 January 2016.

It was on 28 january 2016 that the midday auction took a whopping 29 rounds to complete and the price derived in the auction was manipulated down by a massive 6% under where silver spot and silver futures prices were trading at that time. See the beginning of BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing” for further details about the 28 January auction.



Where is the Commitment?

On 15 August 2014, the day the LBMA Silver Price auction was launched, William Knottenbelt, MD at CME Group stated:

“Through our existing relationships with market participants and the broader silver marketplace we are uniquely positioned to provide a seamless transition for the spot silver benchmark in London.” 

“CME Group has a long and successful history of offering benchmark risk management and price discovery solutions for the global precious metals markets.” 

Then, on 22 March 2016, when CME and Thomson Reuters introduced some changes to the auction in the wake of the 28 January 2016 auction price manipulation, both parties released more spin on their continued commitment to the auction. Thomson Reuters’ Head of Benchmark Services, Tobias Sproehnle, in a statement that now looks to be hollow, said:

“these changes together with a comprehensive consultation with the broader silver community – producers, intermediaries and consumers - are a further demonstration of Thomson Reuters and CME Group’s commitment to providing innovative, market leading benchmarks for the Silver market.

While Gavin Lee, the head of CME Benchmark Services, led with an equally hubristic statement that:

“in consultation with Silver market participants, we are always looking for new ways to develop this benchmark further

These statements from CME and Thomson Reuters, less than a year ago, run totally contrary to the fact that the duo are now going to abandon the LBMA Silver Price auction ship, which will necessitate the appointment of a replacement administrator and calculation agent. Where is the continued “commitment” to the silver benchmark and the silver market that they were we eager to espouse last March?

Why the Hasty Departure?

According to the Reuters news report last Friday 3 March:

A spokesman for Thomson Reuters confirmed the company was stepping down from the process. CME could not immediately be reached for comment.

Not very informative or cooperative from either party when one of the providers was not even available to explain its exit rationale, and the other merely confirms a fact to its in-house news arm, a fact which the LBMA had already announced earlier that day to its members.

However, if you look at the CME Group website, a short announcement was added to its website on 3 March 2017, which states:

The forthcoming European Benchmark Regulation, due to be implemented in January 2018, prompted a review of the existing LBMA Silver Price administration arrangements and, in consultation with the LBMA, CME Group and Thomson Reuters have decided to step down from their respective roles in relation to the LBMA Silver Price auction.

This statement was also added to the Thomson Reuters website on 3 March.

Before briefly looking at the relevance of this “European Benchmark Regulation”, which the Reuters news article even failed to mention, its notable that the CME / Thomson Reuters early withdrawal was also covered on 3 March by the MetalBulletin website.

According to MetalBulletin (subscription site), the above statement by CME is apparently part of an identical statement which the LBMA released to it members on Friday 3 March (the LBMA statement).

MetalBulletin adds in its commentary that:

“CME is looking to streamline its precious metals division, with contracts in this area being its fastest growing asset. The exchange wants to focus on its core products, Metal Bulletin understands.”

What MetalBulletin means by this I don’t know. The logic doesn’t make any sense. The sentence doesn’t even make sense. Benchmarks are a core product of CME group. CME even states that it offers:

“the widest range of global benchmark products across all major asset classes”

CME Benchmark Europe Limited was specifically set up in 2014 to provide the calculation platform for the LBMA Silver Price. Furthermore, CME has just launched a suite of silver and gold futures contracts for the London market (launched in late January 2017), the silver contract being the “London Spot Silver Futures (code SSP)“. Even though these CME contracts have had no trading interest so far, the CME claims that it is currently “working with major banks to synchronize their systems to start trading” these contracts (London Spot Silver Futures and London Spot Gold Futures).

So why would CME want to voluntarily ditch the provision of a high-profile London silver benchmark, when it could attain trading synergies between the LBMA Silver Price and its new London silver futures contracts, or at the very least improve brand recognition in the market?  And not to forget CME and Thomson Reuters claim a”commitment to providing innovative, market leading benchmarks for the Silver market“.

European Benchmark Regulation

Turning to the new “European Benchmark Regulation”, what exactly is it, and why would it be relevant for the LBMA and CME and Thomson Reuters to mention the European benchmark Regulation in the context CME and Thomson Reuters pulling out of the LBMA Silver Price auction?

At its outset, the European Benchmark Regulation was proposed by the European Commission. The Commission’s proposal was also issued in coordination with a range of entities and initiatives such as MiFID, the Market Abuse Directive, the benchmark setting processes of the  European Securities and Markets Authority (ESMA) and European Banking Authority (EBA), and also the IOSCO financial benchmark principles.

According to law firm Clifford Chance:

The new [EU] Regulation is a key part of the EU’s response to the LIBOR scandal and
the allegations of manipulation of foreign exchange and commodity benchmarks

“The Regulation imposes new requirements on firms that provide, contribute to or use a wide range of interest rate, currency, securities, commodity and other indices and reference prices.”

“Most of the new rules will not apply until 1 January 2018″

“The new Regulation imposes broad ranging and exacting requirements
on a wide range of market participants. It may reinforce the trend to discontinue benchmarks and reference prices

According to law firm Simmons & Simmons:

The Regulation seeks to:

  • improve governance and controls over the benchmark process, in particular to ensure that administrators avoid conflicts of interest, or at least manage them adequately
  • improve the quality of input data and methodologies used by benchmark administrators
  • ensure that contributors to benchmarks and the data they provide are subject to adequate controls, in particular to avoid conflicts of interest
  • protect consumers and investors through greater transparency and adequate rights of redress.

The Regulation aims to address potential issues at each stage of the benchmark process and will apply in respect of:

  • the provision of benchmarks
  • the contribution of input data to a benchmark, and
  • the use of a benchmark within the EU.

All of these goals aspired to by the legislation of the European Benchmark Regulation seem reasonable and would benefit users of the LBMA Silver Price auction, so given the above, it seems very bizarre that CME and Thomson Reuters and the LBMA stated last Friday 3 March that:

The forthcoming European Benchmark Regulation, due to be implemented in January 2018, prompted a review of the existing LBMA Silver Price administration arrangements

Remember that the CME and Thomson Reuters service providers to the LBMA Silver Price are their specialist benchmark units “CME Benchmark Europe Limited” and “Thomson Reuters Benchmark Services Limited”. That is what these units do, administer and calculate benchmarks. This European benchmark Regulation has been known about for a few years. Especially known about by the benchmark units of CME and Thomson Reuters. The Regulation didn’t suddenly appear out of nowhere last week, as the above statement is appearing to hint at.

And why such a brief and unclear statement from CME, Thomson Reuters and the LBMA? Is this European Benchmark Regulation just an excuse being thrown out to distract from other issues that might really be behind CME and Thomson Reuters stepping down.

Or perhaps CME and Thomson Reuters are aware of issues within the current administration of the LBMA Silver Price that would make it difficult to comply with the new legislation or that would make it too onerous to comply? But such rationale doesn’t make sense either because why are CME and Thomson Reuters not bailing out of the all the benchmarks that they are involved in? Furthermore, if the European Benchmark Regulation is a factor, why would any other benchmark service provider such as ICE Benchmark Administration (IBA) bother to pitch in the LBMA’s forthcoming tender process to find a replacement for Thomson Reuters and CME?

Perhaps CME and Thomson Reuters are worried about future reputation damage of being associated with the LBMA Silver Price due to some brewing scandal? Or perhaps the powerful bullion banks within the LBMA wanted to scupper any change that there will ever be wider participation or central clearing in any future version of the auction?

I will leave it to readers to do their own research on this and draw their own conclusions.

A Banking Cartel vs. Wider Auction Participation

One issue which has dogged the LBMA Silver Price auction since launch is that it never gained any level of “wider participation” or market representative participation. There are only 7 bullion banks authorised by the LBMA to be direct participants in the auction, and there are zero direct participants from the silver mining, silver refineries, and silver sectors.

This is despite the LBMA, CME and Thomson Reuters all misleading the global silver market on this issue on many occasions, and claiming that there would be very wide participation in the auction after it was launched. See BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing” for a huge amount of factual evidence to back up this statement, including webcasts by CME, Thomson Reuters and the LBMA, and an interview by Reuters with LBMA consultant Jonathan Spall, formerly of Barclays. Here are a few examples:

The LBMA’s Ruth Crowell was claiming back in July and August 2014 that they were interested in having 111 direct participants:

“clear demand for increased direct participation, and we had 25% of those 444 coming back saying they would be interested, and we’re still interested in having all of those participants on board”

“The advantage with centralised clearing, particularly for the pricing mechanism, is that we can really exponentially grow the amount of direct participants

Jonathan Spall, LBMA Consultant stated that:

“The hope of course is that we get many more participants in the new benchmark process….while it is likely that we will start by having banks involved it is ultimately hoped that the wider market will participate, be they refiners, miners etc.

“Ultimately – and as I said before – the intention is that there is much wider participation. So yes, refiners, miners etc.

Harriett Hunnable, then of the CME Group, stated:

“So this is really the new world, this is not the old fixing…..this is wider participation…and the London bullion market is really encouraging that…this is the new world, or the LBMA Silver Price!”.

According to the CME / LBMA / Thomson Reuters presentations, there was supposed to be a “phase 3 introduction of centralised clearing

Central counterparty clearing will enable greater direct participation in the London Silver Price

In summary, central clearing would allow direct participants to participate directly in the auction without the need for bi-lateral credit lines. However, the plan for central clearing was quietly dropped. The CME and Thomson Reuters have now had 32 months in which to introduce central clearing into the silver auction and it hasn’t happened. Nor will it now. The fact of the matter is that the LBMA banks do not want wider participation and they don’t want central clearing of auction trades either. These banks, which at the end of the day are just costly intermediaries, essentially want to monopolise the silver auction and prevent wider participation, and prevent true silver price discovery. Could it be the banks through their LBMA front that have sabotaged the contract with CME and Thomson Reuters so as to reset the contract and re-start another tender process that will ensure that no wider participation can ever see the light of day?

It’s also important to note that there is no way for miners and refiners to be direct participants in the auction. This is because the LBMA has designed the auction participant rules to keep out refiners and miners (and anyone else that is not a bullion bank). The rules are specifically designed so that only bullion banks can satisfy the LBMA’s Benchmark Participant criteria. See section 3.13 of the LBMA Silver Price auction methodology document accessible here.

Currently only 7 bullion banks are direct participants in the auction, namely HSBC, JPMorgan Chase, Bank of Nova Scotia (ScotiaMocatta), Toronto Dominion, UBS, Morgan Stanley, and China Construction Bank.  Most of these banks are very influential on the LBMA Management Committee. HSBC, Scotia and Mitsui were in the auction from Day 1 on 15 August 2014. UBS joined the auction on 26 September 2014, JP Morgan Chase Bank joined on 14 October 2014, Toronto Dominion Bank joined on 6 November 2014. Mitsui left in either late 2015 or January 2016 (the exact date is unclear). China Construction Bank only joined the auction on 6 May 2016.

Lastly, Morgan Stanley only joined the LBMA Silver Price auction on 25 October 2016 (which is just 4 months ago), at which point the LBMA / CME and Thomson Reuters had the audacity to spin that 7 LBMA bullion banks trading in a shadowy auction of unallocated silver accounts in London somehow represents the global silver market:

CME: “The addition of another member brings greater depth and diversity to the market and underlines the ongoing globalisation of the Silver Price as a leading, liquid precious metals benchmark.”

Thomson Reuters: “With the addition of Morgan Stanley to the panel, the LBMA Silver Price provides even deeper insight into the global silver market. We continue to welcome new participants to this essential mechanism for the markets.”

LBMA: “They [Morgan Stanley] add depth and liquidity to the auction and I look forward to other market participants joining in the future.”

LBMA Silver Price is NOT Representative of Silver Market

But, to reiterate (and as was stated previously in this blog), the LBMA Silver Price auction is not representative of the global Silver Market whatsoever, and it does not meet some of the simplest IOSCO benchmark requirements:

“IOSCO benchmark principles state that a benchmark should be a reliable representation of interest, i.e. that it should be representative of the market it is trying to measure. Interest is measured on metrics such as market concentration. In the Thomson Reuters methodology document (linked above), on page 11 under benchmark design principles, the authors estimate that there are 500-1000 active trading entities in the global silver market.”

The Thomson Reuters methodology document from August 2014 also admitted that “volumes in the LBMA Silver Price are a fraction of the daily volume traded in the silver futures and OTC markets”.

Why then are 7 LBMA bullion banks allowed to monopolize the representation of 500 – 1000 active trading entities from the global silver market within the auction, an auction that its worth remembering generates a silver reference price which is used as a global silver price reference and pricing source?

BullionStar investment silver bars and coins

Refiners and Miners

Based on the current rules, the vast majority of the world’s silver refiners cannot directly take part in the LBMA Silver Price auction.

Only 8 precious metals refiners are Full Members of the LBMA while 25 refiners are associates of the LBMA. Of the 8 full members, 5 of these refiners are on the LBMA refiner Referee panel, namely, Argor-heraeus, Metalor and PAMP from Switzerland, Rand Refinery from South Africa, and Tanaka Kikinzoki Kogyo from Japan. These refiners were added to the panel as LBMA Associates in 2003, and were only made Full Members in 2012. The only reason they happened to be fast-tracked as full members of the LBMA was due to their status as Referees for the LBMA good delivery list. Even the other major Swiss based refinery Valcambi is still not a full member of the LBMA.

Based on the current participant criteria of the Silver auction, where only full LBMA members could conceivably become direct participants, 25 of the refiners that are LBMA Associates cannot directly take part in the auction even if they wanted to. Candidates for Full LBMA Membership also have to jump through a number of hoops based on sponsorship by existing members, business relationships, due diligence, and involvement in the precious metals markets.

For a refiner to even become a LBMA associate, the refiner must have already attained Good Delivery Status for its silver or gold bars. There are about 80 refineries on the LBMA’s current Good Delivery List for silver. The chance of the vast majority of these refiners taking part in the LBMA silver auction is nil since not only are they not LBMA full members, they aren’t even LBMA associates.

Based on the current auction criteria, it’s without doubt literally impossible for nearly all silver producers / miners on the planet to directly participate in the LBMA Silver Price auction. Precious metal mining companies are not normally officially connected to the LBMA, and would more naturally be members of the Silver Institute or World Gold Council or another mining sector organization. So it’s confusing as to why the LBMA even mentions mining companies as possible auction participants since there are no mining companies that are Full Members of the LBMA, so they cannot be participants in the silver auction. The only mining companies that are even “Associates” of the LBMA are Anglogold Ashanti and Coeur Mining.

In 2014, Coeur Mining’s treasurer, referring to the LBMA Silver auction said:

“We hope to have the opportunity to become a direct participant down the road and look forward to working with the LBMA, CME and other silver producers to drive the evolution of this market.”

The unfortunate Coeur Mining now looks like it has been strung along by the LBMA with empty promises that it can somehow someday participate in the silver auction, but this is literally a fiction given the way the auction rules are currently set up.


In its announcement on 3 March, the LBMA said that it will shortly launch a tender process to appoint a replacement provider. The LBMA told Reuters News:

“We would be looking to identify a new provider in the summer, and have the new platform up and running in the autumn”

However, given the abysmal track record of the LBMA Silver Price, the question that should really be asked at this time is why is the bullion bank controlled LBMA even allowed to be in charge of such an important “Regulated Benchmark” as a global silver price benchmark, a benchmark that has far-reaching effects on global buyers and sellers of silver.

Take a brief look back at how the last tender process run by the LBMA for the London silver price was handled.

A Silver Price Seminar held by the LBMA on 19 June 2014 was not even open to the wider bullion market. As Ruth Crowell, CEO of the LBMA, told the publication MetalBulletin in an October 2014 interview:

“Not just our members, but ISDA members, and any legitimate members of the market were invited to the seminar. We also had observers from the FCA and the Bank of England. We wanted to keep [attendance] as wide-ranging as possible but to avoid anyone who perhaps would be disruptive

What is this supposed to mean? To prevent anyone attending the seminar who might have a different view on how the global silver price benchmark should be operated that doesn’t align with the view of the LBMA?

The actual process of selecting the winning bid from the shortlist of tender applicants was only open to LBMA Full members and Seminar attendees via a 2nd round voting survey. The independent consultant review that was part of the selection process, was conducted by someone, Jonathan Spall, who was not independent of the former fixings and so should not have been involved in the process.

Promises of wider participation involving refiners and miners were abandoned. Promises of central clearing of auction traded were thrown out the window. Prior to launch, the auction platform was hastily built by Thomson Reuters and CME without an adequate market-wide solution for clearing silver trades. Another of the bidders, Autilla/LME, had a working auction solution which would have allowed wider market participation at August 15 2014 go-live, but this solution was rejected by the LBMA Management Committee, LBMA Market Makers and the LBMA Data Working Group, the groups which had the ultimate say in which applicant won the tender.

There were only 3 participants in the LBMA Silver Price auction (all of them banks) when it was launched in August 2014, and two of which, HSBC and Scotia, were parties to the former London Silver Fixing. The LBMA Silver Price auction was therefore an example of same old wine in a new bottle. The same 2 banks, HSBC and Scotia are now defendants in a silver price manipulation class action suit in New York. There are now only 7 direct participants in the LBMA Silver Price. These are all bullion banks. This is 32 months after the auction has been launched. The LBMA accreditation process specifically prevents refiners and miners from joining the auction. As there are 500 – 1000 trading entities of silver globally, the LBMA Silver Price mechanism is totally unrepresentative of the silver market.

The defection of CME and Thomson Reuters now provides a one-off opportunity for the global silver market to insist that the current scandal ridden current auction be scrapped and taken out of the hands of the bullion bank controlled London Bullion Market Association (LBMA). It is also an opportunity to introduce a proper silver price auction in its place that is structured to allow direct participation by hundreds of silver trading entities such as the world’s silver refiners and miners, an auction that employs central clearing to allow this wider participation, and an auction that is based on trading real physical silver and not the paper credits representing unallocated claims that the participating London bullion banks shunt around between themselves. This could help lead to real silver price discovery in the global silver market. However, the chances of this happening with the LBMA still involved in the new tender process are nil.

Germany’s Gold remains a Mystery as Mainstream Media cheer leads

On 9 February 2017, the Deutsche Bundesbank issued an update on its extremely long-drawn-out gold repatriation program, an update in which it claimed to have transferred 111 tonnes of gold from the Federal Reserve Bank of New York to Germany during 2016, while also transferring an additional 105 tonnes of gold from the Banque de France in Paris to Germany during the same time-period.

Following these assumed gold bar movements, the Bundesbank now claims to have achieved its early 2013 goal of repatriating 300 tonnes of gold from New York to Frankfurt, but after 4 years it is still 91 tonnes short of its planned transfer of 374 tonnes of gold from Paris to Frankfurt. In essence, over an entire 4-year period (i.e. 208 weeks), the Bundesbank has only been able to transfer 583 tonnes of gold back from New York and Paris to Germany. And the Bundesbank still claims to have 1236 tonnes of gold remaining in storage with the New York Fed.

Predictably, instead of prompting the mainstream financial media into asking why these supposed gold bar movements have taken so long, the Bundesbank press release threw the mainstream media into a frenzy of immediately back-slapping the Bundesbank while regurgitating its press release with articles such as “Germany brings its gold stash home sooner than planned” from Reuters , “Germany Gets Its Gold Back Faster With Job Seen Done in 2017” from Bloomberg, and “Germans Sent Gold Away to Keep It From the Soviets. Now Much of It Is Back” from the New York Times.

Furthermore, if the mainstream financial media had bothered looking at Federal Reserve “Table 3.13 – Selected Foreign Official Assets Held at Federal Reserve Banks” under ‘Earmarked Gold’ (line item 4), they would have seen that the foreign custody gold figure that the Fed reports has not changed since September 2016, and that the Fed’s foreign custody gold figure had dropped by 113 tonnes between March 2016 and September 2016, meaning that the Bundesbank’s 111 tonne gold transfer from the US to Germany had been completed by September 2016, i.e. at least 4 months before the Bundesbank reported it.

table frb
Selected Foreign Official Assets Held at Federal Reserve Banks – ‘Earmarked Gold’, 2016. CLICK TO ENLARGE

100 tonnes of gold per day Air-Lifted

All gold withdrawals from the Fed’s “earmarked gold” reporting category in 2016 occurred between March and September 2016, with activity each month throughout that period except in May. As to why there were gold withdrawals from the Fed of 113.45 tonnes when the Bundesbank only reported transferring back 111 tonnes is not clear. Was an additional amount withdrawn from the Fed vault by another foreign central bank or did the Bundesbank conduct further melting down of its US Assay office gold bars and lose 2+ tonnes (1.7%) of fine ounce content that was overstated in its Federal Reserve holdings? Or perhaps this amount was lost when weighing old US Assay Office ‘melts’ (batches of 18-22 bars) which had never been properly weighed before.

Whatever the case, we will never know because the Fed does not divulge the identities of its central bank gold custody customers, nor does the Bundesbank divulge simple details such as gold bar serial numbers on its so-called gold bar list (more of which below).

Simple common sense would have alerted the mainstream media robots to the fact that it is not normal for international gold movements to take 4 years to complete, and that there is something absolutely not right with Germany’s foreign held gold taking so long to transport from New York and Paris. Paris is just a 1 hour flight from Frankfurt and 6 hours by road, and New York is less than 9 hours flying time to Frankfurt.

Other simple questions which the mainstream financial media have failed to ask or have failed to think of include why does the Bundesbank need to keep any gold at all stored at the Federal Reserve in New York, let alone 1236 tonnes, when the New York Fed vault is not even an international gold trading center. And is this gold left in New York is under any liens, claims, encumbrances, loans or swaps?

In contrast to the Bundesbank’s laughable repatriation program duration, take for example, the Banco Central do Venezuela, which was able to transfer 160 tonnes of gold from Europe to Venezuela’s capital, Caracas, over a 2 month period from 25 November 2011 to 30 January 2012. See “Venezuela’s Gold Reserves – Part 2: From Repatriation to Reactivation” for details.

That’s 80 tonnes per month, which would equate to a 4 month transfer window for 300 tonnes of the Bundesbank’s gold stored in New York, not 4 years. Furthermore, why is the mainstream media not asking the Bundesbank why it takes more than 4 years to transfer 374 tonnes of gold from Paris to Frankfurt?

More damning to the contemporary Bundesbank, the same Americans (Federal Reserve) were able to fly over 800 tonnes of gold from the US to England exactly 50 year ago, in November and December 1967, to prop up their share of the London Gold Pool gold holdings at the Bank of England. This gold was flown into RAF Mildenhall in Suffolk over 9 days in batches of around 100 tonnes each day using US air force cargo carriers, and then this gold was ferried by police escorted convoys down to the City of London.

The first 4 of these US air force flights were on Tuesday 28 November 1967, Wednesday 29 November, Friday 1 December, and Sunday 3 December, with the Americans flying in 100 tonnes of gold each day to RAF Mildenhall over those 4 days. That’s 400 tonnes of gold flown from the US to Europe in just 6 days. See screenshot below.

100 tonnes per day
The Federal Reserve is able to organise massive and rapid gold movements by air when it wants to

These 4 flights in late November and early December 1967 were followed by 5 more flights on Tuesday 19 December, Thursday 21 December, Thursday 28 December , Friday 29 December, and Sunday 31 December 1967. These 5 flights transported another 445 tonnes of gold bars (14,317,458 fine ounces) from the US to the Bank of England vaults (see screenshot below). That’s another 445 tonnes of gold moved from the US to London in just 13 days.

5 flights
Federal Reserve had 445 tonnes of gold flown from the US to London in just 13 days in December 1967

Overall, the November and December 1967 gold airlifts transported nearly 850 tonnes of gold from the US to Europe in just 1 month.

There were also further massive gold airlifts from the US to the Bank of England in the summer of 1968 which ironically the Federal Reserve needed to do so as to pay back physical gold swaps which the Bundesbank had made available to the Americans at the Bank of England during the last days of the London Gold Pool in March 1968.

These rapid and massive physical gold movements over international borders in 1967 and 1968 show how laughable the Bundesbank’s current gold repatriation program actually is, and how servile the mainstream financial media are in not even questioning the timeframe of the Bundesbank’s repatriation operations.

RAF Mildenhall police escort
POLICE ESCORTS for Gold Run from RAF MILDENHALL to BANK OF ENGLAND, December 1967. Source here

Updated “So-Called” Bar List

Following its press release on 9 February, the Bundesbank then published an updated version of its so-called gold bar list on 23 February, specifying its gold holdings as of 31 December 2016. A so-called gold bar list, because the format of the Bundesbank’s gold bar list does not follow any accepted industry standard format and does not contain basic details such as bar serial number and bar refiner name that are crucial to any normal gold bar weight list. The updated Bundesbank bar list was also released in a very low-key way, and its publication does not seem to have been picked up by any of the mainstream financial media. The updated Bundesbank ‘list’ can be viewed here in a file that the Bundesbank had actually created on 14 February 2017.

DB 2016
Bundesbank gold bar holdings as per 31 December 2016

To reiterate, a proper gold bar weight list, as per the definition of the London Bullion Market Association (LBMA) in its Good Delivery Rules for Gold and Silver Bars, contains the following details:

  • Serial Number of bar
  • Bar Refiner Brand
  • Gross weight (troy ounces)
  • Assay (Fineness)
  • Fine Weight (troy ounces)

For example, here is a recent gold bar weight list from the iShares Gold Trust (IAU). For each bar held in the iShares Gold Trust, the weight list lists:

  • bar brand (refiner name)
  • bar serial number
  • shape (400 oz)
  • Assay (fineness)
  • Gross ounces
  • Fine ounces
  • Vault (example JP Morgan London)

The Bundesbank claims that all of its gold bars are good delivery bars, so it and its gold custodians (Bank of England, Banque de France and Federal Reserve Bank of New York) have all of this information stored on their respective gold bar accounting systems, including real bar serial numbers and refiner names. They have to store this information since any bars entering or leaving LBMA network gold vaults need to be accompanied by proper weight lists, including serial number and bar refiner brand.

Compare a proper weight list with the sparse and incomplete what the Bundesbank includes in its gold bar list:

  • Inventory Number (internal sequence numbers or incomplete bar numbers)
  • Gross Weight
  • Fineness
  • Fine Weight
Bundesbank 'list' format
Bundesbank gold bar ‘list’ format – No serial numbers, No bar refiner names

For Germany’s bars listed as held by the Bundesbank, Bank of England and Banque de France, these inventory numbers are merely “internally assigned inventory numbers”, and ludicrously in the case of the Bank of England and Banque de France gold vaults, they only allow other central banks to publish partial internal inventory numbers (the last three digits).

The secrecy with which the Bank of England, Banque de France and other central banks treat real gold bar serial numbers and other identifiers is most likely due to their paranoia that publication of such serial numbers would undermine their ability to operate with secrecy in the gold lending and gold swap market where bar identities might pop up in the gold holdings of commercial operators such as gold-backed Exchange Traded Funds (ETFs).

Numbers listed against Bundesbank bars held at the Federal Reserve Bank of New York do supposedly show a refiner number, or a melt number, but without the refiner name and year of manufacture of these bars being divulged by the Bundesbank, there is no way to verify and cross-check these bar numbers.

Note that this new Bundesbank gold bar list is the third such list that it has published, and it is in the same format as the previous two versions, both of which are also not real gold bar weight lists since they lack refiner serial numbers and refiner names.

For the purposes of this article, let’s refer to a “Bundesbank bar list” as an “incomplete partial weight list”. The Bundesbank had actually signalled the publication of its updated list at the bottom of its 9 February press release, where it stated:

“On 23 February, the Bundesbank will publish an updated list of its gold bars on its website. This list contains the bar, melt or inventory numbers, the gross and fine weight as well as the fineness of the gold.”

3 Bundesbank gold bar lists

To recap, the Bundesbank had already published 2 incomplete partial weight lists. The first of these was published on 7 October 2015 and showed holdings as of 31 December 2014. The file can be accessed here, or at the bottom of the page here. The Bundesbank actually created this file on 5 October 2015 and saved it with a file name of 2015_10_07_gold.pdf.

DB 2014
Cover page of Bundesbank’s 2014 incomplete partial gold bar list

The publication of this first bar list was elegantly and deftly dissected and critiqued by Peter Boehringer, of the German campaign “Repatriate our Gold”, in his October 2015 article “Guest Post: 47 years after 1968, Bundesbank STILL fails to deliver a gold bar number list”.

The Bundesbank’s second incomplete partial weight list was created on 4 February 2016 and listed holdings as of 31 December 2015, and was published sometime after 4 February 2016. Confusingly, the incomplete partial weight list as of 31 December 2015 file was uploaded to the same web page and with the same file name as the 31 December 2014 file (i.e. it was uploaded with the filename  2015_10_07_gold.pdf and it over-wrote the first list). This second incomplete partial weight list can be accessed here.

DB 2015
Cover page of Bundesbank’s 2015 incomplete partial gold bar list

Why no lists prior to December 2014?

Given that the Bundesbank has now demonstrated its ability to generate files itemising its gold holdings, even with limited bar details, the fact that the Bundesbank only began publishing its gold holdings’ lists in October 2015 should immediately raise suspicion as to why it did not publish such bars lists as of the end of 31 December 2012 (prior to the repatriation beginning), and as of 31 December 2013.

A casual observer would deduct that the Bundesbank does not want anyone to see an itemised list of its gold holdings on these dates in 2012 and 2013, and the casual observer would probably be correct in deducing such a conclusion. For its was during 2013 and 2014 that the Bundesbank melted down and recast 55 tonnes of the gold bars that it had held in New York. Five tonnes of its gold was melted down and recast in 2013 and a whopping 50 tonnes was melted down and recast in 2014. Recall that in January 2014, the Bundesbank stated that during 2013:

We had bars of gold which did not meet the ‘London Good Delivery’ general market standard melted down and recast. We are cooperating with gold smelters in Europe,” Thiele continued. The smelting process is being observed by independent experts. It is set up in such a manner that the Bundesbank’s gold cannot be commingled with foreign gold at any time.’

Some of the bars in our stocks in New York were produced before the Second World War.” “Our internal audit team was present last year during the on-site removal of gold bars and closely monitored everything. The smelting process is also being monitored by independent experts.”

“The very same gold arrived at the European gold smelters that we had commissioned.” “The gold was removed from the vault in the presence of the internal audit team and transported to Europe. Only once the gold had arrived in Europe was it melted down and brought to the current bar standard.”

And again in January 2015, the Bundesbank revealed that: during 2014 it:

“took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard, today’s internationally recognised standard.”

For more details of these statements, and follow-up questions to the Bundesbank, please see “The Keys to the Gold Vaults at the New York Fed – Part 3: ‘Coin Bars’, ‘Melts’ and the Bundesbank“.

If the Bundesbank had published weight lists as of the end of years 2012 and 2013, then details such as bar gross weight, fineness (gold purity), and bar fine weight would have to have been divulged. By not publishing earlier bars lists, no one outside the Bundesbank – Federal Reserve nexus will ever be aware of the weights and purities of these 55 tonnes of gold bars that were melted down and recast. The Bundesbank obviously has or had the details of these smelted bars, since it commissioned and monitored the smelting process. But as Peter Boeringher stated in his October 2015 article “it appears the bar lists for these transferred bars were lost or destroyed.”

What secrets did these bars hold? One distinct possibility was that they were low-grade coin bars, that had been produced from melted gold coin. In this case they would have been bars of 0.90 or .9167 gold purities or similar. Low grade coin bars began appearing at the NY Fed vault in Manhattan in 1968 and most likely came from the US Treasury’s gold holdings at  Fort Knox, Kentucky which consist of about 80% low-grade coin bars. It would not look good for the NY Fed if such low grade bars appeared on a foreign central bank’s gold bar list, and would invariably raise questions as to which US vaults this gold was sourced from.

Perhaps the bars that the Bundesbank melted were Prussian Mint bars from the Nazi era which the Bundesbank would be averse to holding in Germany for political reasons? Or maybe they were problematic US Assay office bars which had a lower fine ounce content than was stated on the actual bar, an issue that dogged another portion of the Bundesbank’s gold stocks in London in 1968. Or perhaps they were gold bars with some other embarrassing provenance which the Bundesbank and Federal Reserve needed to mask the true origin of. Without the Bundesbank ever clarifying this issue, we will never know.

Comparing the 3 Lists

What can we glean from comparing the 3 lists to each other? The only variable on which to compare the lists are gross weight, fineness, and fine weight, and the bar and melt counts per location.

In theory, the lists from December 2014, December 2015 and December 2016 should be identical assuming that the total amount of gold bars has not changed between versions.

If the lists are not identical, then it could suggest a number of things including:

  1. gold bars that were previously held in Melts have now been individually weighed and itemized on the more recent list. This would most likely be for bars that were transferred to Frankfurt, but could also apply to bars which remained in the other storage locations
  2. further instances of gold bars remelted / recast while being transferred from New York or Paris to Frankfurt that the Bundesbank has kept quiet about
  3. gold bars still held in Paris or New York (or London) that have been being recast and upgraded before being moved. This would apply more to Paris going forward
  4. sales of gold bars to ‘fund’ the German official gold coin program.
  5. gold lending / swap / repo transactions

Since the lists do state melt number, if there are less any melt numbers listed in more recent lists compared to older lists, then it means that the Bundesbank or its agents have weighed and itemised the individual bars in various melts (groups of 18-24 bars). For example, if the entries for 20 melts had disappeared from a more recent version of a list, then there should be about 400 extra individual bars of the newer list.

Using some quick eyeballing, the file dated 31 December 2014 has 2307 pages including introduction. The file dated 31 December 2015 has 2401 pages including introduction, i.e. the latter file has 94 extra pages. There are approximately 44 pages of melts in the 2014 file listed from page 2263 to the last page 2307. There are approximately 40 pages of melts in the 2015 file listed from page 2361 to the last page 2401. From a rough count, there are about 85 rows per page. This would mean about 340 melts were weighed and converted into itemised rows of single bars during 2015. Not all melts have full sets of bars, but assuming they did, that would be about 20 bars per melt, which would be about 20*340 = 6800 bars which would appear in individual rows in the 2015 list if the melts were “broken out”, which is about 80 pages, and is fairly near explaining the reason for the extra 94 pages in the 2025 file.

If you look at the number of gold bars listed in the press releases (current version and archived version), you will see that there were in total 270,326 bars at the end of 2014 and 270,058 bars at the end of 2015, so there were 258 less bars at the end of 2015.

As of the end of 2015, there were 34,808 bars in London vs 35,066 bars at the end of 2014. i.e. There were 258 bars less in London (about 3 tonnes). So the London drop explains the total drop. This could be gold used for a gold coin program.

This is just some quick eyeballing. The next step is to do an automated comparison of the 3 lists side by side by comparing the variables gross weight, fineness and fine weight so see which bar details may have changed over the 2 year period, and to look at what might have changed. This matching and calculation exercise will probably be undertaken by a gold bar database expert in the near future, so watch this space for further details.


A Chink of Light into London’s Gold Vaults?

On 5 February, the Financial Times of London (FT) featured a story revealing that the London Bullion Market Association (LBMA) plans to begin publishing data on the amount of real physical gold actually stored in the London precious metals vaulting network. The article titled “London gold traders to open vaults in transparency push” can be read here (accessible via FT subscription or via free monthly FT read limit).

This new LBMA ‘monthly vault data’ will, according to the FT’s sources, be published on a three-month lagged basis, and will:

show gold bars held by the BoE, the gold clearing banks, and those [vaults] operated by the security companies such as Brink’s, which are also members of the LBMA.”

The shadowy source quoted in the FT article is attributed to “a person involved in setting up the programme”, but at the same time, although “the move [to publish the data] is being led by the LBMA“, the same LBMA ”declined to comment” for the FT story. This then has all the hallmarks of a typical authorised leak to the media so as to prepare the wider market for the data release.

On 16 February, the World Gold Council in its “Gold Investor, February 2017″ publication featured a focus box on the same gold vault topic in its “In the News” section on page 4, where it states:

“Enhanced transparency from the Bank of England

The Bank of England is, for the first time, publishing monthly data revealing the amount of gold it holds on behalf of other central banks.

 As a leading custodian of gold, with one of the largest vaults in the world, the Bank of England’s decision is highly significant. Not only will it enhance the transparency of the Bank’s own gold operations; it will also support the drive towards greater transparency across the gold market.

The data reveals the total weight of gold held within the Bank of England’s vaults and includes five years of historical data.”

The Proposed Data

Based on these two announcements, it therefore looks like the gold vault data release will be a combined effort between the LBMA and the Bank of England, the blood brothers of the London Gold Market, with the Bank of England data being a subset of the overall LBMA data. While neither of the above pieces mention a release date for the first set of data, I understand that it will be this quarter, i.e. sometime before the end of March. On a 3 month lagged basis, the first lot of data would therefore probably cover month-end December 2016, because that would be a logical place to start the current dataset, rather than, for example, November 2016.

While the Bank of England data looks set to cover a 5 year historical period, there is no indication (from the FT article) that the wider LBMA vault data will do likewise. From the sparse information in the FT article, the LBMA data will “show gold bars held“. Does it mean number of gold bars, or combined weight of gold bars? What exactly it means, we will have to wait and see.

The Bank of England data will capture “total weight of gold held“. Notice that in the above World Gold Council piece it also states that the data will cover the amount of gold that the Bank of England “holds on behalf of other central banks.” There is no mention of the amount of gold that the Bank of England holds on behalf of commercial bullion banks.

Overall, this doesn’t exactly sound like it is “enhancing the transparency of the Bank’s own gold operations” as the World Gold Council puts it. Far from it. Enhancing the transparency of the Bank of England’s gold operations would require something along the lines of the following:

  • Identities of all central banks and official sector institutions (ECB / IMF / BIS / World Bank) holding active gold accounts at the Bank of England. Active gold accounts meaning non-zero balances
  • Identities of all commercial / bullion banks holding active gold accounts at the Bank of England
  • A percentage breakdown between the central bank gold held in the Bank of England vaults and the bullion bank gold held in the Bank of England vaults
  • An indicator for each gold account as to whether it is a set-aside earmarked custody account or whether it is a fine troy ounce balance account
  • Information for each central bank and official sector institution as to whether any of “its” gold is lent, swapped or repo’d
  • Information for the bullion bank gold accounts as to whether the gold recorded in those accounts is borrowed, sourced from swaps, sourced from repos, or otherwise held as collateral for loans
  • Information on the gold accounts of the 5 LPMCL clearing banks showing how much gold each of these institutions holds each month and whether the Bank of England supplies physical gold clearing balances to these banks
  • Information on when and how often the London-based gold-backed ETFs store gold at the Bank of England, not just using the Bank of England as sub-custodian, but also storage in their own names, i.e. does HSBC store gold in its own name at the Bank of England which is used to supply gold to the SPDR Gold Trust
  • Information on whether and how often the Bank of England intervenes into the London Gold Market and the LBMA Gold Price auctions so as to supply gold in price smoothing and price stabilisation operations in the way that the Bank of England’s Terry Smeeton seems to have been intervening into the London Gold Market in the 1980s
  • Information on the BIS gold holding and gold transactions settlements accounts at the Bank of England and the client sub-account  details and central bank identities for these accounts
  • Information on gold location swaps between gold account holders at the Bank of England and gold accounts at the Federal Reserve Bank of New York, the Banque de France, and the Swiss National Bank, and BIS accounts in those locations
  • Gold for oil swaps and oil for gold swaps

Anything less is just not cricket and does not constitute transparency.

And its important to remember that any publication of gold vault data by the LBMA and Bank of England is not being done because the LBMA suddenly felt guilty, or suddenly had an epiphany on the road to Damascus, but, as the FT correctly points out:

“the LBMA, whose members include HSBC and JPMorgan, hopes to head off the challenge and persuade regulators that banks trading bullion should not have to face more onerous funding requirements.”

Bank of England

The Current Data

As a reminder, there is currently no official direct data published on the quantity of real physical gold bars held within the London gold vaulting system. This vaulting system comprises the vaults of eight vault operators (see below for list).

Once a year in its annual report, the Bank of England provides a Sterling (GBP) value of gold held by its gold custody customers, while the LBMA website states a relatively static total figure of “approximately 6,500 tonnes of gold held in London vaults” that it claims are in the vaults in its network. But beyond these figures, there is currently no official visibility into the quantity of London Good Delivery gold bars held in the London vaults. There are, various ways of estimating London gold vault data using the Bank of England annual figure and the LBMA figure together with Exchange Traded Fund gold holdings and central bank divulged gold holdings at the Bank of England.

These approaches have been documented in BullionStar articles “Central bank gold at the Bank of England” and “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“, both from September 2015, and more recently “Tracking the gold held in London: An update on ETF and BoE holdings” from September 2016.

The September 2015 estimates calculated that there were 6,256 tonnes of gold in total in the London vaults, with 5,134 tonnes at the Bank of England (as of end February 2015), and 1,122 tonnes in London “not at the Bank of England“, all of which was accounted for by gold-backed ETFs which store their gold in London. These calculations implied that there was nearly zero gold stored in London outside the Bank of England that was not accounted for by ETF holdings.

The “Tracking the gold held in London” estimates from September 2016 used a figure of 6,500 tonnes of gold in total in the London vaults, and showed that there were 4,725 tonnes inside the Bank of England vaults, of which about 3,800 tonnes was known to be held by central banks (and probably a lot of the remainder was held by central banks also) and that there were 1,775 tonnes of gold outside the Bank of England. The article also calculated that there were 1,679 tonnes of gold in the gold backed ETFs that store their gold in London, so again, there was very little gold in the London vault network that was not accounted for by ETFs and central bank gold.


The Vaults of London

Overall, there are 8 vault operators for gold within the LBMA vaulting network. These 8 vault operators are as follows:

  • The Bank of England
  • HSBC Bank plc
  • JP Morgan Chase
  • ICBC Standard Bank Plc
  • Brink’s Limited
  • Malca-Amit Commodities Ltd
  • G4S Cash Solutions (UK) Limited
  • Loomis International (UK) Ltd

HSBC, JP Morgan and ICBC Standard are 3 of the London Gold Market’s clearing banks that form the private company London Precious Metals Clearing Limited (LPMCL). The other two member of LPMCL are Scotia Mocatta and UBS. Brink’s, Malca-Amit, G4S and Loomis are the aforementioned security companies. The LBMA website lists these operators, alongside their headquarters addresses.

Bizarrely, the FT article still parrots the LBMA’s spoon-fed line that the vaults are “in secret locations within the M25 orbital motorway”. But this is far from the truth. Many of the London vault locations are in the public domain as has been covered, for example, on this website, and the FT knows this:

JP Morgan:



And perhaps HSBC:

G4S location

Malca-Amit location

HSBC possible location

And obviously, the Bank of England vaults are where they always have been, under the Bank’s headquarters in the City of London:

It’s slightly disappointing that we spend time and effort informing the London financial media where some of the London gold vaults are, and then they continue to parrot the LBMA’s misleading “secret locations” line. I put this fake news down to a decision by the FT editors, who presumably have a stake in playing along with this charade so as not to rock the boat with the powerful investment banks that they are beholden to.

The FT also reminds us in its article that “last year a gold vault owned by Barclays, which can house $80bn of bullion, was bought by China’s ICBC Standard Bank.

This Barclays vault in London was built by and is operated by Brink’s, and presumably after being taken over by ICBC Standard, it is still operated by Brink’s. Logistically then, this ICBC Standard vault is most likely within the Brink’s complex, a location which is also in the public domain, and which even hosts an assay office as was previously mentioned here over a year ago. The Barclays vault (operated by Brink’s) is even mentioned in a Brink’s letter to the SEC in February 2014, which can also be seen here -> Brinks letter to SEC February 2014.


Brink’s letter to SEC, February 2014

Given the fact that there are eight sets of vaults in the London vault system (as overseen by various groups affiliated to the LBMA such as the LBMA Physical Committee, the LBMA Vault Managers Working Party,  the gold clearers (London Precious Metals Clearing Limited), and even the LBMA Good Delivery List referees and staff, then one would expect that whatever monthly vault data that the LBMA or its affiliates publishes in the near future, will break out the gold bar holdings and have a distinct line item in the list for each vault operator such as:

  • HSBC – w tonnes
  • JP Morgan – x tonnes
  • ICBC Standard – y tonnes
  • Brink’s – z tonnes



At the LBMA conference in Singapore last October, there was talk that there were moves afoot for the Bank of England to begin publishing data on the custody gold it holds on a more regular basis. It was also mentioned that this data could be extended to include the commercial bank and security carrier vaults but that some of the interested parties were not in favour of the idea (perhaps the representative contingents of the powerful HSBC and JP Morgan). Whatever has happened in the meantime, it looks like some data will now be released in the near future covering all of the participating vaults. What this data will cover only time will tell, but more data than less is always welcome, and these data releases might also help show how near or how far we were with earlier estimates in trying to ascertain how much gold is in the London vaulting system that is not accounted for by ETF holding or central bank holdings.

Revealing the extent of the gold lending market in London is critical though, but this is sure to remain a well-kept secret, since the LBMA bullion banks and the Bank of England will surely not want the general market to have any clue as to which central banks don’t really have any gold while still claiming to have gold (the old gold and gold receivables trick), in other words, that there is serious double counting going on, and that some of the central bank gold has long gone out the door.


Lukewarm start for new London Gold Futures Contracts

The second half of 2016 saw announcements by three exchange providers for plans to compete in the London Gold Market through offerings of exchange-traded London gold futures contracts.

First off the mark was the London Metal Exchange (LME) in conjunction with the World Gold Council with a planned platform called LMEprecious. There were rumblings of this initiative in the London financial media from as early as January 2015,  but concrete details for the actual platform were only announced on 9 August 2016. See LME press release “World Gold Council, LME and key market participants to launch LMEprecious.” The LME plans to call its gold futures contract LME Gold. There will also be an “LME Silver”. Each is a suite of contracts of varying lengths including a daily futures (spot settlement) contract. See also BullionStar blog “The Charade Continues – London Gold and Silver Markets set for even more paper trading” from August 2016 which took a first look at the LMEprecious suite.

Two months after the LME announcement, during the annual conference of the London Bullion Market Association (LBMA), Intercontinental Exchange (ICE) announced on 17 October that it too planned the launch of a gold futures contract in the London market. See Bullion Desk’s “ICE to launch gold futures in 2017, competition in gold market grows” as well as the ICE press release. The ICE contract is named “Gold Daily Futures” and resides on the ICE Futures US platform. It too is a daily futures contract.

Not to be outdone, the CME Group then followed suit on 1 November 2016 and it too announced plans for a “London Spot Gold Futures contract” as well as a “London Spot Silver futures contract”. See CME press release “CME Group Announces New Precious Metals Spot Spread” from 1 November 2016, and “CME to launch London spot gold, silver futures for spot spread” from the Bullion Desk, 1 November 2016. The CME contract was to trade on COMEX (Globex and Clearport) as a daily futures contract, and was devised so as to offer traders a spot spread between COMEX and London OTC Spot gold.

As of August 2016, the LME’s target launch date was said to be “the first half of 2017”. ICE was more specific with a target launch of February 2017 (subject to regulatory review). In it’s announcement, CME went for an even earlier planned launch date of 9 January 2017 (subject to regulatory approval).

cme ice lme

Two Launches – No Volume

Why the update? Over the 2 weeks, there have been a number of developments surrounding these 3 contracts. The CME and ICE gold futures contracts have both been launched, and additionally, LME has provided more clarity around the launch date of its offering.

Surprisingly, while there was plenty of financial media coverage of these 3 gold futures contracts when their plans were initially publicised from August – November 2016, there has been little to no financial media coverage of the contracts now that 2 of the 3 have been launched.

On 25 January, I took a look at the CME website to see what the status of the CME gold futures contract might be. Strangely, the contract itself was defined on the CME website (with a code of GSP) but it had no trading volume. From the website, it was not clear when the contract actually launched, but it looked to be sometime during the last week of January.

On 25 January, I also sent a short email to CME asking:

“Has the London Spot Gold contract started trading yet? 

It doesn’t look like it has, even though the contract is defined on your website. Could CME confirm when it will start trading?”

Next day on 26 January, I received this response from the CME:

“Thank you for reaching out to the CME Group with your query.  The London Spot Gold and Silver products are available to trade but at this time no trades have been made in the listed contract months.”

Fast forward to end-of-day 7 February. From the CME website, I still cannot see that there have been any trades in this gold futures since it was launched. The volumes are all zero. The same applies to the London Spot Silver futures contract (code SSP).

Next up the ICE gold futures contract (AUD). Upon checking the ICE website under section “Products”,  the new ICE Gold Daily Futures contract has been defined, and the description states “The Daily Gold Futures contract will begin trading on trade date Monday, January 30, 2017“.

Turning to the ICE reporting section of the website for futures products, and selecting the end of day ICE Futures US report page, and then selecting the reports for AUD, there are 6 daily reports available for download, namely, from 30 and 31 January, and 1, 2, 3 and 6 February. Again, looking at each of these reports, there are varying prices specified in the reports but there are no trading volumes. All of the volumes are zero.

Therefore, as far as the CME and ICE websites show, both of these new gold futures contracts have been launched and are available to trade, but there hasn’t been a single trade in either of the contracts. Not a very good start to what was trumpeted and cheer-led as a new dawn for the London Gold Market by outlets such as Bloomberg with the article “Finance Titans Face Off Over $5 Trillion London Gold Market“.

LMEprecious – To Launch Monday 5 June 2017

Finally, possibly so as not to be forgotten while its rivals were launching their London gold futures offerings, the LME on Friday 3 February announced in a general LME and LME Clear update memo that the planned launch date of its LMEprecious platform is now going to be Monday 5 June, i.e. 4 months from now.

LME update header

LME footer

As a reminder, the LMEprecious contracts will be supported by a group of market maker investment banks, namely Goldman Sachs,Morgan Stanley, Société Générale, Natixis and ICBC Standard Bank.

It’s also important to remember that all 3 of these gold futures contract product sets are for the trading of unallocated gold, (i.e. claims on a bullion bank for gold, aka synthetic / fictional gold). All 3 contracts claim to be physically-settled but this is essentially a play on words, because in the world of the London Gold Market, physically-settled does not mean physically-settled in the way any normal person would define it. LBMA physically-settled just means passing unallocated balances around, a.k.a. pass the parcel. To wit:

ICE London gold futures settle via unallocated accounts:

“The contract will be settled through unallocated loco London gold vault accounts using LBMA Good Delivery Rules.”

CME London gold futures settle via unallocated accounts:

London Spot Gold futures contract will represent 100 troy ounces of unallocated gold

And for LMEprecious, settlement will be:

“Physical settlement one day following termination of trading. Seller transfers unallocated gold to [LME Clearing] LMEC account at any LPMCL member bank, and buyers receive unallocated gold from LMEC account at any LPMCL member bank.”


With neither the CME nor the ICE gold futures contracts registering any trades as of yet (according to their websites), it will be interesting to see how this drama pans out. Will they be dud contracts, like so many gold futures contracts before them that have gone to the gold futures contracts graveyard, or will they see a pick up in activity? All eyes will also be on the LME contract from 5 June onwards.

The lack of coverage of the new CME and ICE London gold futures contracts is also quite unusual. Have the London financial media already forgotten about them? According to Reuters it would seem so. On 22 January, Reuters published an article titled “LME’s pitch for share of gold market faces bumpy ride” which exclusively questioned whether the LME gold contract would be a success, while not even mentioning the CME and ICE contracts. Given that 22 January was right before the CME and ICE contracts were about to be launched, this is quite bizarre. Presumably Bloomberg will come to the rescue of its ‘financial titans’ heros, and will write glowing tributes about the new contracts, but this will be tricky given the zero trade volumes. We await with bated breath.

Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom of Information – Part 2

This is Part 2 of a two-part series. Part 1 of this series, “Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom of Information – Part 1” published on 23 January, looked at initial attempts in 2011 and 2012 to extract basic information about Ireland’s monetary gold reserves from the Central Bank of Ireland and the Irish Department of Finance. These attempts proved unsuccessful due to non-cooperation from the central bank which at that time was not covered under the Irish Freedom of Information Act (FOI Act), and also a bizarre refusal of a FOI request from the Department of Finance and a subsequent claim by that Department that it had zero records of said gold reserves that it has entrusted to the Central Bank of Ireland (a central bank which it owns).

On 14 October 2014, a new and expanded Freedom of Information Act was enacted into law in the Republic of Ireland. This news FOI Act (2014) extended the scope of coverage of Freedom of Information requests to “All Public Bodies” in the Irish State, and for the first time included Ireland’s central bank, the Central Bank of Ireland. Information and records relating to the expanded list of public bodies are not fully retrospective, and FOI requests under the new FOI Act (2014) only cover the right of access to records created by these additional public bodies on or after 21 April 2008.

FOI to the Central Bank of Ireland – 2015

Given the introduction of the new FOI Act (2014) and the fact that it covered the Central Bank of Ireland, on 21 June 2015 I submitted a FOI Request to the Central Bank of Ireland with a series of questions about Ireland’s gold reserves. I was cognizant of the fact that the FOI Act only covered records after 20 April 2008 so I structured the questions to take account of this time limitation. The Central Bank of Ireland financial year follows the calendar year, with the annual financial accounts being made up to 31 December (i.e. calendar year-end). Therefore, the logical place to start was with the central bank’s 2009 Annual Report and 2010 Annual Report.

In the 2009 annual report, page 77, note 10 to the Balance Sheet for the line item “Gold and Gold Receivables” states that:

“With the exception of coin stocks held in the Bank, gold holdings consist of deposits with foreign banks. The change in the balance in 2009 is due to the change in the market value of gold during the year.”

In the 2010 annual report, page 98, note 10 to the Balance Sheet for line item “Gold and Gold Receivables” states that:

“Gold and gold receivables represent coin stocks held in the Bank, together with gold bars held at the Bank of England. The increase in the balance in 2010 is due to the change in the market value of gold during the year.”

Notice the difference in wording between the 2009 and 2010 annual reports. Exclusive of the gold coin holdings, the gold reserves in 2009 were stated as consisting of “deposits with foreign banks” while in 2010, the gold reserves were stated as consisting of “gold bars held at the Bank of England“, i.e. one is gold deposits with foreign banks (plural) and the other is allocated gold bars at a specific location (i.e. the Bank of England).

If you go back further and look at earlier annual reports of the Central Bank of Ireland from the years 2008 and 2007, the wording used is “ gold holdings consist of deposits with foreign banks. Going back another year to 2006, that year’s annual report contained a critical passage on the Irish gold holdings which stated that:

“The gold is held in physical form and ….may be placed on deposit in the London gold market depending on market conditions”.

See screenshot below.

Note 10 to the Balance Sheet for line item “Gold and Gold Receivables” in the 2006 annual report, page 89, stated in a similar way to the 2007 -2009 annual reports, that:

“With the exception of coin stocks held in the Bank, gold holdings consist of deposits with foreign banks. The change in value is due mainly to the change in the market value of gold during the year.”

The phrase “gold holdings consist of deposits with foreign banks” refers to gold placed on deposit in the London Gold Market, i.e. these gold deposits are central bank gold lending deposits placed with commercial bullion banks.

2006 annual report
Excerpt from Central Bank of Ireland Annual Report 2006 – Gold Holdings

In fact, the phrase “gold holdings consist of deposits with foreign banks” is stated in all the Central Bank of Ireland annual reports from 2009 all the way back to the 2000 Annual Report.

Given that the Central Bank of Ireland Annual Report 2010 stated that the gold holdings consisted of “gold bars held at the Bank of England, my FOI request asked for details of these gold bars in the form of a gold bar weight list. Because, if one claims to have physical gold bars stored at the Bank of England, one certainly has access to produce a weight list with the details of said gold bars.

Since the form of the Central Bank of Ireland’s gold holdings changed from “deposits with foreign banks” in 2009 to gold bars held at the Bank of England in 2010, my FOI Request also asked for records of any correspondence relating to this change. Gold deposits are on a fine ounce basis, gold bars held are on an allocated bar set-aside basis. They are two very different things. When you put gold on deposit with a bullion bank (i.e. lend it), you get back the same amount of gold that you placed on deposit (and maybe interest in the form of gold), but you don’t necessarily get back the same gold bars, since the bullion bank probably sold or lent on the gold that you deposited.

FOI Request Wording

The FOI Request I submitted to the Central Bank of Ireland on 21 June 2015 was as follows (in blue text) and contained 2 parts, the second part of which had 2 questions:

Dear FOI Unit,

This is a request being made under the Freedom of Information Act 2014.

I would like to request that a copy of documents (such as paper records, records held electronically, email correspondence) containing the following information be provided to me:

“1. Details of the gold holdings of the Central Bank of Ireland during 2009 which consisted of “deposits with foreign banks” as specified on page 77 of the 2009 Annual Report.

The details I am requesting are:

- the names of the foreign banks that the Central Bank of Ireland gold was deposited with during 2009, the duration of these gold deposits during 2009, details of the interest earned on these gold deposits, and information on the dates on which these gold deposits ended (since the gold holdings were not on deposit in 2010).

Source for reference: In the 2009 Annual Report, Note 10 to the Statement of Accounts, Page 77 states: “Gold and Gold Receivables With the exception of coin stocks held in the Bank, gold holdings consist of deposits with foreign banks”

2. Details of the gold holdings of the Central Bank of Ireland during 2010 which consisted of “gold bars held at the Bank of England” as specified on page 98 of the 2010 Annual Report.

I am requesting the following information on the “gold bars held at the Bank of England”:

- A document, such as a weight list, bar list, or bullion weight list, that uniquely identifies the bars of gold held on behalf of the Central Bank of Ireland by the Bank of England. This list would include (for each bar), details such as bar brand, bar serial number (serial number from refiner, not Bank of England number), year of manufacture of bar, gross weight, fineness, fine ounces.

- Information or correspondence that discusses the rationale for switching the Central Bank of Ireland’s gold holdings from “deposits with foreign banks” in 2009 (see above) into “gold bars held at the Bank of England” in 2010.

Source for reference: In the 2010 Annual Report, Note 10 to the Statement of Accounts, Page 98 states “Gold and Gold Receivables Gold and gold receivables represent coin stocks held in the Bank, together with gold bars held at the Bank of England.”

On 6 July 2015, the Central Bank of Ireland FOI Unit responded to me by email with an acknowledgement of my FOI Request, which can be viewed here -> Acknowledgement Letter CB of Ireland FOI gold 20150706. This letter also includes my full FOI request as per the blue text above.

FOI Request Refused in Entirety

On 20 July 2015, I received an email from a “FOI Decision Maker” at the Central Bank of Ireland with an attached letter detailing the fact that he had fully refused by FOI Request and his rationale for doing so. That letter can be viewed here -> FOI gold reserves Decision Letter refusing FOI Request – 20 July 2015. The introduction to the letter stated:

 “A final decision was made to refuse your request by myself, Xxxxxxx Xxxxx, FOI Decision
Maker, today, 20 July 2015. I may be contacted by telephone on (01) xxx xxxx in order to
answer any questions you may have, and to assist you generally in this matter.”

Recall that my first question was asking the central bank to provide records “containing the names of the foreign banks that the Central Bank of Ireland gold was deposited with during 2009, the duration of these gold deposits during 2009, details of the interest earned on these gold deposits, and information on the dates on which these gold deposits ended” i.e. information about gold deposits a.ka. gold lending.

In his response, the FOI Decision Maker referred to this question as ‘Category 1′. He completely ignored the fact that I was asking about gold lending and stated that “Please note that the Central Bank of Ireland’s gold bars were held with the Bank of England during the course of 2009.

This was a completely redundant and misleading statement because with gold lending, the lent gold does not necessarily leave the Bank of England. It stays in the Bank of England vault wherein title is transferred to bullion bank gold accounts during the deposit period and more than likely the deposits are then rolled over into other short-term gold deposits with additional bullion banks. It was also a deflection of my question since it ignored the fact that the 2009 Annual Report had stated that “gold holdings consist of deposits with foreign banks“, and failed to explain why the Annual report had referred to deposits with foreign banks (plural).

The FOI Decision Maker went on to say that he had “identified one record falling within the scope of your request, namely a statement from the Bank of England dated 31 December 2009 confirming the number of gold bars held with the Bank of England on that date”, but that he had “made a decision to refuse this part of your request for the following reasons“.

This is where the central bank FOI fiasco became even more bizarre and ludicrous, or in the words of an ex-Irish Taoiseach (Prime Minister), it became “grotesque, unbelievable, bizarre and unprecedented (GUBU)”, because the FOI Decision Maker claimed he was refusing the request to provide the Bank of England gold bar statement by invoking a clause in the FOI Act (2014) [Section 40 (1) of the Act] that allowed an exemption if:

access to the record could reasonably be expected to have a serious, adverse effect on the ability of the Government to manage the national economy or on the financial interests of the State…” 

The FOI Decision Maker also stated that in his view “the release of detailed information regarding the gold bars held at the Bank of England on behalf of the Central Bank of Ireland could have a serious, adverse effect on the financial interests of the State, as it would disclose important information about the Central Bank’s gold holdings.”

Releasing information about gold bars would disclose important information about those same gold bars? No kidding?

He went on to state: “Furthermore the release of this information, which is of substantial value, would identify the stock of gold coins held at the Central Bank from the stock of gold bars held at the Bank of England and from which a market valuation for the separate holdings could easily be calculated.” And? Why would this be a big deal? It would not be a big deal. The gold coin holdings of the Central Bank of Ireland are quite immaterial and completely incidental to the questions raised in my FOI request.

Not to labour the point, but this FOI Decision Maker continued to dig a hole with the embarrassing excuses as he considered “public interest factors for and against the release of this information” and stated that while there is public interest in ensuring transparency and accountability of public bodies, I believe that interest is outweighed by the public interest in protecting the confidentiality of asset valuation information, pertaining to the financial circumstances of the Central Bank” so that “accordingly, I believe the public interest is better served by refusing, rather than granting, access to this record.

Now you can see what we are up against when small-minded central bank bureaucrats are unleashed and given a small amount of power in their FOI Unit fiefdoms to pronounce and decide on what they think is and is not in the public interest.

Question: Who voted that these anonymous central bank staffers should have the power to say what is and what is not in the public interest? Answer: Nobody did.

Category 2(a)

The second part of my FOI Request asked the Central Bank of Ireland to provide “a weight list, bar list or bullion weight list that uniquely identifies the bars of gold held on behalf of the Central Bank of Ireland by the Bank of England“. After all, the 2010 Annual Report stated that the gold holdings of the Central Bank of Ireland were in the form of “gold bars held at the Bank of England.

A gold bar weight list is an itemised list of all the gold bars held within a holding that uniquely identifies each bar. In the London Gold Market, the LBMA’s “Good Delivery Rules” specifies the data that this list should contain for the large 400 oz bars as held by central banks. The data in a weight list includes such details as 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 in troy ounces. All gold being shipped in and out of gold vaults in the London Gold Market, including in and out of the Bank of England vaults, has to be accompanied by a proper industry standard weight list. Gold Backed Exchange Traded Funds (ETFs) produce these weight lists for their gold holdings at the end of each and every trading day so it’s not a big task to produce such a list via a position / accounting system.

So, if you have gold bars held at the Bank of England, like the Central Bank of Ireland claims to have, then you certainly have access to a weight list provided by the Bank of England since the Bank of England has a gold bar accounting system which records all of this information. In fact, the Bank of England has provided such a gold bar list to the Reserve Bank of Australia (RBA) for the 80 tonnes of gold that the RBA stores at the Bank of England. This list came to light via an Australian FOI request, and the Aussie list can be seen here.

A full weight list would also be needed when undertaking a physical gold bar audit, which is something that the large gold-backed ETFs perform twice per year. Keep this in mind for anyone wanting to ask the Central Bank of Ireland how, if ever, they audit the Irish gold stored at the Bank of England.

Given all of this background, the following statement from the Central Bank of Ireland FOI Decision Maker as to why he was refusing my request for a gold bar weight list is nothing short of incredible, because he said:

 “Section 15(1)(a) of the Act states that a FOI request may be refused if:

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

Your request was referred to two divisions within the Central Bank of Ireland, the Payment and Securities Settlement Division and the Currency Issue Division. Both divisions have confirmed that they do not hold any such records which fall within the scope of this part of your request. Accordingly, this part of your request is refused.”

If the Central Bank of Ireland holds gold bars at the Bank of England, then it is a lie to state that a weight list does not exist, because a weight list has to exist even if it is in the gold bar accounting system of the Bank of England and has not been printed.

If the Central Bank of Ireland is claiming that it doesn’t have such a list, then this shows a shocking lack of oversight with regards to the Irish gold holdings at the Bank of England. It could arguably also show a convenient laziness to acquiring such a list which the central bank could then use as a plausible deniability scenario.

Category 2(b)

On my request for records which addressed “the rationale for switching the Central Bank of Ireland’s gold holdings from “deposits with foreign banks” in 2009…into “gold bars held at the Bank of England” in 2010, the FOI Decision Maker again avoided any discussion of gold lending and reverted to reiterating that:

“the Central Bank of Ireland’s gold bars were held with the Bank of England during both 2009 and 2010. Given that there was no switching from foreign banks to the Bank of England, no records exist which fall within the scope of this part of your request and this part of your request is, therefore, refused.”

There was no explanation offered by this Decision Maker as to why the wording between the 2009 and 2010 annual reports had changed.

The FOI Refusal letter wrapped up with a “Right of Review” paragraph which explained that it was possible to seek an internal review of the decision by a more senior staff member of the Central Bank by a written submission to the Central Bank of Ireland FOI Unit stating the reasons for seeking a review and accompanied by a €30 internal review fee.

The refusal letter ended by saying “should you have any questions or concerns regarding the above, please contact me by telephone on +353 1 xxxxxxx“. So I decided to take up the offer of the FOI Decision Maker, and gave him a call the next day.

Phone Call with the FOI Decision Maker

The following is a summary of the phone call I had with the Central Bank of Ireland FOI Decision Maker after he had refused my FOI Request.

Part of my FOI had asked the central bank to explain the change in wording between 2009 and 2010 where the annual report in 2009 had said the gold was on deposit with foreign banks, while the 2010 annual report said the gold was held in the form of gold bars at the Bank of England.

On the phone call, the FOI Decision Maker said that these two descriptions were referring to the same gold and that the Central Bank of Ireland just changed the wording in the 2010 annual report to be more specific. I don’t believe this, but anyway, he said the justification that it was the same thing being described was because the 2010 report lists both the 2010 data and the 2009 data in two columns side by side with the same footnote (gold held in the Bank of England).

He said the central bank senior accounting person had explained this to him and that she had said that ‘there was no change in investment policy‘. [This could mean anything, including that the gold might still be on loan]. Given that one of my previous questions to the central bank prior to 2014 asking it to explain its investment policy on gold had been met with non-cooperation and “talk to the hand” (see Part 1), then its impossible to know what the Central Bank of Ireland’s investment policy on gold is or was in the first place.

I then explained to the FOI Decision Maker about gold lending with commercial banks using Bank of England customer gold, and asked him to explain why the wording had said ‘gold deposits’ with ‘foreign banks’ (plural) all the way through from 2000 to 2009 and that its documented in the 2006 annual report that the bank engaged in gold lending in the London Gold Market. He could not explain this, but he seemed to be hesitant when I was talking about gold lending. He also said that since the Central Bank of Ireland is only subject to the Irish FOI Act for any data since mid 2008 (which is true), then he couldn’t comment on anything in the year 2008 or before that. A nice handy get out clause for him.

Next up, he said that they found one ‘custodian statement’ dated 2009 from the Bank of England which specified number of gold bars and fine ounces held, and they were considering providing this statement to me. This is where the FOI gets bizarre.

He said that they had 2 conference calls with the Bank of England trying to find out if there was a weight list and also about releasing this statement to me. The second conference call even included the “chief security officer” from the Bank of England FOI office, but that the Bank of England told the Central Bank of Ireland guy that ‘you absolutely cannot‘ send this statement out with bars total and fine ounces since its ‘highly classified‘  and  ‘highly‘ something else (I didn’t catch the 2nd ‘highly’ as I was stunned while trying to jot down the notes during the call).

Talk about national security. So here we have the Bank of England instructing another sovereign central bank (the Central Bank of Ireland) in what it’s allowed to and not allowed to release in its own FOIs. I think the Irish Office of the Information Commissioner and any decent Irish journalists might be interested in this, and how the Bank of England was meddling in an Irish FOI Request.

The FOI Decision Maker had said in his letter that the data I was looking for concerned ‘important information about the Central Bank gold reserves‘. When I pointed out that of course it does, that was the whole point of my FOI request, he said ‘well, the FOI Act was not designed with the Central Bank in mind. we have a lot of confidential data etc‘. Again you can see this typical aloof central banker interpretation of the FOI legislation.

I concluded by asking him if there was any point in sending in fresh FOI requests. He said if they are for records, yes, but he tried to steer me in the direction of asking questions to their press office.

Bank of England and Central Bank of Ireland

FOI Appeal to the Central Bank of Ireland

Next up, I decided to appeal the FOI response by annihilating the spurious excuses put forward by the Central Bank of Ireland FOI Decision Maker, and also by arguing that a UK central bank has no right to interfere in determining a FOI Request that falls under Irish law. I sent the following FOI Internal Review / Appeal request to the Central Bank of Ireland on 18 August 2015:

“Hello FOI Unit,

I would like to seek an internal review / appeal of the final decision of Freedom of Information request (ref: 2015-000132)  made by Xxxxxxx Xxxxx, FOI Decision Maker, sent by email to me on 20th July 2015. This decision refused my request of 21st June 2015.

Reasons for seeking the Review

I have documented below the reasons why I am seeking a review of the decision, and listed them by number.

Part of my request was to obtain details of the gold bars held on behalf of the Central bank of Ireland at the Bank of England. Such a record does exist.

The FOI Decision Maker says in his decision: “I have identified one record falling within the scope of your request, namely a statement from the Bank of England dated 31 December 2009 confirming the number of gold bars held with the Bank of England on that date.”

The FOI Decision Maker quotes from “Section 40 (1) of the Act”:

(a) access to the record could reasonably be expected to have a serious, adverse effect on the ability of the Government to manage the national economy or on the financial interests of the State…”

and he specifically says:

“In my view, the release of detailed information regarding the gold bars held at the Bank of England on behalf of the Central Bank of Ireland could have a serious, adverse effect on the financial interests of the State, as it would disclose important information about the Central Bank’s gold holdings.”

  1. There was no proof proved by the FOI Decision Maker as to how releasing a statistic stating the number of gold bars held by the Central Bank of Ireland could “have a serious, adverse effect on the financial interests of the State.”

Likewise, there was no proof provided as to how disclosing “important information about the Central Bank’s gold holdings” could have a “could have a serious, adverse effect on the financial interests of the State.”

I would like a review of the decision to withhold the Bank of England statement dated 31st December 2009 reviewed, with a view to releasing said statement to me.

A follow-up call with the FOI Decision Maker on 21st July about the decision revealed 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’ or similar 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 with bars total and fine ounces since its ‘highly classified’.

  1. I find it unacceptable that a request made under the Freedom of Information Act of Ireland can allow interference from a foreign central bank in determining its outcome. This is the Bank of England interfering in the Freedom of Information Act of another sovereign nation. Any input from the Bank of England in this matter should be inadmissible and I would like these interactions with the Bank of England to be reviewed as part of the appeal, and how a statement of gold bars can be said to be ‘highly classified’.

The FOI Decision Maker says “the release of this information, which is of substantial value, would identify the stock of gold coins held at the Central Bank from the stock of gold bars held at the Bank of England and from which a market valuation for the separate holdings could easily be calculated.”

“While there is public interest in ensuring transparency and accountability of public bodies, I believe that interest is outweighed by the public interest in protecting the confidentiality of asset valuation information, pertaining to the financial circumstances of the Central Bank.”

3. The asset valuation information of gold holdings is not confidential. In line with international accounting standards Central Bank of Ireland gold is valued at market value in the Balance sheet. The FOI Decision Maker’s explanation does not make any sense, and only serves to deflect my request. My request is not about gold coins. Introducing that argument is spurious and irrelevant.

The FOI Decision Maker says: “Your request was referred to two divisions within the Central Bank of Ireland, the Payment and Securities Settlement Division and the Currency Issue Division. Both divisions have confirmed that they do not hold any such records which fall within the scope of this part of your request.”

All foreign gold held in custody at the Bank of England is weight listed. I am submitting to you evidence of this fact in the form of a response to a Reserve Bank of Australia (RBI) freedom of information request in 2014 where the RBI responded to the request with a full Excel spreadsheet “Listing of the Reserve Bank of Australia’s gold inventory as held at the Bank of England”. See details below.

A freedom of Information request to the Reserve Bank of Australia in 2014

Reference No.: RBAFOI-131418

Summary of Request: Listing of the Reserve Bank of Australia’s gold inventory as held at the Bank of England.

Date Released: 17 July 2014

Contents: One XLS file.

It is a minimal requirement in international auditing standards to have access to details of assets held in custody.

  1.  In refusing my request, there was no explanation as to why the Bank of England has not provided such as weight list of gold bars to the Central Bank of Ireland. I would therefore like to appeal this finding also that the Central Bank of Ireland cannot request and provide a weight when other central banks, such as the RBI, can.

The 2009 Central bank of Ireland annual report states that gold holdings consisted of “deposits with foreign banks” as specified on page 77 of the 2009 Annual Report.

The 2010 Central Bank of Ireland annual report states that gold holdings during 2010 consisted of “gold bars held at the Bank of England” as specified on page 98 of the 2010 Annual Report.

The 2009 reference refers to gold deposits as distinct to gold in custody. The 2009 reference also refers to foreign banks in the plural.

The FOI response did not provide any explanation as to why the 2009 annual report used the wording of gold ‘deposits with foreign banks’ (in the plural).

The response merely stated that “the Central Bank of Ireland’s gold bars were held with the Bank of England during the course of 2009.” Gold on loan does not move, it stays in the Bank of England, and so this statement that “the Central Bank of Ireland’s gold bars were held with the Bank of England during the course of 2009” does not address the issue of the “deposits with foreign banks”.

  1. The FOI refusal of ‘Category 2(b)” of my request uses the above justification (i.e. “the Central Bank of Ireland’s gold bars were held with the Bank of England during the course of 2009”). Since there was no adequate explanation of the references to “deposits with foreign banks”, then this is not adequate grounds for refusal and I would like this reviewed.

The FOI Decision Maker says: “there is sufficient information in the public domain regarding the gold holdings of the Central Bank of Ireland.”

This is a subjective assessment. If there was sufficient information in the public domain regarding the gold holdings of the Central Bank of Ireland I would not have felt the need to submit a Freedom of Information request.

The public interest calls for transparency and accountability by the Central Bank of Ireland. 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. In my view, refusing my request undermines the public interest and erodes transparency and accountability, and is not in the spirit and keeping of the Freedom of Information Act.

The Response

On 4 September 2015, I received a response and decision from the Central Bank of Ireland in relation to the request for an internal review. This response letter is uploaded here -> 20150904_Letter_to_requester_internal_review_decision_redacted.

In summary, the response letter, which was written by a separate FOI Decision Maker stated that:

I am a more senior member of staff than the original decision maker in this case and I have decided on 2nd September 2015 to vary the original decision on your request.” 

“In making my decision, I have had regard to the original request, the records
which were located as part of that request, and the appeal letter which you submitted in 
this regard.”

I have identified two records which fall within the scope of the first part of your
request, namely the 2009 and 2010 statements received from Bank of England. I
have decided to vary the original decision in respect of releasing the main text of
these statements

In my opinion, disclosing the total gold holdings in the Bank of England from which an estimate of the gold holdings in the Currency centre could be deduced would not unduly increase the security threat to the Currency centre when compared to the value of banknotes issued into circulation by the Central Bank. Therefore, in my view, the disclosure of the number of gold bars and fine ounces held in the Bank of England in 2009 and 2010, as recorded in the two statements, is unlikely to have a ‘serious adverse effect’ on the financial interests of the State

“With regard to the second part of your request, I am satisfied that there is no record
detailing the weight list, bar list, or bullion weight list, that uniquely identifies the bars of gold held on behalf of the Central Bank of Ireland by the Bank of England for the period 2009/10. I am advised that the Bank of England is unable to provide holdings bar lists which are past dated.

Accordingly, I have decided to affirm the original decision in respect of the second part of your request and …on the grounds that “the record concerned does not exist or cannot be found after all reasonable steps to ascertain its whereabouts have been taken.

You were also advised verbally by the original Decision Maker that a redrafting of
note 10 to the Statement of Accounts took place in 2010 to provide a more accurate
reflection of the external gold holdings of the Central Bank of Ireland.

 From the above you can see that:

a) There was no explanation offered by this second FOI Decision Maker to explain why the first FOI Decision Maker had made a misleading and erroneous statement that the release of record would have a “serious adverse effect  on the financial interest of the State. Putting it into context, this statement by the first FOI Decision Maker was just bluff or in common parlance it was ‘horse manure’.

b) There was no comment or acknowledgement by the second FOI Decision Maker about a foreign central bank, i.e. the Bank of England, meddling in and sabotaging an initial FOI Request, or the presence of a Bank of England FOI security officer on a conference call saying “absolutely this guy cannot have this gold bar statement” since its “highly classified”.

c) This second FOI Decision Maker inadvertently stated that the gold coin holdings held by the Central Bank of Ireland are stored in its ‘Currency centre’ premises, which is located in Sandyford, County Dublin, in a low rise secure building in campus type grounds. No part of my FOI Request or Review asked about these gold coin holdings. But since the second FOI Decision Maker volunteered this information, we now know where the domestically stored gold coin holdings are located.

Central Bank of Ireland Currency Centre, Sandyford, Dublin - Home of the irish gold coin reserves holdings
Central Bank of Ireland Currency Centre, Sandyford, Dublin – Home of the Irish gold coin reserve holdings

d) The second FOI Decision Maker stated that there is no record “that uniquely identifies the bars of gold held on behalf of the Central Bank of Ireland by the Bank of England for the period 2009/10.

If the Irish gold couldn’t be uniquely identified over these years (2009 and 2010), then it would suggest that is was not held in custody on a set-aside / earmarked / allocated basis as specific gold bars, and therefore the claim of the Central Bank of Ireland in its 2010 annual report that it held “gold bars at the Bank of England” is misleading.

 e) “I am advised that the Bank of England is unable to provide holdings bar lists which are past dated.This sounds unbelievable. The Bank of England has a sophisticated gold bar accounting system, and has had one since at least the late 1970s. The Bank of England currently also uses a Book Entry Transfer system (BETs) to transfer gold bars between accounts, a system which would itself need archiving capabilities.

All financial market position and transaction systems have archive capabilities. Historic records in financial markets have to be held for multiple years on electronic storage backup and in offsite backup should clients/customers request such details. To use an excuse that the Bank of England cannot generate a gold bar list for any past date is insulting and infantile. It also shows that the Central Bank of Ireland has no independent oversight or control over the reporting of its gold holdings at the Bank of England.

f) “A redrafting of note 10 to the Statement of Accounts took place in 2010 to provide a more accurate reflection of the external gold holdings of the Central Bank of Ireland”. Taken on face value, this would imply that the 2009 Annual Report of the Central Bank of Ireland was misleading and not accurate. However, at no point in any annual report was there any note or explanation to acknowledge that any redrafting had taken place to provide a more accurate explanation.

There was also no explanation offered by the second FOI Decision Maker as to what “deposits with foreign banks” (in the plural) referred to in the 2009 annual report, as per point 5 in my FOI Review Request.

The Released Records

The 2 statements that the second FOI Decision Maker decided to allow to be released were 2 Swift statements of gold balances for year-end 2009 and 2010, sent from the Bank of England to the Central Bank of Ireland. The release schedule for the statements can be viewed here -> 2015-000132 Schedule. The actual statements, which the Central Bank of Ireland redacted in parts to remove swift codes, can be seen here -> 2015-000132 Records swift. Each of the statements is 6 pages long but contains mostly irrelevant swift formatting etc. The only relevant part of each statement is at the bottom of page 1 of each respective statement, where a varying gold balance is stated, against a total number of bars. That a weight list cannot be produced shows that this gold is not held on an earmarked set-aside basis but merely on a fine ounce basis  (like a cash account) and that the number of bars mentioned on the statement is just an input that was added at some historical point in time when the account became a gold balance account.

For 2009 the statement is as follows:




COB: 31/12/2009


FINE OUNCES GOLD: 182,556.209


For 2010, the statement is as follows:




COB: 31/12/2010


FINE OUNCES GOLD: 182,555.914

This is the data which the first FOI Decision Maker said that “access to the record could reasonably be expected to have a serious, adverse effect on the ability of the Government to manage the national economy or on the financial interests of the State…He has got to be joking, right?


The examples set out in Parts 1 and 2 of this series will hopefully demonstrate to readers the disdain with which the Central Bank of Ireland and the Irish Department of Finance treat Freedom of Information Requests. I have detailed numerous examples where simple questions about the Irish gold reserves have been ignored, blocked, and refused, even when under the remit of the FOI legislation.

However the Central Bank of Ireland has complete contempt for FOI Acts and everything the FOI Act stands for. This is a wide ranging and live issue as the following recent article in the Irish media highlights. An Irish Times article dated 10 June 2016 and titled  “Central Bank ordered to review refusal of access to records“, highlights that the independent Information Commissioner said that his office had had “great difficulty in dealing with the bank in respect of the extent of our jurisdiction”, and said that a recent FOI case that was raised showed “the Bank was ‘entirely at odds’ with the spirit and intent of the FOI legislation.”

The same article quoted the Central Bank as saying that is was “fully committed to meeting the Freedom of Information principles of openness, transparency and accountability, and to the provision of access to records in accordance with its obligations under the Freedom of Information Act.

But this is a complete lie. As demonstrated by the arrogance and lack of cooperation of the Central Bank of Ireland on the topic of the Irish gold reserves, nothing could be further from the truth. Furthermore, there do not seem to be any political representatives willing to push the central bank on FOI issues, not any investigative journalists with the will to cover the topic of the Irish gold reserves at the Bank of England. Have these gold reserves ever even been physically audited? Given the lack of oversight with which the Central Bank of Ireland treats this gold holding, it would appear not. The crux of the issue in my view is the gold lending market, which the world’s central banks do not want the public to know any information about, hence the secrecy about gold bar weight lists.

Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom of Information – Part I

This article and a sequel article together chronicle a long-running investigation that has attempted, with limited success to date, to establish a number of basic details about Ireland’s official monetary gold reserves, basic details such as whether this gold is actually allocated, what type of storage contract the gold is stored under, and supporting documentation in the form of a gold bar weight list. Ireland’s gold reserves are held by the Central Bank of Ireland but are predominantly stored (supposedly) with the Bank of England in London.

At many points along the way, this investigation has been hindered and stymied by lack of cooperation from the Central Bank of Ireland and the Irish Government’s Department of Finance. Freedom of Information requests have been ignored, rejected and refused, and there has also been outright interference from the Bank of England. Many of these obstacles are featured below and in the sequel article.

6 Tonnes of Gold

Ireland ‘only’ owns 6 tonnes of gold in its monetary reserves, which is a fraction of the gold holdings that many of the large European central banks are said to hold. For such a small holding, it may be surprising that basic details of the Irish gold remain a closely guarded secret. However, it’s worth remembering that Ireland is a member of the Eurozone, that the Central Bank of Ireland is a member bank of the European Central Bank (ECB), and that the Irish gold is (supposedly) stored at the Bank of England vaults. Given the clubs that the Central Bank of Ireland is in or is a part of, it is arguably ECB policy and Bank of England policy on gold secrecy which primarily dictates what the Central Bank of Ireland is allowed to say or not to say about the Irish gold reserves.

But don’t forget though that central bankers in general, and Irish central bankers included, are an arrogant and narcissistic bunch who consider themselves immune from having to answer to anyone other than themselves and sometimes their governments. Furthermore, the out of control arrogant culture and ‘cult’ of independence of these organisations also explains their disdain for public discourse, especially on a topic as highly sensitive to them as monetary gold.

For many years Ireland held 14 tonnes in its monetary gold reserves. This remained the case until the end of 1998. In January 1999, as part of Eurozone foreign exchange transfers to the newly established ECB, the Central Bank of Ireland transferred 8 tonnes of gold to the ECB at the birth of the Euro, leaving it as the guardian of just 6 tonnes of gold. This 6 tonne holding has remained static ever since, at least at a reporting level. Most of this 6 tonnes of gold is supposedly stored at the Bank of England in London in the form of gold bars. A small residual of the 6 tonnes is held in the form of gold coins and stored at one of the Central Bank of Ireland sites in Dublin.

Central Bank Act (1942) and FOI Acts

The Central bank of Ireland was established via “The Central Bank Act, 1942″ which states that:

“The Bank is a state corporation established under Statute (the 1942 Act) wherein its capital is held by the Minister. The Minister for Finance is the sole shareholder of the Bank.

In Ireland, the Minister for Finance heads up the Department of Finance and this Minister is also a member of the Cabinet, i.e. the Government or Executive branch. The current Minister for Finance is Michael Noonan who has held this position since March 2011.

Freedom of Information requests in Ireland were introduced in Ireland by the relatively recent Freedom of Information (FOI) Act 1997 which was enacted by a coalition government and which advanced the concepts of transparency and openness in government records and cabinet meetings etc. However, the powers of this 1997 Act were diluted somewhat by a 2003 Amendment to the 1997 Act which aimed to row back on some of the advances of the 1997 Act and which introduced fees for submitting FOI requests.

I first examined the Irish gold reserves in August 2011. At that time the FOI Act covered government departments such as the Department of Finance, but not the Central Bank of Ireland. A subsequent FOI Act of 2014 replaced the 1997 FOI Act and the 2003 FOI Amendment, and also extended the coverage of FOI requests to all public bodies including the Central Bank of Ireland. The 2014 Act (in section 42 and Schedule 1 ) specifies a number of exemptions for certain types of information of certain types of public bodies including a few exemptions for certain types of central bank information. A government website summaries the basic framework for FOI’s in Ireland. An independent Office of the Information Commissioner (OIC) also exists to review decisions made by public bodies in relation to the FOI.

At the time in 2011, I began noticing the difficulties which gold researchers in other countries were having in obtaining basic information from their central banks about other countries’ gold reserves, and I thought that going through an investigative process with the Irish equivalent might prove easier to navigate given that the Irish gold holdings were far smaller, and given that the Central Bank of Ireland is not exactly as big as the behemoths of the Bundesbank or Banque de France, and so might be more approachable. However, what the process ended up proving was exactly what others had experienced, that the subject of monetary gold reserves is a subject which central banks do their utmost not to discuss any real details of.

This investigative summary into Ireland’s gold reserves is divided into 2 parts. Part 1 here details all of the investigations submitted to the Department of Finance and Central Bank of Ireland prior to my submission of a FOI request to the Central Bank of Ireland in 2015. The Central Bank of Ireland became subject to Freedom of Information requests in 2014 after the FOI Act of 2014 was enacted.

Part 2 looks at the FOI submitted to the Central Bank of Ireland in 2015, how this was rejected, and how it was then appealed and became ‘partially’ successful. I have redacted certain information in emails and FOI letters such as names of FOI officers and various addresses and phone numbers.

Dame Street

2011 – Central Bank First Refusal

The saga began on 26th August 2011 with an email to the Central Bank of Ireland posing a number of seemingly innocuous questions about Ireland’s gold reserves. My questions were as follows:

Could you clarify a number of points on the gold holdings of the Central Bank of Ireland.

Note 10 on page 98 of the Bank’s 2010 annual report states that ‘Gold and gold receivables represent coin stocks held in the Bank, together with gold bars held at the Bank of England’.

Of the Central Bank of Ireland’s bars held at the Bank of England, could you clarify if any of this holding is swapped or loaned out or has any other receivable status recorded against it, and if so, what percentage? Additionally, is this held in an allocated account and do you have a gold bar list for the custody that you can provide?

The Central Bank of Ireland responded a week later on 01 September 2011:

“Good morning,

We received your query in connection with gold custody, please find our response below.

The notes to our accounts confirm the locations at which the Central Bank of Ireland maintains its Gold Holdings.  The Bank is not, however, in a position to provide further information nor to outline its investment strategy in relation to the Gold Holdings.

Trusting this is our assistance to you.”

Knowing at that time that the FOI Act did not cover the Central Bank of Ireland but did cover the Irish Government’s Department of Finance, I emailed the (independent) Office of the Information Commissioner in September 2011 and asked if they thought that a FOI request to the Department of Finance about a topic connected to the central bank would be within the scope of FOI coverage given that the central bank itself was not covered by the Act at that time.

The Office of the Information Commissioner replied to me on 20 September 2011 and advised me as follows:

“you should contact the FOI Central Policy Unit of the Department of Finance for advice
in relation to whether or not certain information might be releasable or not under the FOI Acts. Their email address is:

The same day I sent the following email to the Department of Finance FOI CPU:

I have a hypothetical question regarding a FOI to the Department of Finance, on a matter that might refer to the Central Bank. The scenario would be as follows:
If I made a FOI request to the Department of Finance on a topic that included correspondence between the Department of Finance and the Central Bank, would the information released to me still include items on the Department of Finance side that might reference the Central Bank, or would references or communications with the Central Bank exclude that particular document or communication from the FOI response.”
The Department of Finance FOI CPU responded same day:

“Good afternoon

Under the Freedom of Information Act, the decision to grant or not grant records lies with the decision maker in the organization that holds the records. The Central Bank does not come under the remit of Freedom of Information.  More information can be found at;”

Slightly cryptic and not very helpful, so I decided to submit a FOI request to the Department of Finance.

Department of Finance – Irresponsible or Incompetent?

On 8 November 2011, I submitted the following FOI request to the Department of Finance:

“Please direct this email to FOI officer XXXX XXXXXXX, or the appropriate FOI officer at the Department of Finance.

I would like to make the following request under the FOI Act.

In accordance with the Freedom of Information Act, I request access from the Department of Finance of all records and correspondence between 1997 and 2011 relating to:

  • The Irish State’s gold reserves managed by the Central Bank of Ireland, which are custodied at the Bank of England
  • The investment strategy of the State’s gold reserves
  • The Irish State’s gold reserves transferred to the ECB between 1999 and 2011″

More than four weeks later I had still not received either an acknowledgement or a response from the Department of Finance about my FOI submission. Under the Irish FOI Acts, a lack of reply within 4 weeks of your initial application is deemed a refusal of your request and allows you to seek to have the refusal decision re-examined.

On 13 December 2011, I sent the following email to the Department of Finance FOI unit:

“Since you have not sent me a decision on my FOI request within the four-week deadline as stipulated by the Office of the Information Commissioner, and I note that I did not receive a reply or even an acknowledgement, this issue has now become a “refusal of my FOI request by non-reply” and I wish to escalate this as an ‘internal review’.

Can you confirm receipt of this internal review request immediately or I will be informing the Office of the Information Commissioner of this matter by end of day tomorrow.”

 Two days later the Department responded as follows with what can only be described as an incredible excuse:

“Thank you for your e-mail and apologies for the delay in processing your case.  Unfortunately the FOI Officer in the division has been out for sometime. If you could give me a call on 669xxxx we can go through it.  Requests are processed on receipt of a €15.00 fee. I am not quite sure what happened in your case but I am happy to discuss it further with you. I am in the Office in the mornings only.

Kind regards, Xxxxxxx Xxx, FOI Unit, Extn xxxx

 To which I replied:

“What happened is that no one responded to me within the four-week timeframe and I have informed the Office of the Information Commissioner of this lack of coverage at your department. If an FOI officer is unavailable, there has to be an alternative officer available. That is part of the OIC guidelines. That is why I also stated in my original email that the request was to “FOI officer Xxxx Xxxxxxx, or the appropriate FOI officer”.

 As per the FOI Acts,  “A person should be available to handle queries from members of the public in each organisation.”

Additionally, since your department hosts the FOI Central Policy Unit [for the entire Irish Government], I find it hard to believe that you don’t have multiple FOI officers. 

So I would like a full explanation of why my request was ignored and a fee waiver since I have been waiting for over 5 weeks now.”

Merrion Street

On 20 December 2011, just before Christmas, I received a phone call from a FOI officer at the Department of Finance. The FOI Officer told me, and I quote the conversation, since I jotted it down:

“there are no records or correspondence of gold reserves. I talked to various people in the Department and they told me to tell you there are no records. They said responsibility for gold reserves was transferred to the central bank prior to 1999.”

The FOI Officer said she would send a letter confirming this, and said that I could appeal, and that “a principal officer will check the type of searches undertaken”.

The next day, an email from the same FOI Officer arrived which stated:

“Further to our telephone conversation. A request for Internal Review has to be submitted to this Office within 15 days of receipt of our letter.  The cost of an Internal Review is €75. The letter will issue to-morrow.”

The official letter duly arrived in the post, and it’s uploaded and can be viewed here -> FOI Response Dept of Finance Dec 2011. In summary, the letter said:

“22nd December 2011

Your request was received by email in this Department on 9th November. I as the deciding officer have today made a final decision on your request. I may be contacted by telephone. The delay in responding to your request is regretted.

I regret to inform you that a search of the Department has not yielded any of the records sought by you. Consequently I must refuse your request in accordance with section 10(1)(a) of the FOI Act.  

…Right of Appeal (as above)”

Given that I had no confidence in a Department of Finance internal review finding anything after being told on the phone that “they told me to tell you there are no records“,  I did not see the point of wasting €75 in confirming this with an internal review. As an aside, unless an internal review is pursued, the independent Information Commissioner cannot normally review the FOI. As the Office of the Information Commissioner told me when I reported the Department of Finance shenanigans to them:

“Under  the  terms  of the FOI Acts, requesters must, apart from a number of exceptional  circumstances, avail of their right to seek internal review by the public body before the Commissioner can review the matter.

If after three weeks (15 working days) you have received no internal review decision,  or  if  you  are not satisfied with the internal review decision that  the Department issues, you can then apply to this Office for a review of your case by the Information Commissioner.”

However, for a number of reasons, it’s quite unbelievable that the Irish Department of Finance would have zero records or correspondence about the Irish gold reserves.

Firstly, it was only a few months earlier on 16 June 2011, in Dáil Éireann (the Irish Parliament), that the very  head of the Department of Finance, the Minister for Finance, Michael Noonan, in answer to a parliamentary question, stated that he had been “informed by the Central Bank that the value of gold and gold receivables held by the Bank at the end of 2010 was some €203.792 million (€147.975 million at end-2009)”. To wit:

Deputy Seamus Kirk asked the Minister for Finance  if the suggestion that gold profits in the EU central banks should be used to tackle the debt crisis in the peripheral countries in the eurozone such as Greece, Portugal and Ireland; and if he will make a statement on the matter. [15924/11]

Minister for Finance (Deputy Michael Noonan):  I am informed by the Central Bank that the value of gold and gold receivables held by the Bank at the end of 2010 was some €203.792 million (€147.975 million at end-2009). Gold is valued at the closing market price and securities at mid-market closing prices at year-end. The increase in the balance sheet entry for the value of the Bank’s gold holdings at end-2010 is due to the change in the market value of gold during the year.

Note that Noonan did not say that he or one of his juniors had looked in the central bank’s annual report. He said that he was informed by the central bank. If Noonan was informed by the central bank, this would have to have been documented in Department of Finance files as part of official departmental and parliamentary business. If these files don’t exist as the FOI response from the Department of Finance claimed, then it would indicate that the Department of Finance engages in sloppy record keeping and operates in an unprofessional and irresponsible manner. If files do exist about Noonan’s interactions with the central bank concerning the gold reserves, it shows that the Department of Finance had records about Irish gold reserves and lied when they said to me that they didn’t.

More fundamentally, the Irish Nation and people of Ireland essentially entrust to the care of the Irish State and it’s Department of Finance, the Nation’s gold reserves. In turn, the Department of Finance employs the Central Bank of Ireland as an agent or custodian, and so the Central Bank of Ireland is answerable to the Minister for Finance on these gold reserves. Also, the Bank of England is (on paper) acting as sub-custodian (or maybe deposit taker) to the Central Bank of Ireland.

The FOI response and phone call from the Department of Finance stating that it had no record whatsoever of the Irish gold reserves, no records of how these reserves are managed, and no records of the gold transferred to the ECB, if true, indicates complete lack of oversight by the Irish Government and Department of Finance into an important component of Ireland’s foreign exchange reserves, and indicates a complete dereliction of due diligence over a substantial monetary asset of the Irish State.

2012 – Central Bank Second Refusal

The Central Bank of Ireland annual report is usually published in late April of the year following financial year-end. After the 2011 Central Bank of Ireland Annual Report was published in late April 2012, I decided in May 2012 to submit some additional questions about the gold reserves to the central bank in the hope that whoever answered might be more cooperative than the previous non-cooperative individual in September 2011 (see above).

On 24 May 2012, after reading the relevant sections of the annual report and establishing how the auditors and bank staff prepared the annual accounts in relation to the balance sheet items, I posed the following seven specific and reasonable questions about the Irish gold reserves to the email address of the central bank:

“Hello, I have some questions on an item in the annual accounts 2011 Central Bank of Ireland annual report.

 Item 1 in the balance sheet on page 98 as of 31 December 2011 lists “Gold and gold receivables“ of € 234,967,000. Note 10 to the accounts on page 112 states that “Gold and gold receivables represent coin stocks held in the Bank, together with gold bars held at the Bank of England“.

Given that the valuation difference in this line item between 2010 and 2011 represents an increased gold price and no holding increase, the 2011 valuation represents approximately 193,000 fine troy ounces, which is equivalent to  6 fine troy tonnes, or about 485 london good delivery bars.

 My questions are as follows – 

Is the Central Bank of Ireland bar gold held at the Bank of England on a specific bar basis or a fine ounce basis?

Is the Central Bank of Ireland bar gold held at the Bank of England earmarked in a set-aside account or is it construed as a gold deposit? 

Is the Central Bank of Ireland bar gold held at the Bank of England held under a contract of bailment (with the Central Bank of Ireland as bailor and the Bank of England as bailee), or is the relationship a creditor/debtor relationship?

Is the Central Bank of Ireland bar gold held at the Bank of England beneficially and legally owned by the Central Bank of Ireland free and clear of liens, charges, encumbrances, claims or defects?

Is any of the Central Bank of Ireland bar gold held at the Bank of England currently loaned or swapped out to the Bank of England or other parties?

Given that the quantity of the Central Bank of Ireland bar gold held at the Bank of England did not vary between 2010 and 2011, what verifications and checks did the members of the Central Bank Commission use for gold and gold receivables when preparing the 2011 Statement of Accounts?

And finally, given that the quantity of the Central Bank of Ireland bar gold held at the Bank of England did not vary between 2010 and 2011, what sources of material did the Comptroller and Auditor General use for verification of gold and gold receivables in his audit of the 2011 accounts?”

 On 12 June 2012, the Central Bank of Ireland responded as follows:

“Thank you for your email request of 24th May 2012 to our Publications email address . As I do not have a postal address for you, I am responding by this email.

I can inform you that the gold bars held by the Central Bank of Ireland are held in safe custody at the Bank of England.

It is not Bank policy to enter into financial/commercial detail (beyond that contained in the Bank’s Annual Report & Accounts) relating to these or other financial assets that are held. You will note that the Bank’s external auditors have certified that its statement of Accounts gives a true and fair view of the Bank’s affairs.

Xxxxxxx Xxxxxxx, Strategy, Planning  & Publications, General Secretariat Division

 On the same day, 12 June 2012, I sent a follow-up email to the central bank employee from this Strategy, Planning  & Publications group.

“Dear Mr Xxxxxxx,

Thank you for your reply. Could you direct me to the published Bank Policy, statutory, compliance or otherwise, that covers Bank discussion of its financial assets and investments, so that I can relate this policy to my questions?

 On 20 June 2012, I received a reply from this individual:

“Dear Mr Manly, Thank you for your email of 12th June 2012.

The Bank’s management and staff comply with an employment provision that the Bank’s business must not be disclosed, or discussed with, outside parties.

The duties and obligations of management and staff in this regard are governed by Section 33AK of the Central Bank Act, 1942 (as inserted).  All staff are given copy of this Section on appointment and are required to familiarise themselves with its provisions and to comply with them at all times.

Xxxxxxx Xxxxxx, Strategy, Planning  & Publications, General Secretariat Division”

Section 33AK of the Central Bank Act of 1942 is a long and restrictive section that was only inserted into Act in 2003. It details specific circumstances of the central bank not disclosing confidential information, one part of which relates to:

“any matter arising in connection with the performance of the functions of the Bank or the exercise of its powers”

Importantly, Section 33AK of the Central Bank Act of 1942 has been routinely criticised in Ireland as a ridiculous secrecy cop-out by the Department of Finance and Central Bank to allow them not to answer all manner of questions in relation to the activities of the central bank, for example it has been used by the Minister of Finance to avoid discussing multiple issues related to Ireland’s economic collapse and subsequent bail-outs. The frequent abuses of Section 33AK were succinctly summed up in an Irish bailout blog in 2013 in an article titled “Is 33AK undermining the banking sector in Ireland?“:

“Section 33AK had never been mentioned by Minister Noonan before November 2012, but 33AK is now routinely used by Minister Noonan to tell pesky TDs (Members of Parliament) to “get lost” when they try to ask important questions about the banking sector…”

“No doubt the mandarin discoverer of Section 33AK in the Department of Finance is regularly patted on the back, but for the sake of our Republic, shouldn’t this legislation be repealed?”

According to Ireland’s independent Information Commissioner whose role it is to oversee compliance with the FOI Act, the Central Bank of Ireland had described Section 33AK as deriving:

“primarily from the obligations of ‘professional secrecy’ that arise as a result of certain EU law obligations contained within what were previously called the Supervisory Directives and are now called the supervisory EU legal acts”.

In my opinion, this invocation of Section 33AK by the above mentioned Central Bank of Ireland employee of the Strategy, Planning  & Publications group to decline answering simple questions about Ireland’s gold reserves and the central bank’s published financial statements is pure obstruction, it is an abuse of power, it is an abuse of the legislation, it is an outrage, it has nothing to do with the EU, and it goes far beyond the meaning of the legislation’s original intention.


Freedom of Information Act (2014) – A New Hope

In October 2014, the Irish President signed the Freedom of Information Act (2014) into law. This repealed and replaced the FOI Acts of 1997 and 2003. The FOI Act (2014) extended “FOI bodies” to “all Public Bodies” unless specifically exempted. Exemptions were either full or partial. Importantly, the Central Bank of Ireland was included under the FOI Act (2014) but with partial exemptions.  But for new public bodies (with exemptions), the Act only covers access to information and records created from 21 April 2008 onwards.

Part 2 of this article (forthcoming) details a FOI request about the Irish gold reserves that I made to the Central Bank of Ireland in the 2015 on the back the introduction of this updated FOI Act. As you will see, the central bank deciding officer initially refused all parts of my request and even liaised with the Bank of England on a number of occasions where they discussed by FOI request. That refusal contained such gems as:

“the release of detailed information regarding the gold bars held at the Bank of England on behalf of the Central Bank of Ireland could have a serious, adverse effect on the financial interests of the State”

“‘the record concerned [a gold bar weight list] does not exist or cannot be found after all reasonable steps to ascertain its whereabouts have been taken,’

I appealed this FOI refusal. The appeal was partially successful in producing some very limited details of the supposed Irish gold reserve holdings, including at the Bank of England and gold coins within storage in Dublin, Ireland. Full details in Part 2.

COMEX and ICE Gold Vault Reports both Overstate Eligible Gold Inventory


In the world of gold market reportage, much is written about gold futures prices, with the vast majority of reporting concentrating on the CME’s COMEX contracts. Indeed, when it comes to COMEX gold, a veritable cottage industry of websites and commentators makes its bread and butter commentating on COMEX gold price gyrations and the scraps of news connected to the COMEX. The reason for the commentators’ COMEX fixation is admittedly because that’s where the trading volume is. But such fixation tends to obscure the fact that there is another set of gold futures contracts on ‘The Street’, namely the Intercontinental Exchange (ICE) gold futures contracts that trade on the ICE Futures US platform.

These ICE gold futures see little trading volume. Nonetheless, they have a setup and infrastructure rivaling that of COMEX gold futures, for example, in the reporting of the gold inventories from the vault providers that have been approved and licensed by ICE for delivery of gold against its gold futures contracts.

At the end of each trading day, both CME and ICE publish reports showing warehouse inventories of gold in Exchange licensed facilities/depositories which meet the requirements for delivery against the Exchanges’ gold futures contracts. These inventories are reported in two categories, Eligible gold and Registered gold. Many people will be familiar with the COMEX version of the report. A lot less people appear to know about the ICE version of the report. For all intents and purposes they are similar reports with identical formats.

Most importantly, however, both reports are technically incorrect for the approved vaults that they have in common because neither Exchange report takes into account the Registered gold reported by the other Exchange. Therefore, the non-registered gold in each of the vaults in common is being overstated, in a small way for COMEX, and in a big way for ICE. And since COMEX and ICE have many approved vaults in common, technically this is a problem.

The Background

Before looking at the issues surrounding the accuracy of the reports, here is some background about CME and ICE which explains how both Exchanges ended up offering gold futures contracts using vaults in New York. The Commodity Exchange (COMEX) launched gold futures on 31 December 1974, the date on which the prohibition on private ownership of gold in the US was lifted. In 1994, COMEX became a subsidiary of the New York Mercantile Exchange (NYMEX).

In 2001, Euronext acquired the London International Financial Futures and Options Exchange (LIFFE) to form the Euronext.LIFFE futures exchange. In April 2007, NYSE and Euronext merged to form NYSE Euronext. Following the merger with NYSE, this merged futures exchange was renamed NYSE Liffe US.

In July 2007, Chicago Mercantile Exchange (CME) merged with the Chicago Board of Trade (CBOT) and CME and CBOT both became subsidiaries of ‘CME Group Inc’. CBOT had traded a 100 oz gold futures contract from 2004 and a ‘CBOT mini-sized’ gold futures contract (33.2 ozs) from 2001. During 2007, NYSE Euronext had also been attempting to acquire CBOT at the same time as CME.

In August 2008, the CME Group acquired NYMEX (as well as COMEX), and NYMEX (including COMEX) became a fully-owned subsidiary of holding company CME Group Inc. Just prior to acquiring NYMEX/COMEX and its precious metals products, the CME sold the CBOT products to NYSE Euronext in March 2008. This included the CBOT 100 oz and mini gold futures contracts, and the CBOT options on gold futures. NYSE Euronext then added these gold contract products to its NYSE Liffe US platform.

In 2013, ICE acquired NYSE Liffe. In mid 2014, ICE transferred the NYSE Liffe US precious metals contracts to its ICE Futures US platformICE then spun off Euronext in 2014. ICE Futures US had been formerly known as the New York Board of Trade (NYBOT). ICE had acquired NYBOT in January 2007 and renamed it as ICE Futures US in September 2007.

Both COMEX and ICE Futures US are “Designated Contract Markets” (DCMs), and both are regulated by the Commodity Futures Trading Commission (CFTC). Any precious metals vault that wants to act as an approved vault for either COMEX or ICE, or both, has had to go through the COMEX / ICE approval process, and the CFTC has to be kept in the loop on these approvals also.

The Vault Providers

For its gold futures contracts, COMEX has approved the facilities of 8 vault providers in and around New York City and the surrounding area including Delaware. These vaults are run by Brink’s, Delaware Depository, HSBC, International Depository Service  (IDS) Delaware, JP Morgan Chase, Malca-Amit, ‘Manfra, Tordella & Brookes’ (MTB), and The Bank of Nova Scotia (Scotia). Their vault addresses are:

  • Brinks Inc:  652 Kent Ave. Brooklyn, NY and 580 Fifth Avenue, New York, NY 10036
  • Delaware Depository: 3601 North Market St and 4200 Governor Printz Blvd, Wilmington, DE
  • HSBC Bank USA: 1 West 39th Street, SC 2 Level, New York, NY
  • International Depository Services (IDS) of Delaware: 406 West Basin Road, New Castle, DE
  • JP Morgan Chase NA: 1 Chase Manhattan Plaza, New York, NY
  • Malca-Amit USA LLC, New York, NY (same building as MTB)
  • Manfra, Tordella & Brookes (MTB): 50 West 47th Street, New York, NY
  • Scotia Mocatta: 23059 International Airport Center Blvd., Building C, Suite 120, Jamaica, NY

Malca-Amit and IDS of Delaware were the most recent vault providers to be approved as COMEX vault facilities in December 2015/January 2016.

ICE has approved the facilities of 9 vault providers in and around New York City and the surrounding area including Delaware and also Bridgewater in Massachusetts. A lot of the ICE vaults in New York and the surrounding region were approved when its gold futures were part of NYSE Liffe. The ICE approved vaults are run by Brink’s, Coins N’ Things (CNT), Delaware Depository, HSBC, IDS Delaware, JP Morgan Chase, MTB, Loomis, and Scotia. From these lists you can see that Malca-Amit is unique to COMEX, and that CNT and Loomis are unique to ICE. The addresses of CNT and Loomis are as follows:

  • CNT Depository in Massachusetts: 722 Bedford St, Bridgewater, MA 02324
  • Loomis International (US) Inc: 130 Sheridan Blvd, Inwood, NY 11096

There are therefore 10 vault providers overall: Brink’s, CNT, Delaware Depository, HSBC, IDS Delaware, JP Morgan, Loomis, Malca-Amit, MTB, and Scotia. Three of the vaults are run by security transport and storage operators (Brink’s, Malca, and Loomis), three are owned by banks (HSBC, JP Morgan and Scotia), three are parts of US precious metals wholesaler groups (MTB, CNT and Dillon Gage’s IDS of Delaware), and one Delaware Depository is a privately held precious metals custody company.

Importantly, there are 7 vault provider facilities common to both COMEX and ICE. These 7 common vault providers are Brink’s, Delaware Depository, HSBC, IDS Delaware, JP Morgan, MTB, and Scotia.

The Inventory Reports

Each afternoon New York time, CME publishes a COMEX ‘Metal Depository Statistics’ report for the previous trading day’s gold inventory activity, which details gold inventory positions (in troy ounces) as well as changes in those positions within its approved vault facilities at Brink’s, Delaware Depository, HSBC, IDS Delaware, JP Morgan, Malca-Amit, MTB and Scotia. The COMEX report is published as an Excel file called Gold_Stocks and its uploaded as the same filename to the same CME Group public directory each day. Therefore it gets overwritten each day:

Below are screenshots of this COMEX report for activity date Friday 16 December 2016 (end of week), which were reported on Monday 19 December 2016. For each depository, the report lists prior total of gold reported by that depository, the activity for that day (gold received or withdrawn) and the resulting updated total for that day. The report also breaks down the total of each depository into ‘Registered’, and ‘Eligible’ gold categories.

Eligible gold is all the gold residing in a reporting facility / vault  which is acceptable by the Exchange for delivery against its gold futures contracts and for which a warrant (see below) has not been issued, i.e. the bars are of acceptable size, gold purity and bar brand. In practice, this just applies to 100 oz and 1 kilo gold bars. This ‘eligible gold’ could be gold owned by anyone, and it does not necessarily have any connection to the gold futures traders on that Exchange.

For example, 400 oz gold bars in a COMEX or ICE approved vault would not be eligible gold. Neither would 100 oz bars or kilo bars arriving in a vault if  the bars had been outside the chain of custody and had not yet been assayed.

Registered gold is eligible gold (acceptable gold) for which a vault has issued a warehouse receipt (warrant). These warrants are documents of title issued by the vault in satisfaction of delivery of a gold futures contract, i.e. the vault receipts are delivered in settlement of the futures contract. This is analogous to set-aside or earmarked gold.

For the COMEX 100 oz gold futures contract (GC), physical delivery can be either through 1 unit of a 100 troy ounce gold bar, or 3 units of 1 kilo bars, therefore eligible gold on the CME report would include 100 troy ounces bars of gold, minimum 995 fineness, CME approved brand, and 1 kilo gold bars, CME approved brand. The CME E-Mini gold futures contract (QO) is exclusively cash settled and has no bearing on the licensed vault report. CME E-micro gold futures (MGC) can indirectly settle against the CME 100 oz GC contract through ‘Accumulated Certificates of Exchange’ (ACEs) which represent a 10% claim on a GC (100 oz) warrant. Therefore, the only gold bars reported included on the CME Metal Depository Statistics reports are 100 oz and 1 kilo gold bars.




COMEX Warehouse Inventory Report – Gold. Click to Enlarge

Each afternoon New York time, ICE publishes a “Metal Vault Statistics” report as an Excel file which is uploaded to an ICE public web directory. The report lists the previous trading day’s gold inventory activity, and like the CME report, shows gold inventory positions and changes in those positions (receipts and withdrawals) in troy ounces within its approved vault facilities. The ICE report also breaks down the total of each depository into ‘Registered’ and ‘Eligible’ gold.

The ICE licensed vault reports are saved as individually dated reports. The ICE report dated 19 December 2016 for activity on 16 December 2016, can be seen at

Two gold futures contracts trade on ICE Futures US, a 100 oz gold futures contract (ZG), and a Mini gold futures contract (YG). YG which has a contract size of 32.15 troy ounces (1 kilo). Both of these ICE gold contracts can be physically settled. The gold reported on the ICE Metal Vault Statistics report therefore comprises 100 oz and 1 kilo gold bars that are ICE approved brands. In practice, CME and ICE approved brands are the same brands.




ICE Warehouse Inventory Report – Gold. Click to Enlarge

The Rules

The data required to be conveyed to CME each day by the approved depositories is covered in NYMEX Rulebook Chapter 7, section 703.A.7 which states that:

“on a daily basis, the facility shall provide, in an Exchange-approved format, the following information regarding its stocks:

  • a. The total quantity of registered metal stored at the facility.
  • b. The total quantity of eligible metal stored at the facility.
  • c. The quantity of eligible metal and registered metal received and shipped from the facility.”

The ICE Futures US documentation on gold futures does not appear to specifically cover the data that its approved vaults are required to send to ICE each day. Neither does it appear to be covered in the old NYSE Liffe Rulebook from 2014. In practice, since ICE generate a report for each trading day which is very similar to the CME version of the report, then it’s realistic to assume that the vaults send the same type of data to ICE. But as you will see below, the vaults seem to just send each Exchange a ‘number’ specifying the registered amount of gold connected to warrants related to the Exchange, and then another ‘number’ for acceptable gold that is not registered to warrants connected to that Exchange.

The Comparisons

What is immediately obvious when looking at the CME and ICE reports side by side is:

  • a) they are both reporting the same total amounts of gold at each of the approved facilities (vaults) that they have in common, and also reporting the same receipts and withdraws to and from each vault. This would be as expected.
  • b) CME and ICE are reporting different amounts of ‘Registered’ gold at each facility because they only report on the gold Registered connected to their respective Exchange contracts…
  • c)… which means that CME and ICE are also reporting different amounts of ‘eligible’ gold at each approved facility that they have in common.

In other words, because neither Exchange takes into account the ‘Registered’ gold at the other Exchange, each of CME and ICE is overstating the amount of Eligible gold at each of the vaults that they both report on.

Brink’s Example

Look at the below Brinks vault line items as an example. For activity date Friday 16 December 2016, CME states that at the end of the day there were 588,468.428 troy ounces of gold Registered, leaving 223,946.744 ounces in Eligible, and 812,415.172 ounces in Total. ICE also states the same Total amount of 812,415.195 ounces (probably differs by 0.023 ozs due to rounded balances carried forward), but from ICE’s perspective, its report lists that there were 321.51 ounces (10 kilo bars) registered in this Brink’s vault, so therefore ICE states that there are 812,093.685 ounces of eligible gold in the Brinks vaults. However, CME has 588,468.428 troy ounces of gold ‘earmarked’ or Registered against the total amount of reported 100 oz and 1 kilo gold bars in the Brink’s facility. In practice, if the situation ever arose, the Brink’s vault could issue warrants against ICE gold futures of more than 223,635.234 ozs, because this is the maximum amount of eligible gold in the vault which is neither registered with the COMEX exchange or registered with the ICE exchange.


CME Brinks gold – Report date: 19 December 2016, Activity date: 16 December 2016

ICE Brinks gold – Report date: 19 December 2016, Activity date: 16 December 2016

Therefore in this example, both the CME and ICE reports are not fully correct, but the ICE report is far ‘more’ incorrect than the CME report because the ICE report substantially understates the true amount of Eligible (non-registered) gold in the Brink’s vault. This trend is evident across most ‘Eligible’ numbers for the vaults in the ICE report. Since the trading volume in ICE gold futures is very low overall, the number of ICE gold futures contracts that have ultimately generated warrants is also very low.

Although the relatively tiny amounts of ‘Registered’ ounces listed on the ICE report won’t really affect the overall accuracy of the COMEX reporting, a more correct approach to reflect reality would be for the vault providers to combine the Registered numbers from the two Exchanges, and subtract this combined amount from the reported Total at each facility so as to derive an accurate and real Eligible amount for each vault facility.

MTB Example

But what about a scenario in which very little non-registered gold is actually left in a vault right now due to a high Registered amount having been generated from COMEX activity? In such a situation, the ICE report will overestimate the amount of Eligible gold in a big way and a reader of that report would be oblivious of this fact. This is the case for the Manfra, Tordella & Brookes (MTB) vault data on the ICE report.

According to the CME report, as of Friday 16 December, there were 104,507.221 ozs of gold in the MTB vault in the form of acceptable 100 oz or 1 kilo bars, with 99,698.357 ozs of this gold registered against warrants for COMEX, and only 4,808.864 ozs not Registered (i.e. Eligible to be Registered).

CME MTB gold – Report date: 19 December 2016, Activity date: 16 December 2016

The ICE report for the same date and same vault states that there are the same amount of Total ounces in the vault i.e. 104,507.217 ounces (0.004 oz delta). However, the ICE report states that 104,153.567 ozs are Eligible to be registered, since from ICE’s perspective, only 353.65 ozs (11 kilo bars) are actually Registered. But this ICE Eligible figure is misleading since there are a combined 100,052.007 ozs (99,698.357 ozs + 353.65 ozs) Registered between the 2 Exchanges, and only another 4,455.214 ozs of Eligible gold in total in the vault.

ICE MTB gold – Report date: 19 December 2016, Activity date: 16 December 2016

IDS Delaware Example

The reporting for International Depository Services (IDS) of Delaware is probably the most eye-opening example within the entire set of vault providers, because when looking at the 2 reports side by side, it becomes clear that there is no ‘Eligible’ (non-Registered) gold in the entire vault. CME states that 675.15 ozs (21 kilo bars) are Registered and that 514.4 ozs (16 kilo bars) are Eligible, giving a total of 1,189.55 ozs (37 kilo bars), but ICE states that 514.4 ozs (16 kilo bars) are Registered and thinks that 675.15 ozs (21 kilo bars) are Eligible. But in reality, between the two Exchanges, the entire 1,189.55 ozs (37 kilo bars) is Registered and there are zero ozs Eligible to be Registered. CME thinks whatever is not Registered is Eligible, and ICE thinks likewise. But all 37 kilo bars are Registered by the combined CME and ICE. IDS therefore sums up very well the dilemma created by the Exchanges not taking into account the warrants held against each other’s futures contracts.

ICE IDS gold – Report date: 19 December 2016, Activity date: 16 December 2016


ICE IDS gold – Report date: 19 December 2016, Activity date: 16 December 2016

Delaware Depository Example

Based on a report comparison, Delaware Depository (DD) is unusual in that there are different ‘Total’ amounts reported by each of CME and ICE. CME states that there are 110,336.484 ozs of acceptable gold in the DD vault, whereas ICE states that there are 112,008.284 ozs. This difference is 1,671.80 ozs which is equivalent to 52 kilo bars. So, for some unexplained reason, the vault has provided different total figures to CME and ICE.

CME Delaware Dep gold – Report date: 19 December 2016, Activity date: 16 December 2016


ICE Delaware Dep gold – Report date: 19 December 2016, Activity date: 16 December 2016

The above comparison exercise can be performed for the other 3 vaults that both CME and ICE have in common, namely the 3 bank vaults of HSBC, JP Morgan and Scotia. These 3 vaults  hold the largest quantities of metal in the entire series of New York area licensed vaults. The ICE contracts have very tiny registered amounts in these vaults, but the Eligible amounts listed on the ICE report for these vaults should technically take account of the Registered amounts listed on the CME report for these same 3 vaults.

The licensed vault that is unique to CME, i.e. the vault of Malca-Amit, surprisingly only reports holding 1060.983 ozs of gold (33 kilo bars), with all 33 bars reported as Registered. This is surprising since given that Malca operates a vault in the recently built International Gem Tower on West 47th Street, one would expect that Malca would be holding far more than just 33 gold kilo bars which would only take up a tiny amount of shelf space.

The two vaults that are unique to ICE, namely CMT and Loomis, also report holding only small amounts of acceptable gold. CNT has 9966.154 ozs (310 kilo bars), 90% of which is Registered, while Loomis reports holding just 7064.07 ozs, all of which is non-registered. 


In gold futures physical settlement process, it’s the responsibility of the exchanges (COMEX and ICE) to assign the delivery (of a warrant) to a specific vault (the vault which is ‘stopped’ and whose warehouse receipt represents the gold delivered). Presumably, the settlement staff at both CME and ICE both know about each other’s registered amounts at the approved vaults, and obviously the vaults do since they track the warrants. But then, if this is so, why not indicate this on the respective reports?

The CME and ICE reports both have disclaimers attached as footnotes:

CME states:

“The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.”

ICE states:

“The Exchange has made every attempt to provide accurate and complete data. The information contained in this report is compiled for you convenience and is furnished for informational purpose only without responsibility for accuracy.”

The exact definition of ‘Eligible’, taken from the COMEX Rulebook, is as follows:

“Eligible metal shall mean all such metal that is acceptable for delivery against the applicable metal futures contract for which a warrant has not been issued

However, in the case of ICE, its report is vastly overstating figures for Eligible gold at the vaults in which COMEX is reporting large registered amounts. In these cases, a warrant has been issued against the metal, it’s just not for ICE contracts, but for the contracts of its competitor, the COMEX. Surely, at a minimum, these footnote disclaimers of the ICE and CME vault inventory reports should begin to mention this oversight?

Guest Post: How to Trigger a Silver Avalanche by a Pebble: “Smash(ed) it Good”

UBS and other precious metals traders on how to wreak havoc in silver markets

Written by Allan Flynn, specialist researcher in aspects of gold and silver.


“An avalanche can be triggered by a pebble if you get the timing right” 

Earlier this year at April’s hearings for London Silver and Gold Fix lawsuits, the judge and defendant’s attorney quipped about trader chats named “the mafia” and “the bandits” published in prosecutors findings of Forex investigations but conspicuously absent from precious metals investigation findings, and the silver and gold antitrust lawsuits under consideration.

THE COURT: “Those were bad facts for the defendants.”

LACOVARA: “I think, your Honor, that if we had chat rooms that said “The Cartel”, we might be having a different focus to oral argument today.”

THE COURT: “I think that is correct.”

Given the judges skepticism of the allegations described in an earlier article, it came as a surprise early October when the banks listed were ordered by magistrate Valerie E. Caproni to face charges. More surprising perhaps was the exemption granted Swiss bank UBS, which despite having been found guilty and fined for “precious metals misconduct” by the Swiss Financial Market Supervisory Authority FINMA in November 2014, was granted motion to dismiss from both silver and gold lawsuits.

All that may be about to change according to documents filed in a New York district court December 7th, where plaintiffs claim that transcripts showing conspiracy to manipulate silver, provided by Deutsche Bank as part of an April settlement agreement, includes extensive smoking gun evidence involving UBS and other banks. Plaintiffs describe a “multi-year, well-coordinated and wide-ranging conspiracy to rig the prices of silver and silver financial instruments that far surpasses” that of the previous complaint, including potentially incriminating evidence of UBS precious metals traders allegedly conspiring with other banks.

Five additional banks to the remaining defendants HSBC and Bank of Nova Scotia are mentioned including Barclays Bank, BNP Paribas, Standard Chartered Bank, Bank of America and Merrill Lynch. The Memorandum of Law signed by Vincent Briganti on behalf of Lowey Dannenberg Cohen & Hart for plaintiffs on Wednesday 7th December seeks leave to amend the existing complaint filed with the United States District Court Southern District of New York.

Included in the memo are numerous astounding transcripts indicating coordination between UBS and other banks of “pushing,” ”smashing,” ”bending,” ”hammering,” ”blading,” ”muscling,” and “ramping” the prices of silver and silver financial instruments.

In support of claims of conspiracy to manipulate the price of silver downward the following gem is attributed to UBS Trader A: “so we both went short” “f*cking hell it just kept going higher” “63,65, then my guy falls asleep, it goes to 69 paid!” “then finally another reinforcement came in.

Discussions supposedly of coordination between UBS and their competitors about fixing the price of physical silver by offering only wide spreads between the bid and ask (where a “lac” is reference to an Indian measure equaling 100,000 units) go like this:

UBS Trader B: “what did u quote let me check”

Deutsche Bank Silver Fix Trader-Submitter A: “44/49”

UBS Trader A: “just quote wider if they call me in 1 lac I will quote 7-8 cents”

Deutsche Bank Trader B: “how wide u making 1 lac today 5 cents?”

UBS Trader A: “silver actually steadier than gold i would make 5-6 cents wide in silver”

UBS Trader A: how wide would you quote 5 lacs silver?”

Deutsche Bank Trader B: “10cu>?”

Deutsche Bank Trader B:”how wide u quote for 3 lacs?”

UBS Trader A: 10 cents”).

Manipulation of the Silver Fix price to benefit their silver trading positions in derivatives by UBS is claimed in the following exchanges:

Deutsche Bank Trader B: “u guys short some funky options” “well you told me to no one u just said you sold on fix”

UBS Trader A: “we smashed it good.”

Deutsche Bank Silver Fix Trader-Submitter A: “UBS boring the market again”…”just like them to bid it up before the fix then go in as a seller…they sell to try and push it back.”

It’s further alleged by plaintiffs that UBS implemented an “11 oclock rule” where both UBS and Deutsche Bank would short silver at 11A.M.

As examples of the comparative ease by which UBS moved the silver market the memo reveals Deutsche Bank Trader B added UBS Trader A to a chat with HSBC Trader B, which UBS Trader A deemed “the mother of all chats,” and leading to the trader’s own analysis:

UBS Trader A to Deutsche Bank Trader B: “if we are correct and do it together, we screw other people harder”

UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”, and in reference to UBS supposed manipulative influence by an unnamed party: “u guys WERE THE SILVER MKT.”


UBS intended to reap financial rewards by manipulation of the price of physical silver and associated financial instruments, the memo says as UBS Trader A suggested: “go make your millions now jedi master…”pls write me a check when u aer a billionare,” and “i teach u a fun trick with silver” to which Deutsche Bank Trader B replied: “show me the money.

Confident of their ability to manipulate UBS made bold predictions according to the following alleged extracts:

UBS Trader A: “gonna bend this silver lower”; “i will bend it lower told u”; ”hah cool its gonna get ugly”; “use the blade on silver rg tnow it’ll hold it up,

Deutsche Bank Trader B: “yeah,

UBS Trader A: “gona blade silver now.

Of course all the secrecy in the world about the operations was required of the chat groups by UBS Trader A stating: “pls keep all these trick to yourself,” “btw keep it to yourself…,” and “ok rule of thumb EVERYTHING here stays here.

Examples of other banks alleged transcripts are included in the following:


Deutsche Bank Trader B instructing Barclays trader A: “today u smash,

Barclays Trader A: “yeah” and “10k silver” “im short.

It’s alleged that Barclays and Deutsche Bank shared information so often that Barclays Trader A remarked “we are one team one dream.”

Materials in the memo even include the Deutsche Bank and Barclays precious metals traders agreeing at one stage to “stay away” from silver for a week.

The traders of course knew it was terribly wrong with Barclays Trader A responding to Deutsche Bank’s Trader B instruction to “push silver”: “HAHAHA lol i don’t think this is politically correct leh on chat.

Merrill Lynch

Allegedly fixing the bid-ask spread they offered clients on silver:

Merrill Lynch Trader A: “How wide r u on spot? Id assume 10 cents for a few lacs?

Deutsche Bank Silver Fix Trade-Submitter A: “im getting ntg but stops”

…Merrill Lynch Trader A: “we had similar” “I sweep them…Fuk these guys.

Showing disregard to global regulators even after noting their activities the two continued to “sweep” the silver market, allegedly observing at one stage: “Someone got stopped messily.


BNP Paribas Fortis

Fortis Bank Trader B allegedly conspired with Deutsche Bank to manipulate silver prices, using what he termed a “bulldozer” on the silver market.

Standard Chartered

Conversations between Deutsche Bank Silver Fix Trade-Submitter A and Standard Chartered Trader A as follows:

 “Yeh” “small long out of the fix…” “ok where to sell sivler then?

23.40 thru that use it as a stop profit and let it runnnnnnnnnnnnn

were on the same wavelength

im long silver”…”ilke both [silver and gold] to get the absolute sht squeezed out of them” “im longer silver than i am gold


Assuming the transcripts submitted are accepted and plaintiffs are permitted to file their Third Amended Complaint, the possible pending “avalanche” of settlements in silver lawsuits will speak volumes for the investigative prowess of the CFTC and the DOJ, both of which were commissioned to investigate long running allegations of silver and precious metals market manipulation over recent years, and came up completely empty.

It appears Judge Caproni, former FBI General Counsel, was on the money when considering the potential of ineptitude in government investigations of precious metals markets at April’s gold hearing: “I don’t put a lot of stock in the fact that there are investigations because I was a government lawyer for a long time and I know what you need to open an investigation. By the same token, the fact that they closed it without charging anybody doesn’t mean that everybody is innocent. So I don’t put a lot of stock in it one way or the other.”

The CFTC proudly announced in September 2013 they had spent five years and seven thousand enforcement hours investigating complaints of manipulation in the silver market, including with assistance by the Commission’s Division of Market Oversight, the Commission’s Office of Chief Economist, and outside experts, but yet found nothing.

The Department of Justice Antitrust Division which were so confident of their investigation of collusion in precious metals they went to the extraordinary lengths in January of this year of providing a letter to silver and gold lawsuit defendants advising they had closed their investigation without findings of wrongdoing.

The Swiss Financial Services watchdog FINMA investigated, published and prosecuted UBS for forex and precious metals trading misconduct but yet said so little about precious metals findings in their November 2014 investigation report, it was impossible for the court to withstand UBS motion to dismiss in both metals.

And finally of the ability of authorities to reign in rogue banks in the precious metals or any other markets, the memorandum flags a fact that should draw the attention of those trying to figure out if they can indeed trust that their bullion bank has their best interests at heart simply by banning participation in trader chat rooms.

“The chats contained in the DB material are just the tip of the iceberg, as evidence suggests that Defendants intentionally communicated in undocumented ways to keep their manipulation hidden.”

For example the memo includes the salient reminder that banks will always find a way “to evade detection,” in this case where two traders are described as also communicating “via email and personal cell phone.”

The above article was first published at Allan Flynn’s website here.

Allan Flynn is a specialist researcher in aspects of gold and silver. He is currently investigating for future publication on the same topic and works in property and commercial architecture when he needs to eat. He holds shares in precious metals producers and banks.


European Central Bank gold reserves held across 5 locations. ECB will not disclose Gold Bar List.

The European Central Bank (ECB), creator of the Euro, currently claims to hold 504.8 tonnes of gold reserves. These gold holdings are reflected on the ECB balance sheet and arose from transfers made to the ECB by Euro member national central banks, mainly in January 1999 at the birth of the Euro. As of the end of December 2015, these ECB gold reserves were valued on the ECB balance sheet at market prices and amounted to €15.79 billion. 

The ECB very recently confirmed to BullionStar that its gold reserves are stored across 5 international locations. However, the ECB also confirmed that it does not physically audit its gold, nor will it divulge a bar list / weight list of these gold bar holdings.

Questions and Answers

BullionStar recently put a number of questions to the European Central Bank about the ECB’s gold holdings. The ECB Communications Directorate replied to these questions with answers that appear to include a number of facts about the ECB gold reserves which have not previously been published. The questions put to the ECB and its responses are listed below (underlining added):

Question 1:The 2015 ECB Annual Report states that as at 31 December 2015, the ECB held 16,229,522 ounces of fine gold equivalent to 504.8 tonnes of goldGiven that the ECB gold holdings arose from transfers by the respective member central banks, could you confirm the storage locations in which this ECB gold is currently held (for example at the Bank of England etc), and the percentage breakdown of amount stored per storage location.”

ECB Response:The gold of the ECB is located in London, Paris, Lisbon, New York and Rome. The ECB does not disclose its distribution over these places. The gold of the ECB is stored there because it was already stored there before ownership was transferred to the ECB and moving it was seen and is seen as too costly.

Question 2: “Could you clarify as to how, if at all, this gold is audited, and whether it physical audited by the ECB or by a 3rd party?”

ECB Response:The ECB has no physical audit of its gold bars. The gold bars that the ECB owns are individually identified and each year the ECB receives a detailed statement of these gold deposits. The central banks where the gold is stored are totally reliable.

Question 3: “Finally, can the ECB supply a full weight list of the gold bars that comprise the 504.8 tonnes of gold referred to above?”

ECB Response:The ECB does not disclose this information.


London, New York, Paris, Rome, Lisbon

Given that some of the information shared by the ECB has arguably not been in the public record before, each of the 3 ECB answers above is worth further exploration.

In January 1999, when the Euro currency was created (Stage 3 of Economic and Monetary Union), each founding member national central bank (NCB) of the Euro transferred a quantity of foreign reserve assets to the ECB. Of these transfers, 85% was paid to the ECB in the form of US dollars and Japanese Yen, and 15% was paid to the ECB in the form of physical gold.

Initially in January 1999, central banks of 11 countries that joined the Euro made these transfers to the ECB, and subsequently the central banks of a further 8 countries that later joined the Euro also executed similar transfers to the ECB.

All of the foreign exchange and gold reserves that were transferred to and are owned by the ECB are managed in a decentralised manner by the national central banks that initiated the transfers. Essentially, each national central bank acts as an agent for the ECB and each NCB still manages that portion of reserves that it transferred to the ECB. This also applies to the transferred gold and means that the gold transferred to the ECB never physically moved anywhere, it just stayed where it had been when the transfers of ownership were made.

That is why, as the ECB response to Question 1 states: “The gold of the ECB is stored there because it was already stored there before ownership was transferred to the ECB”.

What is probably most interesting about the latest ECB statement is that it names 5 city locations over which the ECB’s gold is stored. The 5 gold storage locations stated by the ECB are London, New York, Paris, Rome and Lisbon. Since the gold transferred to the ECB in 1999 by the national central banks would have already been stored in central banks gold vaults, these 5 city locations undoubtedly refer to the gold vaults of:

  • the Bank of England
  • the Federal Reserve Bank of New York
  • the Banque de France
  • the Banca d’Italia
  • Banco de Portugal

The fact the ECB’s gold holdings are supposedly stored at these 5 locations can be explained as follows:

Table 1: Central bank FX and Gold transfers to the ECB, January 1999

Between 4th and 7th January 1999, 11 central banks transferred a total of €39.469 billion in reserve assets to the ECB (in the form of gold, cash and securities). Of this total, 15% was in the form of gold, amounting to 24 million ounces of gold (747 tonnes of gold) which was valued at that time at €246.368 per fine ounce of gold, or €5.92 billion. The 85% transferred in the form of currencies comprised 90% US Dollars and 10% Japanese Yen. See pages 152 and 153 of ECB annual report 1999 for more details.

The 11 central banks that made the transfers to the ECB in January 1999 were the central banks of Belgium, Netherlands, Germany, France, Luxembourg, Italy, Ireland, Austria, Finland, Spain and Portugal. See Table 1 for details of these gold transfers, and the amount of gold transferred to ECB ownership by each central bank.

The value of reserves transferred to the ECB by each national central bank were based on a percentage formula called a ‘capital key’ which also determined how much each central bank subscribed to the founding capital of the ECB. This capital key was based on equally weighting the percentage of population and GDP each Euro founding member economy represented, therefore central banks such as Deutsche Bundesbank, Banque de France, and Banca d’Italia comprised the largest transfers, as can be see in Table 1. It also meant that these 3 central banks transferred the largest amounts of gold to the ECB, with the Bundesbank for example transferring 232 tonnes of gold to the ECB.

The Bundesbank gold transfer to the ECB in January 1999 took place at the Bank of England. The Bundesbank actually confirmed in its own published gold holdings spreadsheet that this transfer took place at the Bank of England. See spreadsheet Column 5 (BoE tonnes), Rows 1998 and 1999, where the Bundesbank gold holdings fell by 332 tonnes between 1998 and 1999 from 1,521 tonnes to 1,189 tonnes and also see Column 20 where gold lending rose from 149 tonnes to 249 tonnes. Therefore, between 1998 and 1999, 232 tonnes of gold was transferred from the Bundesbank gold account at the bank of England to the ECB account at the Bank of England, and 100 tonnes was added to the Bundesbank’s gold loans.

Paris and Rome

The Banque de France currently stores the majority (over 90%) of its gold reserves in its own vaults in Paris, so it it realistic to assume that when the Banque de France transferred 159 tonnes of gold to the ECB in January 1999, it did so using gold stored in the Banque de France vaults in Paris. Likewise, it is realistic to assume that the Banca d’Italia, which currently stores half of its gold reserves at its own vaults in Rome, transferred 141 gold stored in its Rome vaults to the ECB in 1999. This would explain the Paris and Rome gold holdings of the ECB. While a few ex French colony central banks are known to have historically stored gold with the Banque de France in Paris, none of the founding members of the Euro (apart from the Bundesbank) are on the record as having stored gold in Paris, at least not for a long time. The Banca d’Italia is not known for storing gold on behalf of other national central banks.

Lisbon and New York

The Banco de Portugal currently holds its gold reserves in Lisbon and also at the Bank of England, the Federal Reserve Bank of New York (FRBNY), and with the BIS. The ECB gold stored in Lisbon, Portugal most likely refers to the 18.2 tonnes of gold transferred by the Banco de Portugal to the ECB in January 1999, because a) that makes most sense, and b) the Banco de Portugal is not known as a contemporary gold custodian for other central banks.

Of the other 7 central banks that transferred gold to the ECB in January 1999, the central banks of Austria, Belgium and Ireland store most of their gold at the Bank of England so are the most likely candidates to have made gold transfers to the ECB at the Bank of England. See BullionStar blog “Central bank gold at the Bank of England” for more details of where central banks are known to store gold.

The Netherlands and Finland currently store some of their gold reserves at the Bank of England and at the Federal Reserve Bank of New York and probably also did so in 1998/99, so one or both of these banks could have made transfers to the ECB at the FRBNY. Another contender for transferring gold held at the FRBNY is the Spanish central bank since it historically was a holder of gold at the NYFED. It’s not clear where the central bank of Luxembourg held or holds gold but it’s not material since Luxembourg only transferred just over 1 tonne to the ECB in January 1999.

Greece and Later Euro members

Greece joined the Euro in January 2001 and upon joining it transferred 19.5 tonnes of gold to the ECB. Greece is known for storing some of its gold at the FRBNY and some at the Bank of England, so Greece too is a candidate for possibly transferring New York held gold to the ECB. In theory, the ECB’s New York held gold may not have even arisen from direct transfers from Euro member central banks but could be the result of a location swap. Without the national central banks or the ECB providing this information, we just don’t know for sure how the ECB’s New York gold holdings arose.

Another 7 countries joined the Euro after Greece. These countries were Slovenia on 1st January 2007, Malta and Cyprus 1st January 2008, Slovakia 1st January 2009, Estonia 1st January 2011, Latvia 1st January 2014, and Lithuania 1st January 2015. The majority of these central banks made gold transfers to the ECB at the Bank of England. In total these 7 central banks only transferred 9.4 tonnes of gold to the ECB, so their transfers are not really material to the ECB’s gold holdings.

ECB Gold Sales: 271.5 tonnes

More importantly, the ECB sold 271.5 tonnes of gold between Q1 2005 and Q1 2009. These sales comprised 47 tonnes announced on 31 March 2005, 57 tonnes announced 31 March 2006,  37 tonnes over April and May 2007 announced 1 June 2007, 23 tonnes of sales completed on 30 November 2006, 42 tonnes announced 30 November 2007, 30 tonnes of completed sales announced 30 June 2008, and 35.5 tonnes completed in Q1 2009.

These sales explain why the ECB currently only holds 504.8 tonnes of gold:

i.e. 766.9 t (including Greece) – 271.5 t sales + 9.4 t smaller member transfers = 504.8 t

The ECB does not provide, nor has ever provided, any information as to where the 271.5 tonnes of gold  involved in these 2005-2009 sales was stored when it was sold. The fact that the ECB still claims to hold gold in Paris, Rome and Lisbon, as well as London and New York, suggests that at least some of the gold transferred by the Banque de France, Banca d’Italia and Banco de Portugal in 1999 is still held by the ECB.

If the ECB had sold all the gold originally transferred to it by all central banks other than France, Italy, Portugal and Germany, this would only amount to 197 tonnes, so another 74 tonnes would have been needed to make up the shortfall, which would probably have come from the ECB holdings at the Bank of England since that is where most potential central bank and bullion bank buyers hold gold accounts and where most gold is traded on the international market.

Even taking into account Greece’s 19.4 tonne gold transfer to the ECB in January 2001, and excluding the French, Italian, German and Portuguese transfers in 1999, the ECB’s 271.5 tonnes of gold sales would still have burned through all the smaller transfers and left a shortfall. So the ECB gold sales may have come from gold sourced from all of its 5 storage loacations.

It’s also possible that one or more of the original 11 central banks transferred gold to the ECB that was stored at a location entirely distinct from the 5 currently named locations, for example gold stored at the Swiss National Bank. If that particular gold was then sold over the 2005-2009 period, it would not get picked up in the current locations. It’s also possible that some or all of the 271.5 tonnes of gold sold by the ECB over 2005-2009 had been loaned out, and that the ‘sales’ were just a book squaring exercise in ‘selling’ gold which the lenders failed to return, with the loan transactions being cash-settled.

Draghi resumes ECB press conference after being attacked by protester

No Physical Audit of ECB Gold

Given that the Euro is the 2nd largest reserve currency in the world and the 2nd most traded currency in the world, the ECB’s gold and how that gold is accounted for is certainly a topic of interest. Although the ECB’s gold doesn’t directly back the Euro, it backs the balance sheet of the central bank that manages and administers the Euro, i.e. the ECB.

The valuation of gold on the ECB’s annual balance sheet also adds to unrecognised gains on gold in the ECB’s revaluation account. Given gold’s substantial price appreciation between 1999 and 2015, the ECB’s unrecognised gains on gold amount to €11.9 billion as of 31 December 2015.

It is therefore shocking, but not entirely surprising, that the ECB doesn’t perform a physical audit of its gold bars and has never done so since initiating ownership of this gold in 1999. Shocking because this lack of physical audit goes against even the most basic accounting conventions and fails to independently prove that the gold is where its claimed to be, but not surprising because the world of central banking and gold arrogantly ignores and bulldozes through all generally accepted accounting conventions. Geographically, 2 of the locations where the ECB claims to store a percentage of its gold are not even in the Eurozone (London and New York), and infamously, the Bundesbank is taking 7 years to repatriate a large portion of its gold from New York, so the New York storage location of ECB gold holdings should immediately raise a red flag. Furthermore, the UK is moving (slowly) towards Brexit and away from the EU.

Recall the response above from the ECB:

The ECB has no physical audit of its gold bars. The gold bars that the ECB owns are individually identified and each year the ECB receives a detailed statement of these gold deposits. The central banks where the gold is stored are totally reliable.

Imagine a physical-gold backed Exchange Traded Fund (ETF) such as the SPDR Gold Trust or iShares Gold Trust coming out with such a statement. They would be run out of town. References to ‘totally reliable’ are all very fine, but ‘totally reliable’ wouldn’t stand up in court during an ownership claim case, and assurances of ‘totally reliable’ are not enough, especially in the gold storage and auditing businesses.

The ECB is essentially saying that these ‘statements’ of its gold deposits that it receives from its storage custodians are all that is needed to for an “audit” since the custodians are ‘totally reliable‘.

This auditing of pieces of paper (statements) by the ECB also sounds very similar to how the Banca d’Italia and the Deutsche Bundesbank conduct their gold auditing on externally held gold i.e. they also merely read pieces of paper. Banca d’Italia auditsannual certificates issued by the central banks that act as the depositories” (the FRBNY, the Bank of England, and the SNB/BIS).

The Bundesbank does likewise for its externally held gold (it audits bits of paper), and solely relies on statements from custodians that hold its gold abroad. The Bundesbank actually got into a lot of heat over this procedure in 2012 from the German Federal Court of Auditors who criticised the Bundesbank’s blasé attitude and lack of physical auditing, criticism which the Bundesbank’s executive director Andreas Dombret hilariously and unsuccessfully tried to bury in a speech to the FRBNY  in New York in November 2012 in which he called the controversy a “bizarre public discussion” and “a phantom debate on the safety of our gold reserves“, and ridiculously referred to the movies Die Hard with a Vengeance and Goldfinger, to wit:

“The days in which Hollywood Germans such as Gerd Fröbe, better known as Goldfinger, and East German terrorist Simon Gruber, masterminded gold heists in US vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a US Fed accounting clerk.”

Where is the ECB Gold Bar Weight List?

Since, as the ECB states, it’s gold bars are “individually identified“, then gold bar weight lists of the ECB’s gold do indeed exist. This then begs the question, where are these weight lists, and why not release them if the ECB has nothing to hide?

Quickly, to define a weight list, a gold bar weight list is an itemised list of all the gold bars held within a holding which uniquely identifies each bar in the holding. In the wholesale gold market, such as the London Gold Market, the LBMA’s “Good Delivery Rules” address weight lists, and state that for each gold bar on a weight list, it must list the bar serial number, the refiner name, the gross weight of the bar, the gold purity of the bar and the fine weight of the bar. The LBMA also state that “year of manufacture is one of the required ‘marks’ on the bar”.

Recall from above that when the ECB was asked to provide a full weight list of its 504.8 tonnes of gold bars, it responded: The ECB does not disclose this information.

After receiving this response, BullionStar then asked in a followup question as to why the ECB doesn’t disclose a weight list of the gold bars. The ECB responded (underlining added):

“We would like to inform you that, while the total weight and value of the gold held by the European Central Bank (ECB) can be considered to be of interest to the public, the weight of each gold bar is a technicality that does not affect the economic characteristics of the ECB’s gold holdings. Therefore the latter does not warrant a publication.

It is a very simple task to publish such a weight list in an automated fashion. The large gold backed ETFs publish such weight lists online each and every day, which run in to the hundreds of pages. Publication of a weight list by the ECB would be a very simple process and would prove that the claimed bars are actually allocated and audited.

This ECB excuse is frankly foolish and pathetic and is yet another poorly crafted excuse in the litany of poorly crafted excuses issued by large gold holding central banks in Europe to justify not publishing gold bar weight lists. The Dutch central bank recently refused to issue a gold bar weight list since it said it would be too costly and administratively burdensome. The Austrian central bank in refusing to publish a weight list claimed as an excuse that it “does not have the required list online“. Last year in 2015, the German Bundesbank issued a half-baked useless list of its gold bar holdings which was without the industry standard required refiner brand and bar serial number details.  (For more details, see Koos Jansen BullionStar blogs “Dutch Central Bank Refuses To Publish Gold Bar List For Dubious Reasons“, and “Central Bank Austria Claims To Have Audited Gold at BOE. Refuses To Release Audit Reports & Gold Bar List“, and a Peter Boehringer guest post “Guest Post: 47 years after 1968, Bundesbank STILL fails to deliver a gold bar number list“).

The more evidence that is gathered about the refusal of central banks to issue industry standard gold bar weight lists, the more it becomes obvious that there is a coordinated understanding between central banks never to release this information into the public domain.

The most likely reason for this gold bar weight list secrecy is that knowledge of the contents of central bank gold bar weight lists could begin to provide some visibility into central bank gold operations such as gold lending, gold swaps, location swaps, undisclosed central bank gold sales, and importantly, foreign exchange and gold market interventions. This is because with weight list comparisons, gold bars from one central bank weight list could begin turning up in another central bank weight list or else turning up in the transparent gold holdings of vehicles such as gold-backed Exchange Traded Funds.


Instead of being fixated with the ECB’s continual disastrous and extended QE policy, perhaps some financial journalists could bring themselves to asking Mario Draghi some questions about the ECB gold reserves at the next ECB press briefing, questions such as the percentage split in storage distribution between the 5 ECB gold storage locations, why ECB gold is being held in New York, why is there no physical audit of the gold by the ECB, why does the ECB not publish a weight list of gold bar holdings, and do the ECB or its national central bank agents intervene into the gold market using ECB gold reserves.

The lackadaisical attitude of the ECB to its gold reserves by never physically auditing them is also a poor example to set for all 28 of the central bank members of the European System of Central Banks (ESCB), and doesn’t bode well for any ESCB member central bank in being any less secretive than the ECB headquarters mothership.

If gold does re-emerge at the core of a revitalised international monetary system and takes on a currency backing role in the future, the haphazard and non-disclosed distribution of the ECB’s current gold reserves over 5 locations, the lack of physical gold audits, and the lack of public details of any of the ECB gold holdings won’t really inspire market confidence, and is proving to be even less transparent than similar metrics from that other secretive large gold holding bloc, i.e the USA.

Swiss gold refinery Argor-Heraeus to be acquired by Private Equity investors

News has just emerged in the gold market that the giant Swiss precious metals refiner, Argor-Heraeus, has held discussions to be acquired, and that the likely outcome is an acquisition by a private equity group. This private equity group is believed to be London-based WRM CapInvest, part of Zurich headquartered WRM Capital. Other interested buyers are also believed to have examined a bid for Argor-Heraeus, including Japanese refining group Asahi and Swiss refining group MKS-PAMP, however, neither of these are thought to be in the running at this stage. Since this news is developing, details of the discussions and potential acquisition are still thin on the ground.

If Argor-Heraeus is acquired, it will mean that 3 of the 4 giant Swiss gold refineries will have been taken over within less than a year and a half of each other.

In July 2015, Indian headquartered Rajesh Exports, the world’s largest gold jewellery fabricator, announced the agreed acquisition of the giant Swiss gold refinery Valcambi. See BullionStar article “Swiss Gold Refineries and the sale of Valcambi” for full details. In July 2016, Japanese precious metals refiner Tanaka Kikinzoku Kogyo K.K , part of the Tanaka Precious Metals group, announced the agreed acquisition of Metalor Technologies, another of the large Swiss gold refineries. Retrospectively, the acquisition of Valcambi by Rajesh Exports now looks to have initiated a flurry of take-over activity in the normally low-key Swiss precious metals refining world.

While Metalor is based in Marin-Epagnier in the Canton of Neuchâtel in northwest Switzerland, the other 3 giant Swiss gold refineries, Argor-Heraeus, Valcambi and MKS-owned PAMP are all located literally within a few kilometres of each other in the Italian speaking Canton of Ticino, in southern Switzerland, near the Swiss-Italian border. Argor-Heraeus is in Mendrisio, Valcambi is in Balerna, and PAMP is in Castel San Pietro. Mendrisio is 4 kms from Balerna and 2kms from Castel San Pietro.


The Golden Triangle of Swiss gold refineries, Canton of Ticino

Argor-Heraeus is currently jointly-owned by German bank Commerzbank, German industrial and refining group Heraeus, the Austrian Mint, and Argor-Heraeus management. See BullionStar Gold University for a full profile of Argor-Heraeus.

Commerzbank owns 32.7% of Argor-Heraeus’ share capital. The Austrian Mint holds another 30% of Argor-Heraeus shares. In its annual report, Heraeus doesn’t reveal its holding in Argor-Heraeus, but with the Austrian Mint and Commerzbank owning a combined 62.7%, this means 40.2% of the shares are held by Heraeus and Argor-Heraeus management. On the Argor-Heraeus website, Heraeus is listed first on the shareholder list, which could signify that it’s the largest shareholder. This would put Heraeus’ shareholding above Commerzbank’s 32.7% stake, and mean that Argor-Heraeus management probably hold a shareholding somewhere below 7%.

A Precedent for Private Equity Ownership

Interestingly, there is a precedent of private equity ownership in the Swiss precious metals refining sector. Until Tanaka’s take-over of Metalor technologies last July, Metalor was majority owned by French private equity company Astorg Partners and Belgian private equity company Sofina, which between them held approximately 60% of Metalor’s shares. The remainer of Metalor’s shares were held by Metalor management, as well as by Martin Bisang and Daniel Schlatter. Bisang and Schlatter are connected with Swiss boutique investment bank Bellevue Group, which has in the past also acted as a strategic adviser to Metalor. Bisang had bought into Metalor in 1998 along with Swiss executives Ernst Thomke, Rolf Soiron and Giorgio Behr, and an additional group of Swiss executives bought into Metalor in 2004. These additional buyers were a secretive bunch, only known as the ‘Partners Only’, a group which was said by Swiss media at the time to have been connected to the Swiss Roche group.

Likewise, when Valcambi was sold to Rajesh Exports in July 2015, the then owners of Valcambi were a combination of US gold mining company Newmont (with an approximate 60% shareholding) and a group of shy Swiss private investors (who held the remaining shares) the largest of which were Emilio Camponovo and the Camponovo family. Technically, you could call these Swiss private investors direct private equity investors, or equivalent.

Even the PAMP refinery, which is owned by the Geneva based MKS-PAMP group, could be described as private equity, or at least concentrated privately-owned equity, since the group is controlled by the founding Shakarchi family. Note that MKS-PAMP has a parent company MKS PAMP Group BV based in Amsterdam, but this appears to be purely for corporate structure reasons.


The Sellers – Heraeus, Commerzbank and Austrian Mint

Since Argor-Heraeus has multiple owners, any sale would in theory be more complex than if the refinery only had a single owner. Looking quickly at the current owners, Commerzbank in its bullion banking marketing literature usually draws attention to the fact that its partial owner of a gold refinery, and uses this as a selling point by trumpeting the fact that it has direct connections to the physical gold world. Selling Argor would probably be a negative for Commerzbank, however, it may need the cash given that german banking is in a crisis at the moment. The Austrian Mint is owned by the Austrian central bank (OeNB), which in turn is owned by the Austrian State. Any sale of the Austrian Mint’s shares in Argor would be a one-off profit boost to the OeNB. In 2015, the Austrian Mint sold a stake it held in Casinos Austria (yes, a casino company), so maybe the Mint has a new-found strategy to jettison its non-core investments. Although presumably the Mint gets preferential precious metal supply from Argor, or one would think that it does.

Heraeus also has close relationships with Argor-Heraeus, for example, in the production of various precious metals products, so a sale by Heraeus of its stake in Argor could in theory affect these synergistic relationships. All of these shareholders also receive a substantial annual cash dividend from Argor-Heraeus which is a nice to have to say the least. Selling their stakes would obviously be a loss of their cash dividends. I personally was surprised that Argor-Heraeus would be up for sale, since it definitely has what looks like a very stable, secure and content set of shareholders. As per BullionDesk coverage of this potential deal, Commerzbank and Heraeus have yet to respond or comment on the potential sale of Argor-Heraeus.

Interested Parties in an Argor Bid

Presuming that the private equity company WRM CapInvest, as well as Asahi Refining, and MKS-PAMP all looked at potentially acquiring Argor-Heraeus (and that’s the word in the gold market right now), let’s have a quick look at these players.

The current Asahi Refining group, headed by Asahi Holdings, owns precious metals refinery operations in 5 locations worldwide, namely Tokyo, Salt lake City, Utah (US), Brampton, Ontario (Canada), Mexico City, and Santiago (Chile). Some readers will be familiar with Asahi’s takeover of the US and Canadian gold and silver refining operations of Johnson Matthey, which was completed in March 2015.  If Asahi had emerged as the favourite suitor to acquire Argor-Heraeus, it would mean that 2 Japanese headquartered precious metals refiners, Tanaka and Asahi, would both own a Swiss precious metals refinery, namely Metalor and Argor-Heraeus. Market sources indicate that Asahi’s bid value for Argor-Heraeus wasn’t as high as the bid tabled by the favoured private equity group bidder. Argor-Heraeus also operates a precious metals processing plant in Santiago in Chile, which could feasibly provide synergies to Asahi, since Asahi runs a refining operation in Santiago.

Its interesting that MKS-PAMP has been mentioned as a possible acquirer of Argor-Heraeus. As mentioned, the PAMP precious metals refinery is literally ‘down the road’ from the Argor-Heraeus refinery, i.e. 2 kms down the road. PAMP is a prestigious global brand in precious metals refining and bar production, and so is Argor-Heraeus. But would the resulting consolidation in the Swiss precious metals refining industry make sense, and how would this affect the PAMP and Argor-Heraeus brands. That’s a difficult question to answer, and only PAMP could accurately answer that at this time. Market sources say that MKS PAMP was shy in revealing its full financials, data that would presumably be necessary if it put in a bid for Argor-Heraeus.

Argor-Heraeus opened a new refining headquarters in Mendrisio in 2013 which doubled its former refining capacity. According to its 2014 corporate responsibility report, the new Argor-Heraeus refinery has an annual refining capacity for gold of between 350 and 400 tonnes. The PAMP refinery has an annual refining capacity of 450 tonnes of gold, and an annual silver refining capacity of over 600 tonnes.  A merged PAMP and Argor-Heraeus would have an annual refining capacity for gold of about 900 tonnes. Their neighbour Valcambi has an annual refining capacity for gold of 1600 tonnes. A combined PAMP and Argor-Heraeus would therefore start to approach the production capacity of Valcambi. Each of Valcambi and a combined PAMP ~ Argor would also have a refining presence in India also, since PAMP has an Indian refining joint-venture with MMTC, and Valcambi, owned by Rajesh Exports, has refining operations in India. Argor-Heraeus is also one of only five refinery members of the London Bullion Market Associations (LBMA) good delivery referee panel. PAMP is also on this panel, as is Metalor and Tanaka. This panel assists the LBMA is maintaining quality standards of refinery members worldwide. Argor-Heraeus is also a full member of the LBMA, one of the few refineries to be a full LBMA member.

Finally, turning to the private equity company WRM CapInvest, which is said by sources in the gold market to be the preferred bidder for Argor-Heraeus, what is known about this company? According to its website,  WRM CapInvest is a division of the WRM Capital group of companies. The WRM Group was founded by Raffaele Mincione, who is Italian, but who resides in Switzerland. WRM Group seems to have started as a private wealth management / family office type company but has expanded into private equity.

WRM CapInvest is based in Berkeley Square in Mayfair in London, Mayfair being a very popular location for hedge funds and private equity funds to locate in. WRM CapInvest was incorporated in the UK in March 2012 as Capital Investment Advisors Ltd, but changed name to WRM CapInvest on 11 May 2016. The original single director of WRM CapInvest was Massimo Cattizone, also an Italian. Massimo Cattizone and Raffaele Minicone were listed as shareholders, with Minicone holdings 80% of the WRM CapInvest shares and Cattizone holding 20% of the shares. In July 2013, Leonidas Klemos (Italian), and Michele Cerqua (Italian) were appointed as directors of WRM CapInvest, and Massimo Cattizone ceased to be a director. Between May 2014 and March 2015, Roberto Agostini (Italian) was also a director. In July 2015, Raffaele Minicone was appointed as a director. In February 2016, Leonidas Klemos ceased to be a director. By April 2016, Raffaele Minicone was listed as owning the entire share capital of WRM CapInvest. The current directors are therefore Raffaele Minicone and Michele Cerqua. The reason for listing the above is to highlight that all the directors of WRM CapInvest since it was incorporated have been Italian, and there is a Swiss connection since Raffaele Minicone is based in Switzerland, and the WRM Group is headquartered in Zurich, Switzerland.

Therefore, the fact that Argor-Heraeus is based in the Italian speaking Swiss Canton of Ticino, right beside the Italian border, and that CapInvest is operated by an Italian team, owned by an Italian, and part of a Swiss based group is probably of relevance to a potential acquisition of Argor by CapInvest. Additionally, Knight Frank, a large commercial real estate agent, mentioned on its website in a 2013 article that “CapInvest, which is also backed by private Italian investors, purchased 60 Sloane Avenue for US$206m.”

So the question is, assuming CapInvest acquires Argor-Heraeus, is it acquiring the company on behalf of CapInvest, or on behalf of some other Italian or Swiss investors, or Italian Swiss, or Swiss Italians? And if an acquisition is on behalf of other investors, who are these investors? Could the private investors who were involved in Metalor (such as Martin Bisang and his circle of business acquaintances), or the private investors that were involved in Valcambi (such as Emilio Camponovo and friends) be re-entering the Swiss refining industry with an acquisition of Argor-Heraeus. They would definitely be some of the best placed people around that understand how the precious metals refining industry works, given their experience. Or possibly the Argor-Heraeus management and other local business people in Ticino are moving to take ownership of Argor through a private equity route?

Another potential connection is UBS. Swiss investment bank UBS previously owned the Argor-Heraeus refinery, and only exited its shareholding in 1999, so it’s also possible that a UBS connection could pop up in a Argor-Heraeus acquisition deal. This has a precedent since when Valcambi was acquired by Rajesh Exports in 2015, Credit Suisse, which itself used to own Valcambi (and which Valcambi executives had close ties to), provided strategic corporate finance advice on the Valcambi acquisition and also actually partially funded the Rajesh acquisition.

Whatever the outcome of these developments with Argor-Heraeus, further details should emerge sooner rather than later. So, as they say, watch this space.