Tag Archives: Bank Of England

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.

Bullion Banks pass the parcel on El Salvador’s gold reserves

Eighteen months ago I wrote a short synopsis of a gold sales transaction by the central bank of El Salvador wherein it had sold 80% (about 5.5 tonnes) of its official gold reserves. The title of the post was “El Salvador’s gold reserves, the BIS, and the bullion banks“. If you thought, why the focus on the Banco Central de Reserva de El Salvador (BCR), it’s not a major player on the world gold market, you’d be correct, it’s not in its own right that important.

However, the point of the article was not to profile the gold transactions of a relatively obscure central bank in Central America, but to introduce the topic of central bank gold lending to LBMA bullion banks, and the use of short-term ‘gold deposits‘ offered by these bullion banks. The reason being is this is a very under-analysed topic and one which I will be devoting more time to in the future.  Gold loans by central banks to bullion banks are one of the most opaque areas of the global gold market. The fact that I’m using the central bank of El Salvador as the example is immaterial, it’s just convenient since the BCR happens to report the details of its gold lending operations, unlike most central banks.

A Quick Recap

At the end of September 2014, the BCR claimed to hold 223,113 ozs of gold (6.94 tonnes), of which 189,646 ozs (5.9 tonnes) was held in the form of “deposits of physical gold” with the Bank for International Settlements (BIS), and 33,467 ozs (1.04 tonnes) which was held as “time deposits” of gold (up to 31 days) with 2 commercial bullion banks, namely Barclays Bank and the Bank of Nova Scotia.

The following table and all similar tables below are taken from the BCR’s ‘Statement of Assets backing the Liquidity Reserve’, or ‘Estado de Los Activos Que Respaldan la Reserva de Liquidez’, which it publishes every 3 months.

BCR gold position as of 30 September 2014

In November 2014, the BCR executed a small sale of 5007 ozs of its gold from its quantity held with the BIS, leaving a holding of 218,106 ozs (6.784 tonnes) as of 31 December 2014, comprising 184,639 ozs held in “deposits of physical gold” with the BIS, and 33,467 ozs of “time deposits” (of between 2 and 14 days duration) with 2 bullion banks, namely BNP Paribas and the Bank of Nova Scotia. Notice that as of the end of 2014, BNP Paribas was now holding one of the time deposits of gold, and that Barclays was not listed.

BCR gold position as of 31 December 2014

Notice also in the above table the tiny residual time deposit gold holding attributed to Standard Chartered Bank Plc. Rewind for a moment to 30 June 2014. At the end of June 2014, the BCR’s gold deposits were placed with 3 LBMA bullion banks, namely, Barclays, Bank of Nova Scotia, and Standard Chartered.

This is the way short-term gold deposit transactions work. A central bank places the short-term gold deposit with one of a small number of bullion banks, most likely at the Bank of England, and when the deposit expires after e.g. 1 month, the central bank places the deposit again, but not necessarily with the same bullion bank. The deposit rates on offer (by the bullion banks) and the placements by the central banks are communicated over a combination of Bloomberg terminals, or by phone and then the transactions are settled by Swift messages. More about the actual mechanics of this process in a future article.

BCR gold position as of 30 June 2014


BCR sold its gold at the BIS, put the rest on deposit

In March 2015, the BCR sold 174,000 ozs (5.412 tonnes ) of gold, which left El Salvador with 44,000 ozs. When I wrote about this transaction 18 months ago I had speculated that:

“Since the Salvadoreans had 189,646 ozs on deposit with the BIS and needed to sell 179,000 ozs, the gold sold was most definitely sold to the BIS or to another party with the BIS acting as agent.

It would not make sense to sell some or all of the time deposits that are out with the bullion banks such as Barclays and Scotia, since a large chunk of the BCR gold at the BIS would have to be sold also. It would be far easier to just deal with one set of transactions at the BIS

The above would leave the time deposits of 33,467 ozs (and accrued interest) out with the bullion banks, rolling over each month as usual. The other roughly 11,000 ozs that the BCR held with the BIS could be left with the BIS, or else this too could be put out on deposit with the bullion banks.”

This speculation turns out to have been correct. By 31 March 2015, the BCR held 10,639 ozs of gold “deposits of physical gold” with the BIS, and the same 33,467 ozs of “time deposits“, but this time split evenly between BNP Paribas and Barclays. The entire 174,000 ozs of gold sold came from the “deposits of physical gold” that El Salvador held with the BIS.

BCR gold position as of 30 March 2015

By 30 June 2015, the central bank of El Salvador had moved its remaining 10,639 ozs of “deposits of physical gold” from the BIS, and placed it into “time deposits” with bullion banks, with the entire 44,106 ozs being evenly split across Bank of Nova Scotia, BNP Parias and Standard Chartered, each holding 14,702 ozs.

BCR gold position as of 30 June 2015

Over the 12 months from end of June 2014 to 30 June 2015, a combination of at least 4 LBMA bullion banks, namely, Barclays, Bank of Nova Scotia, Standard Chartered and BNP Paribas were holding short-term gold deposits on behalf of the central bank of El Salvador. I say at least 4 banks, because there could have been more. The snapshots every 3 months only reveal which banks held gold deposits on those dates, not the full list of deposits that could have been placed and matured over each 3 month period.

These time deposits are essentially obligations by the bullion bank in question to repay the central bank that amount of gold. The original gold which was first deposited into the LBMA system could have been sold, lent or otherwise encumbered. It has become a credit in the LBMA unallocated gold system. Ultimately it needs to be paid back to the central bank by whichever bullion bank holds the deposit when the central bank decides that it no longer wants to roll its short-term deposits. This is why the anology of pass the parcel is a suitable one.

Looking at the more recent 3 monthly snapshots from September 2015 to June 2016, the same 4 LBMA bullion bank names were still holding the BCR’s gold deposits, namely Bank of Nova Scotia, Barclays, Standard Chartered and BNP Paribas.

As of 30 September 2015 – Bank of Nova Scotia, Barclays and BNP Paribas, evenly split between the 3 of them.

BCR gold position as of 30 September 2015

On 31 December 2015 – Bank of Nova Scotia, BNP Paribas, and Standard Chartered, evenly split between the 3 of them.

BCR gold position as of 30 December 2015

On 30 March 2016 – Bank of Nova Scotia and BNP Paribas, evenly split between the 2 of them.

BCR gold position as of 30 March 2016

On 30 June 2016, the BCR gold deposits were held by Bank of Nova Scotia and BNP Paribas, evenly spilt between the 2. The 30 June 2016 file on the BCR website doesn’t open correctly so this data was taken from the Google cache of the file.

IMF Reporting standards

Finally, let’s take a quick look at what monetary gold and gold deposits actually are, as defined by the International Monetary Fund (IMF).

“Monetary gold is gold owned by the authorities and held as a reserve asset.  Monetary Gold is a reserve asset for which there is no outstanding financial liability”, IMF Balance of Payments Manual (BPM)

In April 2006, Hidetoshi Takeda, of the IMF Statistics Department published a short opinion paper on the ‘Treatment of Gold Swaps and Gold Deposits (loans)‘ on behalf of the Reserve Assets Technical Expert Group (RESTEG) of the IMF Committee on Balance of Payments (BoP) Statistics. The paper was called “Issues Paper (RESTEG) #11“. In the Issues paper, Takeda states:

“monetary authority make  gold deposits ‘to have their bullion physically deposited with a bullion bank, which may use the gold for trading purpose in world gold markets‘”

“‘The ownership of the gold effectively remains with the monetary authorities, which earn interest on the deposits, and the gold is returned to the monetary authorities on maturity of the deposits'”

 ” Balance of Payments Manual, fifth Edition (BPM5) is silent on the treatment of gold deposits/loans. However, the Guidelines states that, “To qualify as reserve assets, gold deposits must be available upon demand to the monetary authorities” 

You can see from the above that once the gold balance that is represented by the gold deposit is under the control of a bullion bank as a unallocated balance, then it becomes an asset of the bullion bank and can be used in subsequent bullion bank transactions, such as being lent again,  or used to support its trading book, etc.

The big question is whether the gold as represented by the gold deposit is available on demand by the central bank which lent it. For ‘available on demand’ think using an ATM or walking into your local bank and withdrawing some cash from your account. It’s as simple as that.

Takeda said:

“Regarding the statistical treatment of gold deposits/loans, keeping the status quo is suggested. That is, if the deposited/loaned gold is available upon demand to the monetary authorities, it can be included in reserve assets as monetary gold. However, if the gold is not available upon demand, it should be removed from reserve assets

Takeda’s paper also covers the topic of “Double counting of gold from outright sales of gold acquired through gold swaps or gold deposits/loans” where he says logically:

“double counting of gold can occur when a bullion bank sells outright gold acquired through gold deposits/loans from… monetary authorities”

If the gold sold is not removed from the central bank’s balance sheet, it could:

“pose a problem when international statistical standards allow swapped/deposited gold to remain in the reserve assets of the gold provider.”

Given that nothing has changed in the IMF’s reporting standards since 2006, i.e. the IMF did not take on board Takeda’s recommendations on gold loan accounting treatment, and given that all central banks still report gold as one line item of “gold and gold receivables”, then you can see how these gold deposits that are being continually rolled over by central banks using a small number of LBMA bullion banks based in London a) are being double counted if the gold involved has been sold, b) only represent claims by a central bank on a bullion bank, and c) allow bullion banks to increase their unallocated balances which can then be used in myriad leveraged and hypothecated ‘gold’ trading transactions

If you think 4 LBMA bullion banks passing a parcel of central bank gold claims around between them is excessive, wait until you see 28 bullion banks doing the same thing! Coming soon in a future article.

Tracking the gold held in London: An update on ETF and BoE holdings

Just over a year ago, gold researchers Nick Laird, Bron Suchecki, Koos Jansen and myself took a shot at estimating how much physical gold was accounted for in London within the gold-backed ETFs and under Bank of England custody. The results of that exercise are highlighted in September 2015 articles “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults”, and “Central Bank Gold at the Bank of England”, and also on Nick Laird’s website in a post titled “The London Float” which contains some very impressive charts that visualize the data. Some of the latest updated versions of these charts from www.goldchartsrus.com are featured below.

Given that it’s now just over a year since that last set of calculations, it made sense at this point to update the data so as to grasp how many Good Delivery golds bars held in London is spoken for in terms of ownership, versus how much may be unaccounted for. Estimating gold held in London vaults is by definition a tricky exercise, since it must rely on whatever data and statements are made available in what is a notoriously secret market, and there will usually be timing mismatches between the various data points. However, using a combination of published sources from the Bank of England, the London Bullion Market Association (LBMA), the Exchange Traded Fund websites, and UK gold import/export data, it is possible to produce some factual numbers.

In the Bank of England vaults

Exactly once per year, the Bank of England publishes a snapshot of how much gold it is holding in custody for its central bank and commercial bank customers. This snapshot is featured in the Bank’s annual report which is usually published around July each year, and reports on its financial year-end, as of end of February. In its 2016 Annual Report, the Bank of England states (on page 31) that:

“At end-February 2016, total assets held by the Bank as custodian were £567 billion (2015: £514 billion), of which £135 billion (2015: £130 billion) were holdings of gold”

With an afternoon LBMA Gold Price fix of £888.588 on Monday 29 February 2016, this equates to 151,926,427 fine troy ounces of gold, or 4725 tonnes held in custody at the Bank of England. This equates to approximately 380,000 London Good Delivery gold bars, each weighing 400 fine troy ounces.

The corresponding figure for end of February 2015 was £130 billion, which, valued at the afternoon fix on that day of £787.545 per ounce, equalled 5,134 tonnes. Therefore between the end of February 2015 end of February 2016, the amount of gold held in custody by the Bank of England fell by 409 tonnes. Since, according to World Gold Council data, there were no central bank sellers of gold over that period apart from Venezuela whose gold was predominantly held in Venezuela at that time, then most of this 409 tonne decline must be either due to unreported central bank sales, central bank gold repatriation movements, London bullion bank sales, or some combination of all three.

The year-on-year drop of 409 tonnes came after a previous decline of 350 tonnes to end of February 2015, and before that a drop of 755 tonnes between February 2013 and February 2014. So overall between February 2013 and February 2016, the amount of gold held in custody in the Bank of England’s vaults fell by 1,514 tonnes.

LBMA Ballpark: 6,500 tonnes in London

Up until at least October 2015, the vaulting page on the LBMA website stated that:

“In total it is estimated that there are approximately 7,500 tonnes of gold held in London vaults, of which about three-quarters is stored in the Bank of England.”

This is based on a Wayback Machine Internet Archive page cache from 9 October 2015.

The current version of that page on the LBMA website now states:

In total it is estimated that there are approximately 6,500 tonnes of gold held in London vaults, of which about three-quarters is stored in the Bank of England.

The earliest Internet Archive page cache mentioning 6,500 tonnes is from 8 February 2016. So sometime between October 2015 and February 2016, the LBMA changed its ballpark figure, revising it down by 1000 tonnes. Wayback Machine Archive web crawlers usually update a web page following a change to that page, so its likely that the revision to 6,500 tonnes was done nearer February than October. Using a figure from a LBMA website page is admittedly quite general, but at least it’s an anchor, and someone at the LBMA saw fit to make that actual change from 7,500 tonnes to 6,500 tonnes. In June 2015 (as some readers might recall), the LBMA had said that there were 500,000 Good Delivery gold bars in all the London vaults, which is approximately 6256 tonnes, so perhaps the 6500 tonne estimate was partially based on this statistic from mid-year 2015 that the LBMA was playing catch-up with.

With 6,500 tonnes in London vaults, ~ 75% of which is at the Bank of England, this would mean 4,875 tonnes at the Bank of England, and another 1,625 tonnes at other (commercial) gold vaults in London, mostly at HSBC’s and JP Morgan’s vaults. As per the Bank of England’s annual report as of 29 February 2016, we know now that there were 4,725 tonnes in custody at the Bank, so the LBMA ballpark of 4875 is actually very close to the actual 4725 tonnes reported by the Bank, and the difference is only 150 tonnes. Lets’s move on to the vaulted gold held in London but held outside the Bank of England vaults.

ETF Gold held in London

In the September 2015 calculation exercise, we estimated that there were 1,116 tonnes of gold held in the London vaults within a series of gold-backed Exchange Traded Funds.

The known ETFs and other companies that hold their Good Delivery bar gold in London are as follows:

  • SPDR Gold Trust: GLD. Custodian HSBC London, all GLD gold held at HSBC vault
  • iShares Gold Trust: IAU. Custodian JP Morgan, majority of IAU gold held in London
  • iShares Physical Gold ETC: Custodian JP Morgan, code SGLN
  • ETF Securities: Six separate ETFs – their short codes are PHAU, GBS, ASX GOLD, HMSL, PHPM, and GLTR. Custodian HSBC London
  • SOURCE: Custodian JP Morgan, all gold held in London
  • Deutsche Bank: There are 5 Deutsche Bank ETFs that store gold in London. Custodian is JP Morgan London
  • ABSA/NewgoldCustodian Brinks, London
  • BullionVault: Some of BullionVault customer gold is held in London
  • GoldMoney: *It’s not clear how much gold Goldmoney stored in London so the previous figure from September 2015 is used again
  • VanEck Merk Gold Trust: Custodian JP Morgan London
  • Betashares: Custodian JP Morgan, London
  • Standard Bank AfricaGold ETF: Custodian JP Morgan London

The 1,116 tonnes of gold ETF holdings in London, calculated in September 2015, were as follows, with the SPDR Gold Trust accounting for the largest share:

2015: Vaulted gold held by gold-backed ETFs in London

The total figure for all gold held in London that we used in September 2015 was the 6,256 tonne figure implied by the LBMA’s 500,000 gold bars statement from June 2015. With 6,256 tonnes in total, and 5,134 tonnes at the Bank of England (as of end February 2015), this left 1,122 tonnes in London but “not at the Bank of England“, which implied that there was nearly no gold in London outside the Bank of England that was not accounted for by ETF holdings. in other words the ‘London Gold Float’ looks to have been near zero as of September 2015.

Assuming 6,500 tonnes of gold held in London in February 2016, and with 4,725 tonnes at the Bank of England in February 2016, we can repeat this exercise and say that the would leave 1,775 tonnes of gold in London but “not at the Bank of England“, as the following chart shows:

2016 – LBMA vaulted gold held in London: Outside vs Inside Bank of England

Its well-known by now that the tide of significant gold ETF outflows that occurred in 2015 suddenly turned to very strong inflows into gold ETFs beginning in early 2016. Although our gold ETF holdings data was updated using holdings information as of 30 September 2016, it’s still worth seeing how well the latest London holdings of the gold ETFs help to explain this 1775 tonnes “not in the Bank of England” figure. As it turns out, as of the end of September 2016, the above ETFs collectively held 1,679 tonnes of gold, so right now, if there were 1775 tonnes of gold in London outside of the Bank of England, the ETF holdings would explain all but 96 tonnes of this total.

2016: 1679 tonnes held in ETFs in London – Yellow Bar
2016: Vaulted gold held by gold-backed ETFs in London

Taking a quick look at some of the individual ETF holdings, the massive SPDR Gold Trust is currently holding around 950 tonnes of gold in London. The iShares figure reported in the charts of 214.89 tonnes comprises 2 components a) the London held gold within IAU (which can be seen in this daily JP Morgan weight list), and b) the gold bars held in iShares trust SGLN. The bulk of the ETF Securities figure of 276.68 tonnes represents gold held in PHAU (over 150 tonnes), and GBS (over 100 tonnes). The Deutsche Bank total is quite hard to calculate and comprises gold held in 5 Deutsche bank ETFs. Nick Laird receives daily holdings files for these ETFs from Deutsche Bank and performs a number of calculations such as fractional ounces per ETF unit to arrive at a total figure of 88 tonnes. The SOURCE and ABSA ETFs make up the vast majority of the remainder, with the other entities listed, such as BetaShares and Standard Bank ETF, being immaterial to the calculation.

Central Bank gold at the Bank of England

For the purposes of this exercise, data on central bank gold holdings at the Bank of England does not need to be updated since there hasn’t been any reported gold buying or selling activity by any of the relevant central banks since September 2015 (except for Venezuela), so the ‘known figure’ of 3779 tonnes attributed to identified banks in September 2015 remains unchanged. If anything, since the Bank of England revealed last February that its gold under custody fell to 4,725 tonnes, it means that there are now approximately 946 tonnes of gold at the Bank of England that are not explained by known central bank holders.

Totoal gold held at the Bank of England, February 2016: 4725 tonnes
Total gold held in custody at the Bank of England, February 2016: 4725 tonnes

Given that many central banks around the world will not cooperate in confirming where they store their foreign stored gold, then there are definitely additional central banks storing gold in the Bank of England vaults which would reduce this 946 tonnes of gold with unknown ownership. Therefore some of this total is unknown central bank gold holdings. Some is presumably also gold and borrowed gold held by bullion banks that have gold accounts at the Bank of England. Given that the Bank of England and the LBMA bullion banks maintain a total information blackout about the real extent of the gold lending market out of London, it is difficult to know how much borrowed gold is being held at the Bank of England by bullion bank account holders.

Some of the growth in the SPDR Gold Trust gold holdings this year looks to have been sourced from gold originating from the Bank of England, as was detailed in a July BullionStar article “SPDR Gold Trust gold bars at the Bank of England vaults“, which highlighted that the Bank of England was a subcustodian of the SPDR Golf Trust during Q1 2016. As a SPDR Gold Trust filing stated:

During the quarter ended March 31, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.

Bank of England vaulted attributed to individual central banks

Year to Date ETF changes and UK Gold Imports

It’s important to highlight that the 6,500 tonnes figure reported by the LBMA and the 4,725 tonne figure reported by the Bank of England relate to the February 2016 period, while the ETF gold holdings totals calculated above are from the end of September 2016. So there is a date mismatch. Nick Laird has calculated that during the February to September 2016 period, the London gold ETFs added 399 tonnes of gold, and during the same period the UK net imported (imports – exports) more than 800 tonnes of non-monetary gold. Given the apparent low float of gold in London late last year, its realistic to assume that gold inflows into the London-based ETFs this year were mostly sourced from non-monetary gold imports into the UK because there was apparently no other gold at hand from which to source the ETF gold inflows. ETF demand would also help explain the drivers of UK gold imports year-to-date. Note that monetary gold imports (central bank gold trade flows) are not reported by the respective trade bodies since the opaque basket of deplorables (i.e. central bankers) get an unfair exemption, therefore the 800 tonnes of net gold imports into the UK refers to non-monetary gold imports.

UK gold imports to July 2016
Net UK gold imports to July 2016: 735 tonnes 

According to the latest comprehensive trade statistics, from January to July 2016 inclusive the UK net imported 735 tonnes of gold from the Rest of the World. To this figure we can add another 84.6 tonnes of gold that the UK net imported from Switzerland in August 2016. This gives total UK gold imports up to August 2016 inclusive of 819.6 tonnes, hence the statement, the UK net imported over 800 tonnes of gold year-to-date.

UK gold imports from Switzerland, August 2016: 84.6 tonnes
UK gold imports from Switzerland, August 2016: 84.6 tonnes

If 399 tonnes of the 800 tonnes of non-monetary gold imported into the UK during 2016 was channeled into the holdings of gold-backed ETFs, this would still mean that the ‘London Float’ of gold could have been augmented by approximately 400 tonnes year-to-date. However, since most non-monetary gold imports into the UK are for bullion bank customers such as Scotia and Barclays, some of these extra imports could have been for repaying borrowed gold liabilities to central bank customers, and the quantity of gold now held at the Bank of England may be higher than reported by the Bank last February.

Full Overview chart courtesy of Jesse’s Café Américain, highlighting ETF and Bank of England gold holdings – Click the above chart to enlarge it

In summary, given the large UK gold imports year-to-date, there may now be over 7,000 tonnes of Good Delivery gold bars held in London vaults. But the fact that very large quantities of gold bars had to be imported into the London market during 2016 does suggest that our calculations from September 2015 were valid and that there was a very low float of gold in the London market. This float may now be a few hundred tonnes higher given the imports, but there is still an unquantifiably large number of claims in the form of ‘unallocated gold’ holdings in the London market which are liabilities against the LBMA bullion banks.

Remember that the London Gold Market trades nearly 6000 tonnes of predominantly paper gold each and every day. The latest LBMA ‘gold’ clearing statistics show that on average, 18.8 million ounces (585 tonnes) of ‘gold’ was cleared per trading day in September 2016 which on a 10:1 trading to clearing ratio equates to 5,850 tonnes traded per day, and 128,000 tonnes traded during September. So the LBMA administered market nearly trades as much ‘gold’ connected transaction per day as is held in the entire London vaulting network.

If gold demand from the Rest of the World ticks up, such as from India, then the London market will not have the luxury of being able to import large quantities of gold in the absence of that excess demand putting upward pressure on the gold price. Until then, the London Gold Market looks likely to continue its physical re-stock with one hand, while trading leveraged paper gold with the other hand, all the while rolling over outstanding borrowed central bank gold obligations, such as the short-term gold deposits held by Banco Central de Bolivia, which will be the subject of an upcoming case study into the hidden London gold lending market consortium.

From Bank of England to LBMA: The ‘independent’ Chair of the LBMA Board

In a recent article titled “Blood Brothers: The Bank of England and the London Bullion Market Association (LBMA)“, I charted the extremely close historical and contemporary relationship between the LBMA and the Bank of England. This article highlighted that:

  • the LBMA was established in 1987 by the Bank of England
  • the original bullion bank founding members and steering committee members of the LBMA represented 6 commercial banks active in the London Gold Market, namely, N.M. Rothschild, Mocatta & Goldsmid, Morgan Guaranty Trust, J. Aron, Sharps Pixley (former Sharps Pixley), and Rudolf Wolff & Co.
  • the Bank of England has been involved in the affairs of the LBMA from Day 1 in 1987, and continues to this day to have observer status on the LBMA Management Committee
  • the Bank of England has observer status on not just the LBMA Management Committee, but also on the LBMA Physical Committee and in the LBMA Vault Managers group
  • the Financial Conduct Authority (FCA) also has observer status on the LBMA Management Committee
  • although there are 2 other London financial market committees closely aligned with the Bank of England, and populated by bank representatives, that publish the minutes of their regular meetings, namely the Foreign Exchange Joint Standing Committee, the Sterling Money Markets Liaison Committee, the LBMA Management Committee does not publish the minutes of its meetings, so the public is in the dark as to what’s discussed in those meetings

Note that “observer status” does not mean to sit and observe on a committee, it just means that the observer has no voting rights at committee meetings. Note also that the structure of the LBMA Management Committee has recently changed to that of a Board, so the Committee is now called the LBMA Board.

One of the most interesting points in the previous article referred to the very recent appointment of a very recently departed Bank of England senior staff member, and former head of the Bank of England Foreign exchange Division, Paul Fisher, as the new ‘independent‘ chairman of the LBMA Management Committee / ‘Board’. Paul Fisher has also in the past, been the Bank of England’s representative, with observer status, on this very same LBMA Management Committee (now LBMA Board) that he is now becoming independent chairman of. Fisher is replacing outgoing LBMA Board chairman Grant Angwin, who if from Asahi Refining (formerly representing Johnson Matthey).

‘Independent’ Non-Executive Chairman

This article continues where the above analysis left off, and looks at the appointment of Fisher as the new ‘independent’ Non-Executive Chairman of the LBMA Board, considers the ‘independence’ of the appointment given the aforementioned very close relationship between the Bank of England and the LBMA, and examines the chairman’s appointment in the context of the UK Corporate Governance Code, which now governs the Constitution and operation of the LBMA Board.

As I commented previously:

Arguably, the pièce de résistance of these Bank of England / FCA relationships with the LBMA Management Committee, is the fact that Paul Fisher, the newly appointed ‘independent‘ Chairman of the LBMA Board, a.k.a. LBMA Management Committee, has already previously been the Bank of England’s “observer” on the LBMA Management Committee.”

This was confirmed in Fisher’s speech to the 2004 LBMA Annual Conference in Shanghai, Fisher, when then Head of Foreign Exchange at the Bank of England, he stated:

I am glad to be invited to the LBMA’s Management Committee meetings as an observer.”

Fisher was Head of Foreign Exchange Division at the Bank of England from 2000 to 2009, so could in theory have been a Bank of England observer on the LBMA Management Committee throughout this period. The Foreign Exchange Division of the Bank of England is responsible for managing the Sterling exchange rate, and for managing HM Treasury’s official reserves held in the Exchange Equalisation Account (EEA), including HM Treasury’s official gold reserves. One would think that when the LBMA announced in a press release in July of this year that Fisher was being appointed as the new LBMA chairman, that the fact that he had previously attended the LBMA Management Committee meetings would be a fact of relevance to the appointment. However, surprisingly, or maybe not so surprisingly, this fact was omitted from the press release.

The LBMA press release, titled “Dr Paul Fisher to be the new LBMA chairman“, dated 13 July 2016, begins:

The LBMA is delighted to announce the appointment of Dr Paul Fisher as the new Chairman of the Association, effective from 5 September, 2016. Paul is due to retire from the Bank of England at the end of July.”

The press release goes on to say:

“Paul brings with him a wealth of financial market experience following his 26 years at the Bank of England. Prior to joining the LBMA, his last role was as Deputy Head of the Prudential Regulation Authority. Paul was selected by the LBMA Board following an independent Executive search procedure.”

“Previously, from 2002, he [Paul Fisher] ran the Bank’s Foreign Exchange Division where he had a constructive relationship with the LBMA and developed a working knowledge of the bullion market.”

Notwithstanding the capability of the appointment, there is absolutely zero mention in this press release of the fact that Paul Fisher used to be the Bank of England observer on the LBMA Management Committee, a committee that he is now being made chair of. Why so? Was it to make the relationship appear more distant that it actually was, thereby reinforcing the perception of ‘independence’?

In addition, the recently added bio of Paul Fisher on the LBMA Board listings features text identical to the press release, with no indication that Fisher previously attended the LBMA Management Committee meetings.

Notice also the reference to an “Executive search procedure” being used to support the new chairman’s appointment.

LBMA Board

At this point, it’s instructive to examine what drove the re-definition of the LBMA Management Committee to become the LBMA “Board”, and the appointment process to that board of an ‘independent‘ Non-Executive Chairperson. It can be seen from the LBMA website archive that until July of this year, the entity providing oversight and strategic direction to the LBMA was the ‘LBMA Management Committee':


Only in July following a LBMA General Meeting on 29 June did the website description change to LBMA Board:



The new Board structure of the LBMA allows it to have 3 representatives from LBMA Market Making firms, 3 representatives from LBMA Full Member entities, 3 ‘independent’ non -executive directors (inclusive of the ‘independent’ chairman), and up to 3 representatives from the LBMA Executive staff, including the LBMA CEO.

One of the first references to a future change in governance structure at the LBMA came in October 2015 at the LBMA annual conference, held in Rome. At this conference, Ruth Crowell, CEO projected that in the future:

“To enhance its governance, the new Board will include for the first time Non-Executive Directors whilst giving more power to the Executive so as to ensure any conflicts of interest are eliminated.”

On 29 April 2016, a LBMA “Future Events” summary document confirmed that a General Meeting (akin to an EGM) of LBMA members would be convened on Wednesday 29 June 2016 in London so as to “update the LBMA’s legal structure and governance“.  The same “Future Events” summary also highlighted a change in schedule to the LBMA’s Annual General Meeting (AGM), which due to the 29 June General Meeting, would now be held on 27 September 2016 with an agenda item to “incorporate, into the constitution of the LBMA, the governance and legal structure changes agreed at the General Meeting in June“. 

It would be quite presumptuous for any normal organisation of members, in the month of April, to not only assume that resolutions that were only being put to its membership in the month of June would be passed, but to also actually hard-code these assumptions into the agenda of a scheduled September meeting. However, this was what was written in the “Future Events” document and appears to be the pre-ordained roadmap that the LBMA Management Committee had already set in stone.

On Thursday 30 June, the day after its General Meeting in London, the LBMA issued a press release in which it confirmed (as it had predicted) that “Members of the LBMA approved by an overwhelming majority a number of important changes to its Memorandum & Articles of Association“.

As well as endorsing the LBMA’s expansion to acquire the responsibilities of the London Platinum and Palladium Market (LPPM), which was the first motion for consideration at the meeting, the press release confirmed that the membership had endorsed the appointment of an independent Non-Executive Chairman:

“The second change was to further enhance the governance of the Association. The UK Corporate Governance Code was incorporated and will govern both the Constitution as well as the operation of the Board. While it is vital for the Board to have a strong voice for its Members, it is important that any actual and perceived conflicts between these parties are balanced by having independence on that Board. This independence protects the interests of the wider membership as well as the individuals themselves serving on the Board. To address this, the LBMA has added an independent Non-Executive Chairman as well as two additional Non-Executive Directors (NEDs).”

Notice the reference to 2 other independent non-executive directors. Nine business days later, on 13 July 2016, the LBMA issued a further press release revealing that ex Bank of England Head of Foreign Exchange and former observer on the LBMA Management Committee, Paul Fisher had been appointed as the “independent Non-Executive Chairman“.

Executive Search Procedure

Recall also that the 13 July press release stated “Paul was selected by the LBMA Board following an independent Executive search procedure.””

Nine days is an extremely short period of time to commence, execute, and complete an ‘independent Executive search procedure‘.  It immediately throws up questions such as which search firm was retained to run the independent Executive search procedure?, which candidates did the search firm identify?, was there a short-list of candidates?, who was on such a short-list?, what were the criteria that led to the selection of the winning candidate above other candidates?, and how could such a process have been run and completed in such a limited period of time when similar search and selection processes for chairpersons of corporate boards usually take months to complete?

How independent is it also to have a former divisional head of the Bank of England as chairman of the London Gold Market when the Bank of England is the largest custodian of gold in the London Gold Market, and operates in the London Gold Market with absolute secrecy on behalf of its central bank and bullion bank customers.

Since the LBMA voluntarily incorporated the UK Corporate Governance Code into the operations of its Board following the General Meeting on 29 June, its instructive to examine what this UK Corporate Governance Code has to say about the appointment of an independent chairman to a board, and to what extent the Corporate Governance Code principles were adhered to in the LBMA’s ‘independent‘ chairman selection process.

 UK Corporate Governance Code

The LBMA is a private company (company number 02205480) limited by guarantee without share capital, with an incorporation filing at UK Companies House on 14 December 1987. Stock exchange-listed companies in the UK are required to implement the principles of the UK Corporate Governance Code and comply with these principles or else explain (to their shareholders) why they have not complied (called the “comply or explain” doctrine). In the world of listed equities, monitoring and interacting with companies about their corporate governance is a very important area of  institutional and hedge fund management. It has to be so as the share owners are able to monitor and grasp if any governance issues arise at any of companies held within their institutional / hedge fund equity portfolios.

Non-listed companies in the UK are also encouraged to apply the principles of the Code, but are not obliged to. When a private company chooses to incorporate the UK Corporate Governance Code to govern its Constitution and operation of its Board, one would expect that it would also then ‘comply’ to the principles of the Code or else ‘explain’ in the spirit of the Code, why it is not in compliance.


The UK Corporate Governance Code is administered by the Financial Reporting Council (FRC). The April 2016 version of the Code can be read here. The main principles of the Code are divided into 5 sections, namely, Leadership (section A), Effectiveness (section B), Accountability (section C), Remuneration (section D), and Relations with Shareholders (Section E).

One of the main principles of Section B is as follows:

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. “

Section A also addresses the independence of the chairman, and Section A.3.1. states that:

“The chairman should on appointment meet the independence criteria set out in B.1.1″

Section B.1.1, in part, states that:

“The board should determine whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director:

  • has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;
  • represents a significant shareholder;”

It goes without saying that the Bank of England has a material business relationship with the commercial banks which are represented on the LBMA Board, and I would argue that although the LBMA has no share capital, because the Bank of England has a material business relationship with the LBMA, and because since Paul Fisher was a senior employee of the Bank of England until July of this year, then the LBMA should “state its reasons as to why it determines that this director is independent“.

Furthermore, although the Bank of England is not a ‘significant shareholder’ of the LBMA, it is the next best thing, i.e. it has a significant and vested interest in the workings of the LBMA and interacts with LBMA banks through the London vaulting system, the gold lending market, and in its regulatory capacity of the LBMA member banks. The Bank of England also established the LBMA in 1987 don’t forget, so the extremely close relationship between the two is of material concern when a senior employee of the former suddenly becomes chairman of the latter.

Section B.2 addresses ‘Appointments to the Board':

“Main Principle

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board

Section B.2.1.:

“There should be a nomination committee which should lead the process for board appointments and make recommendations to the board. A majority of members of the nomination committee should be independent non-executive directors.

The nomination committee should make available its terms of reference, explaining its role and the authority delegated to it by the board. [7]

[Footnote 7]: The requirement to make the information available would be met by including the information on a website that is maintained by or on behalf of the company.

Was there a nomination committee? As of the time of appointing the new chairman to the LBMA Board, there were zero independent non-executive directors on the Board. And, excluding the newly appointed chairman, there are still zero other independent non-executive directors on the LBMA Board.

If there was a nomination committee, notwithstanding that it couldn’t by definition have a majority of independent non-executive directors when overseeing a search process for an independent chairman, then did it “make available its terms of reference” “on a website that is maintained by or on behalf of the company.” Not that I can see on any part of the LBMA website.

Section B.2.4. of the UK Corporate Governance Code includes the text:

Where an external search consultancy has been used, it should be identified in the annual report and a statement made as to whether it has any other connection with the company.

The company here being the LBMA (which is a private company). There has been no public identification as to the identity of the external search consultancy that the LBMA state was used in the appointment of Paul Fisher as ‘independent’ non-executive chairman.

Section  B.3.2. states:

“The terms and conditions of appointment of non-executive directors should be made available for inspection.[9]

[Footnote 9]: The terms and conditions of appointment of non-executive directors should be made available for inspection by any person at the company’s registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).

There is no reference on the LBMA website as to the terms and conditions of appointment of non-executive directors being made available for inspection by any person at the company’s registered office, nor was this communicated in the LBMA’s press release wherein it announced the appointment of the ‘independent’ non-executive chairman. It is one thing to claim to incorporate the UK Corporate Governance Code into a Board’s operations, but an entirely different matter to actually implement the principles into the operations of the Board. Given the above, I can’t see how the LBMA has done much of the latter.

Bank of England

Further ‘Independent’ Non-Executive Director Appointments

Given the opacity in the appointment of the Bank of England’s Paul Fisher as the new ‘independent’ non-executive chairman, it is therefore not unreasonable to suggest that the entire appointment process was a pre-ordained shoo-in. Without substantially more transparency from the LBMA, this view is understandable. Nor have there been any announcements about the appointment of “two additional Non-Executive Directors (NEDs)” that was claimed in the LBMA’s 30 June press release.

The LBMA held its Annual General Meeting this past week, on Tuesday 27 September. During the AGM, the outgoing chairman, Grant Angwin commented in his speech that:

I’m delighted to have by my side Dr. Paul Fisher who will be replacing me as the first Independent Non-Executive Chairman of your Association – Paul will introduce himself to you in a moment. Paul and I will Co-Chair the Board until the end of this year. This is the first major step to making the Board more independent, Paul will be joined by up to 2 other Independent Directors in the near future.

“The Board will now comprise of 6 representatives from the market – three each in the categories of Market Markers and Full Members, up to 3 Independent Non-Executive Directors (of which one will be the Chairman) and up to 3 LBMA Executive Directors. We expect to make further announcements on these roles very shortly.”

Given that the new chairman has been appointed, it is odd, in my view, that the 2 other independent directors have yet to be appointed and their identities announced. Likewise, for the 2 new directors from the LBMA Executive, who, if and when they join the Board, will give the LBMA Executive 3 seats on the Board.  Surely the AGM would have been the ideal venue in which to make these announcements, since other board changes were being voted on at this meeting.

The New Board Profile

For completeness, the changes to the LBMA Board’s composition that did take place at the AGM, based on Board member resolutions that were put to a vote, are explained below:

Prior to the AGM last week, the LBMA Board consisted of the following members:

  • Grant Anwin – Asahi Refining (co-chairman of Board)
  • Paul Fisher (new chairman of Board)
  • Ruth Crowell – Chief Executive of LBMA
  • Steven Lowe – Bank of Nova Scotia-ScotiaMocatta (and vice-chairman of Board)
  • Peter Drabwell – HSBC Bank
  • Sid Tipples – JP Morgan Chase
  • Jeremy East – Standard Chartered
  • Robert Davis, Toronto Dominion Bank
  • Philip Aubertin – UBS (‘Observer’ status)
  • Alan Finn, Malca-Amit
  • Mehdi Barkhordar, PAMP

Notice that there were 5 LBMA Marking Making reps on the Board, namely from HSBC, JP Morgan, Scotia, Standard Chartered and Toronto Dominion Bank. There was also an ‘observer’ from full LBMA Market Maker UBS. There were 3 Full Member representatives, namely from PAMP, Malca-Amit (the security carrier), and Asahi Refining.

At the AGM on 27 September, there was a vote on the Full Member reps to the Board, of which there are 3 positions in the new Board. The existing Full Member reps had to stand down and they, and other Full Member candidates, could re-stand for election:

The voting results elected / re-elected the following:

  • Grant Angwin, Asahi Refining (and co-chairman of the Board)
  • Mehdi Barkhordar, PAMP
  • Hitoshi Kosai, Tanaka Kikinzoku Kogyo

Because there were 5 Market Maker reps already on the Board, and the new Board structure only allowed 3, there was also an election on which 3 of the 5 would remain: The results were:

  • Steven Lowe, Bank of Nova Scotia-ScotiaMocatta
  • Peter Drabwell, HSBC Bank
  • Sid Tipples, JP Morgan Chase

Noticeably, these 3 remaining reps represent what are probably the 3 most powerful bullion banks in the LBMA / LPMCL system, HSBC,  JP Morgan and Scotia, two of which, HSBC and JP Morgan, operate large commercial gold vaults in London, and all 3 of which operate large commercial COMEX approved gold vaults in New York City. The reps from HSBC and Scotia have also been very long serving members of the LBMA Management Committee / Board, having been re-elected in 2015.

The AGM voting results press release also added that:

“The other two Non-Executive Directors of the LBMA Board will be announced in the near future.”

Given the aforementioned profile of the new ‘independent’ LBMA Board Chairman and ex Bank of England senior staffer Paul Fisher, it will be intriguing to examine the new independence credentials of these 2 new Non-Executive Directors who will be announced in the near future. Will they be truly independent, or will they be former bullion bankers previously affiliated with the LBMA and the London Gold Market, or ex FCA people previously affiliated with the LBMA, or maybe a combination of the two.

As per the UK Corporate Governance Code:

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board”. The board should also “state its reasons if it determines that a director is independent“. If an external search consultancy is used in finding either of the 2 new non-executive directors, there should be a “statement made as to whether it [the search consultancy] has any other connection with the company [the LBMA]“.

If 2 extra executive directors are also added to the Board from the LBMA’s staffers, to bring the number of Board directors up to 12, who will these 2 people be? My money in the first instance would be on the LBMA’s senior legal counsel (for regulatory reasons) and the LBMA’s communications officer. Whether the minutes of future or past LBMA Board meetings will ever be made public is another matter, but given the persistent secrecy that surrounds all important matters in the London Gold Market, it would probably be very naive to think that real LBMA communication via, for example LBMA Board meeting minutes, will ever see the light of day.

Blood Brothers: The Bank of England and the London Bullion Market Association (LBMA)

The London Bullion Market Association (LBMA) is a London-based, globally active, trade association for “the promotion and regulation of commerce relating to the London Bullion Market”. The “London Bullion Market” here collectively refers to the London Gold Market and the London Silver Market. The remit of the LBMA has very recently also been extended to cover the London Platinum and Palladium Market (LPPM).

While it is generally known to many, vaguely or otherwise, that the Bank of England has a vested ‘interest’ in the London gold market, the consistently close relationship between the Bank of England and the LBMA tends not to be fully appreciated. This close and familial relationship even extends to the very recent appointment of a very recently departed Bank of England senior staff member, and former head of the Bank of England Foreign exchange Division, Paul Fisher, as the new ‘independent‘ chairman of the LBMA Management Committee (a committee which has recently been rechristened as a ‘Board’). Note that at the Bank of England, the Bank’s gold trading activities fall under the remit of the ‘Foreign Exchange’ area, so should be more correctly called Bank of England Foreign Exchange and Gold Division. For example, a former holder of this position in the 1980s, Terry Smeeton, had a title of Head of Foreign Exchange and Gold at the Bank of England.

What is also unappreciated is that the same Paul Fisher has in the past, been the Bank of England’s representative, with observer status, on this very same LBMA Management Committee that he is now becoming independent chairman of. This is an ‘elephant in the room’ if ever there was one, which the mainstream financial media in London conveniently chooses to ignore.

As you will see below, the UK’s Financial Conduct Authority (FCA) also has a close, and again, very low-key but embedded relationship with this LBMA Management Committee.


At the ‘Behest’ of the Bank of England

The LBMA states in one of its Alchemist magazine articles, that its Association “was established at the behest of the Bank of England” in 1987, with Robert Guy of N.M. Rothschild, the then chairman of the London Gold Fixing, spearheading the coordination of the Association’s formation. Elsewhere, in a recent summary brochure of its activities, the LBMA states that it was “set up in 1987 by the Bank of England, which was at the time the bullion market’s regulator”, while a recently added historical timeline on the LBMA website, under the year 1987, states “LBMA established by the Bank of England as an umbrella association for the London Bullion Market.”

Established at the behest of“, “set up by” or “established by“, take your pick, but they all clearly mean the same thing; that the Bank of England was the guiding hand behind the LBMA’s formation.

Prior to the formation of the LBMA, and before a change of regulatory focus in 1986, the London Gold Market and London Silver Market had primarily followed a model of self-regulation, but the Bank of England had always been heavily involved in the market’s supervision and operations, especially in the Gold Market. Even reading a random sample of the Bank of England’s archive catalogue material will make it patently clear how close the Bank of England has always been to the commercial London Gold Market. For scores of years, the London Gold Market to a large extent merely constituted the Bank of England and the five member firms of the London gold fixing,  namely NM Rothschild, Mocatta & Goldsmid, Sharps Pixley, Samuel Montagu, and Johnson Matthey.

According to the 1993 book, “The International Gold Trade” by Tony Warwick-Ching, a combination of the advent of the Financial Services Act of 1986 which introduced supervisory changes to the UK’s markets, and the growing power of other bullion banks and brokers in the London precious metals market in the 1980s, acted as a combined impetus for the LBMA’s formation in 1987.

As Warwick-Ching stated:

“The LBMA was partly a response to a growing demand of concerns who were not members of the [gold] fixing for a greater involvement at the heart of the bullion market.” 

Morgan and J.Aron join the Party

Specifically, according to its Memorandum of Association, the LBMA was formed into a Company on 24 November 1987 by N.M. Rothschild & Sons Limited, J.Aron & Company (UK) Limited, Mocatta & Goldsmid Limited, Morgan Guaranty Trust Company of New York, Sharps Pixley Limited, and Rudolf Wolff & Company Limited. This company is “a company limited by guarantee and not having a share capital”. Given their participation from the outset, presumably J Aron (now part of Goldman Sachs) and Morgan Guaranty (now part of JP Morgan Chase) were members of the ‘growing demand of concern‘ contingent alluded to by Warwick-Ching, who wanted a bigger say in the gold market’s inner sanctum.

Signatories to the original LBMA Memorandum of Association

The authorising subscribers of the original Memorandum, on behalf of their respective companies were, Robert Guy (Rothschild), Neil Newitt (J. Aron), Keith Smith (Mocatta & Goldsmid), Guy Field (Morgan Guaranty Trust), Les Edgar (Sharps Pixley), and John Wolff (Rudolf Wolff & Company), and they requested that “We, the subscribers to the Memorandum of Association, wish to be formed into a company pursuant to this Memorandum.” The original steering committee of the LBMA comprised five of the above, Robert Guy (Chairman), Guy Field (Vice Chairman), Keith Smith, John Wolff, Neil Newitt, as well as Jack Spall of Sharps Pixley, the father of Jonathan Spall (current consultant to the LBMA). Note that the incorporation filing at UK Companies House for the LBMA is dated 14 December 1987, about 3 weeks after the date listed on the original Memorandum of Association.

As early as April 1988, there were 13 “Market Maker” members and 48 ‘Ordinary’ members in the LBMA. The market maker members had to be ‘listed money market institutions’, which meant that they were institutions listed under section 43 of the Financial Services Act 1986 (on a list actually maintained by the Bank of England) who conducted  various transactions, including bullion market transactions, which were exempt from authorisation.

The Shadowy Observers: Bank of England

According to the LBMA website:

“The Bank of England has been intrinsically linked with the London bullion market since its foundation in 1694.” 

“Although the Bank isn’t a member of the LBMA, members of the LBMA hold gold custody accounts with the Bank”

“The Bank’s vaults hold approximately two-thirds of all the gold held in London vaults and as such plays a significant role in the liquidity within the London gold market. Customers are able to buy or sell gold to other customers, by making or receiving book entry transfers, with ownership transferred in the Bank’s back office system… The service provides a very important element of the gold market infrastructure in London, helping LBMA members and central banks to trade in a secure and efficient way.”

A Bank of England presentation to the 2013 LBMA conference in Rome, titled the-bank-of-englands-gold-vault-operations, gives a good overview of the Bank’s provision of book entry transfers to its central bank and bullion bank clients for the smooth running of the London Gold Lending Market, a market which is totally opaque and completely undocumented. In fact the Bank of England sits at the heart of this gold lending market.

Furthermore, on the clearing side,

“The London bullion clearing members role involves a considerable degree of direct client contact, electronic interfaces between the clearing members and close liaison with the Bank of England…”

From its very foundation in late 1987, the Bank of England was involved in the first steering committee of the LBMA and the activities of the Association. And to this day, Bank of England ‘observers’ attend LBMA Management Committee monthly meetings.

As a historical account of the LBMA’s 1987 formation states:

“From the Steering Committee’s inception, The Bank of England, which held responsibility for the supervision of the wholesale bullion market, was involved in the Association’s affairs and assisted in the drafting of the relevant Code of Conduct. Observers continue to attend Management Committee Meetings to the present day.”

This steering committee ultimately became the LBMA Management Committee, and, in the last few months, has become the LBMA ‘Board’. So the Bank of England is, for all intents and purposes, a highly active partner within the LBMA’s governance structure. As a confirmation of this point, at the LBMA annual general meeting in July 2014, the then chairman of the LBMA Management Committee chairman, David Gornall, of Natixis stated in his speech that:

“The LBMA is also privileged in having an observer from the Bank of England on the Management Committee. The Bank’s presence is of inestimable benefit to us.”

As to what inestimable benefit David Gornall was referring to, or in what way a Bank of England observer participates on the LBMA Management Committee, was not elaborated on. Nor can it be gleaned from any meeting minutes from LBMA Management Committee meetings, because such minutes are not made publicly available (See below).

For anyone not familiar with the concept of an observer on a corporate committee or board, it does not refer to someone who just sits there and observes, as the name may suggest. An observer refers to an attendee at the committee / board meetings who actively participates in discussions but who has no voting rights on committee / board resolutions. Observers can and do fully participate in meeting apart from voting. When voting occurs, they may (or may not) be asked to leave the room.

At the LBMA annual general meeting in June 2013, David Gornall, also chairman of the LBMA Management Committee at that time, revealed that not only was there a Bank of England observer on the Management committee, but there was also an observer from the UK financial regulator, the Financial Conduct Authority (FCA), on the same committee:

“The LBMA is also privileged in having observers from both the Bank of England and the FCA on the Management Committee. Their presence is of inestimable benefit to us.”

In fact, there are many such references within various LBMA related speeches. At the LBMA Precious Metals Conference in September 2013, Matthew Hunt of the Bank of England stated:

“More specifically on gold, even though we are not active traders in the market but we are a large custodian, some of the people in our team responsible for gold observation sit on the LBMA Management Committee and the LBMA Physical Committee as observers. Thus we retain a significant engagement with the gold market via that route.” 

Notably the Bank of England has a team of people responsible for gold observation, but not for the observation of other commodities such as zinc, lean hogs, live cattle, heating oil, soybeans, sugar, beaver pelts etc etc.

In March 2013, Luke Thorn of the Bank of England, while addressing a LBMA Assaying and Refining Seminar, stated:

“We are not a member of the LBMA, but we continue to play a key role in the London market. We have observer status on the Management, Physical and Vault Committees.” 

There are therefore Bank of England observers on 3 LBMA Committees. So, who are these Bank of England and FCA observer representatives? That is not an easy question to answer. There is no mention on the LBMA website’s committee page, and has never been any mention, of any Bank of England observers or FCA observers on the LBMA Management Committee (now Board). Nor are there any published minutes on the LBMA website of any LBMA Management Committee meetings, or the meetings of any of the other five LBMA sub-committees, such meeting minutes as would generally list the attendees of such meetings. More about the lack of minutes below.

Turning briefly to the physical and vault committees, the LBMA website has a listing for its physical committee and does mention that a Bank of England observer called Jennifer Ashton currently is on this committee.

According to the LBMA’s good delivery summary:

“The Physical Committee is made up of industry experts from the physical bullion market. It is responsible for monitoring, developing and protecting the Good Delivery List and works closely with sub-Groups such as the LBMA Referees and the LBMA’s Vault Managers Working Party

There is however, no formal listing of the Vault Manager ‘s group as a LBMA committee within the LBMA’s committee listings section. The only informative reference to such a committee on the LBMA web site is in the good delivery rules explained section, which states:

 “The Vault Managers Working Group, comprising the Bank of England and representatives from those LBMA members with their own vaulting facilities in London, meet regularly to consider issues relating to bar quality and vault procedures. Vault Managers are required to document every case of bar rejection and provide the associated information to the LBMA Executive”

Who is on this committee from the Bank of England, let alone from any of the other committee member companies is not disclosed.

Turning again to the identities of LBMA Management Committee observers, and going back slightly further to the LBMA Annual General Meeting on 20 June 2012, the Chairman, the omnipresent David Gornall of Natixis London Branch, stated:

“Talking of the Management Committee, let me remind you that we are very fortunate to have observers from both the Bank of England and the FSA on the committee. I would like to thank Trevor Stone and Don Groves for their participation in our affairs”.

From a speech at the 2009 LBMA annual conference by Michael Cross, the then Head of Foreign Exchange at the Bank of England, we learn that the Bank of England’s Banking Services area:

“is where Trevor Stone and his colleagues, who will also be known to many of you, work. The Banking Services area provides wholesale banking and custody services to a wide range of bank customers”

These ‘Banking Services’ functions at the Bank of England are similar to Central Bank and International Account Services (CBIAS) services offered to central bank customers by the New York Fed, and include gold custody services.

fca stairs

The Embedded Observers – FCA, Don Groves

On 30 September 2013, the ever-present David Gornall in another speech, this time to the LBMA annual conference in Rome, had this to say:

“We are grateful for the communication and feedback on our work from regulators, particularly that of own regulator the FCA. We are delighted to be joined by Don Groves of the FCA during tomorrow’s financial market regulation session. Don is a long-time observer on the LBMA Management Committee and we thank him for his participation and continued dialogue on our regulatory questions facing the London Market.”

The next day, on 1 October 2013, at the same conference, Ruth Crowell, the then Deputy CEO of the LBMA (and current LBMA CEO) introduced Don Groves as follows:

“With that, I am going to turn it over to Don Groves from the Financial Conduct Authority. Don is a technical specialist in the market contact area of the FCA’s Market Monitoring Department, where he is responsible for reviewing allegations of market misconduct, including market abuse and insider dealing.

Don specialises in the UK commodity markets and has been in market conduct for a number of years. We are also very privileged to have Don as an observer on the LBMA’s Management Committee.

Groves joined the FCA in 1999, and left the FCA in March 2015. While his LinkedIn profile has very detailed listings of his duties while at the FCA, there is no reference to the fact that he ever sat on the LBMA Management Committee, which strikes me as odd, unless that is a deliberate omission.  A previous version of Groves’ LinkedIn profile states:

I am considered to be an expert in Market Conduct matters and market abuse in the UK. I conduct project work pertaining to market conduct issues, contribute to the drafting of European legislation pertaining to market abuse and am an experienced public speaker. My main area of interest is the UK’s commodities markets.

Is it not odd that a FCA regulator was a long-time observer sitting on the LBMA Management Committee, but that the FCA has never had anything to say about the London Gold Market. Perhaps it’s because of the following, which gives the impression of a compliant and embedded regulator. As the FT wrote in October 2013 in an article titled “Gold and oil benchmarks face tighter regulation“:

“I don‘t want to give the impression that the UK is picking on the bullion market or anything else,” Mr Groves told the London Bullion Market Association precious metals conference in Rome. “But a consumer focus is what politicians are looking at…so there’s going to be more focus from us as regulators, on consumer issues.”

“However, [Groves] admitted the regulator did not know enough about physical markets and had launched a project to increase its knowledge. “We are going out as the FCA and learning about those markets,” he said.

What exactly the FCA was doing sitting on the LBMA Management Committee remains unclear, because, to reiterate, there are no publicly available minutes of the Committee’s meetings. At a guess, perhaps Groves was “learning about physical markets“, specifically the physical gold market.

Its also relevant to note that the Bank of England and FCA both crop up as observers when the LBMA holds various seminars, such as the seminar it held in the City of London on 24 October 2014 to showcase various solution providers that were competing to provide the infrastructure for the LBMA Gold Price fixing auction competition that was running at that time:

According to the LBMA press release, “Both the Bank of England and the Financial Conduct Authority attended the seminar as observers.


Where are the LBMA Mgt Committee Meeting Minutes?

Through the Non-Investment Products Code (NIPs), the Bank of England interfaces closely with the UK’s foreign exchange, money and bullion markets. The Bank of England explains NIPs as follows:

“The Non-Investment Products Code

This Code has been drawn up by market practitioners in the United Kingdom representing principals and brokers in the foreign exchange, money and bullion markets to underpin the professionalism and high standards of these markets.[1]

It applies to trading in the wholesale markets in Non-Investment Products (NIPs), specifically the sterling, foreign exchange and bullion wholesale deposit markets, and the spot and forward foreign exchange and bullion markets.”

Footnote [1]: Co-ordinated by the Foreign Exchange Joint Standing Committee, the Sterling Money Markets Liaison Group and the Management Committee of the London Bullion Market Association

Of the three, the  Foreign Exchange Joint Standing Committee is chaired and administered by the Bank of England. The Sterling Money Markets Liaison Group (now known as the Sterling Money Markets Liaison Committee) is also chaired and administered by the Bank of England.

On the Bank of England’s web site, there are very extensive informational resources about the Foreign exchange Joint Standing Committee and the Sterling Money Markets Liaison Committee, but surprise, surprise, there is nothing about the LBMA Management Committee. The Bank of England website offers publicly accessible documents of all meeting minutes of the FX Joint Standing Committee, including the representatives names of attendees and the banks and institutions represented at each meeting. These meeting minutes are highly detailed. See May 2016 FX Joint Standing Committee minutes as an example. Likewise, for the Sterling Money Markets Liaison Committee, the minutes of every meeting have been uploaded to the Bank of England website and are publicly accessible. These minutes are highly detailed. See for example the February 2016 Sterling Money Markets Liaison Committee meeting minutes.

However, the only tiny piece of information offered about the LBMA on the Bank of England website is as follows:

“The Bullion element of the NIPs Code is being replaced by a new code which will be established by the London Bullion Markets Association (LBMA). Further information on the bullion code can be found on the LMBA website.” 

Conveniently, the Bank of England passes the buck back to a web site (LBMA’s website) which is notoriously bereft of any information about the meetings of the LBMA Management Committee, the agendas of such meetings, the minutes of such meetings, and the attendees at these meetings. Why is this opacity allowed by the FCA and Bank of England when the foreign exchange and money market brethren have to submit to published minutes of their meetings, which in many cases involve the same banks and institutions? Could it be that discussion of the London Gold Market is highly secretive and a no-go area, and that the institutions involved have a free pass from the Bank of England and FCA to continue their discussions in private, away from the public eye?

Mark Carney and Paul FIsher
Mark Carney and Paul FIsher

 Pièce de Résistance

Arguably, the pièce de résistance of these Bank of England / FCA relationships with the LBMA Management Committee, is the fact that Paul Fisher, the newly appointed ‘independent‘ Chairman of the LBMA Board, formerly known as the LBMA Management Committee, has already previously been the Bank of England’s “observer” on the LBMA Management Committee.

In his speech to the 2004 LBMA Annual Conference in Shanghai, Fisher, the then Head of Foreign Exchange at the Bank of England, while discussing the “Non-Investment Products Code”, a code which regulates the bullion market, the foreign exchange market, and the wholesale money market, stated that:

“In the bullion section, the work is led by the LBMA and the whole is coordinated by the Bank of England. Partly on that basis, I am glad to be invited to the LBMA’s Management Committee meetings as an observer. I’d just like to pay tribute to the professionalism and integrity with which I see the Management Committee operating for the best interests of the global marketplace for bullion.”

One of the more bizarre parts of Fisher’s appointment, in my view,  is that when the LBMA announced in a press release last July (2016) that Fisher was being appointed as the new LBMA chairman, there was no mention of the fact that he had previously attended the LBMA Management Committee meetings. One would think that this would be a very relevant when considering the ‘independence’ of the appointment?

On hearing the news on 13 July about the appointment of the Bank of England’s Paul Fisher as ‘independent’ non-executive chairman of the LBMA Board, James G Rickards, the well-known gold author and commentator, tweeted the below, which succinctly sums up the elephant in the room, which the mainstream media chooses to ignore.

This appointment reinforces the link, or bridge, between the two entities, which is now even more set in stone than previously. It’s as if the Bank of England, at this time, has felt the need to put it’s man directly at the head of the LBMA. The timing may be relevant, but in what way is not yet clear.

A forthcoming article looks at this appointment of a former Bank of England Head of Foreign Exchange as the new ‘independent’ Non-Executive Chairman of the LBMA Board, considers what, if anything, is independent about the appointment given the extremely close relationship between the Bank of England and the LBMA, and examines the appointment in the context of the UK Corporate Governance Code, which now governs the Constitution and operation of the LBMA Board.

From Gold Trains to Gold Loans – Banca d’Italia’s Mammoth Gold Reserves

Italy’s gold has had an eventful history. Robbed by the Nazis and taken to Berlin. Loaded on to gold trains and sent to Switzerland. Flown from London to Milan and Rome. Used as super-sized collateral for gold backed loans from West Germany while sitting quietly in a vault in New York. Leveraged as a springboard to prepare for Euro membership entry.  Inspired Italian senators to visit the Palazzo Koch in Rome. Half of it is now in permanent residency in downtown Manhattan, or is it? Even Mario Draghi, European Central Bank (ECB) president, has a view on Italy’s gold. The below commentary tries to make sense of it all by bringing together pieces of the Italian gold jigsaw that I have collected.

2,451.8 tonnes

According to officially reported gold holdings, and excluding the gold holdings of the International Monetary Fund (IMF), Italy’s central bank, the Banca d’Italia, which holds Italy’s gold reserves, is ranked as the world’s third largest official holder of gold after the US and Germany, with total gold holdings of 2,451.8 tonnes, worth more than US$ 105 billion at current market prices. Notable, Italy’s gold is owned by the Banca d’Italia, and not owned by the Italian State. This contrasts to most European nations where the gold reserves are owned by the state and are merely held and managed by that country’s respective central bank under an official mandate.

Italy’s gold reserves have remained constant at 2451.8 tonnes since 1999. Although the Banca d’Italia has been a signatory to all 4 Central Bank Gold Agreements and could have conducted gold sales within the limits of the agreements between 1999 and the present, it did not engage in any gold sales under either CBGA1 (1999-2004), CBGA2 (2004-2009), or CBGA3 (2009-2014), and as of now, has not conducted any sales under CBGA4 (2014-2019). With 2,451.8 tonnes of gold, the Banca d’Italia holds marginally more than the Banque de France, which claims official gold holdings of 2,435.8 tonnes.

Gold as a percentage of total reserves for both banks is very similar, with Italy’s gold comprising 69.7% of total reserve assets against 67.2% for France. Similarly, German’s gold reserves, at 3,378.2 tonnes, are 70.1% of its total reserves. See the World Gold Council’s Latest World Official Gold Reserves data for details.

So it appears that the big three European gold holders consider their gold to be a critical part of their foreign reserves and are keeping the ratio of their gold to total reserves within around the 70% mark.

Towards Transparency?

In April 2014, Banca d’Italia published a 3 page report about Italy’s gold reserves titled “Le Riserve Auree della Banca D’Italia” (published only in Italian). The report highlights that Italy’s gold is held in four storage locations, one of which is in Italy.

Specifically, in the report, Banca d’Italia confirmed that 1,199.4 tonnes of its gold, approximately half the total, is held in the Bank’s vaults which are located in the basement levels of its Palazzo Koch headquarters in Rome. The majority of remainder is stored in the Federal Reserve Bank’s gold vault in New York. The report also states that small amounts of Banca d’Italia gold are stored at the vaults of the Swiss National Bank in Berne, Switzerland, and at the vaults of the Bank of England in London.

As to why Italian gold is stored abroad in New York, London and Berne and not in other countries, is explained by historical data, and explained below.

++ Bankitalia: Visco, statuto riafferma indipendenza ++

Palazzo Koch

In its Palazza Koch vaults in Rome, the Banca d’Italia claims to store 1199.4 tonnes of gold. Of this total, 1195.3 tonnes are in the form of gold bars (represented by 95,493 bars), and 4.1 tonnes are in the form of gold coins (represented by 871,713 coins). While most of the bars in Rome are prism-shaped (trapezoidal), there are also brick-shaped bars with rounded corners (made by the US Mint’s New York Assay Office) and also ‘panetto’ (loaf-shaped) ‘English’ bars. The average weight of the bars in Palazzo Koch is 12.5 kg (400 oz), with bar weights ranging from relatively small 4.2 kgs up to some very large 19.7 kgs bars. The average fineness / gold purity of the Rome stored bars is 996.2 fine, with some of the holdings being 999.99 fine bars.

The Banca d’Italia also states that 141 tonnes of gold that it transferred to the ECB in 1999 as a requirement for membership of the Euro is also stored in Palazzo Koch. This would put the total gold holdings in the Palazzo Koch vaults at 1340 tonnes. Gold transferred to the ECB by its Euro member central banks is managed by the ECB on a decentralised basis, and is held by the ECB in whatever location it was stored in when the initial transfers occurred, subject to various location swaps which may have taken place since 1999.

The Vault is revealed

While the Banca d’Italia’s 3 page report appears to be the first official written and self-published confirmation from the Bank which lists the exact storage sites of its gold reserves, these four storage locations were also confirmed to Italian TV station RAI in 2010 when an RAI presenter and crew were allowed to film a report from inside the Bank’s gold vaults in Rome.

This RAI broadcast was for an episode of ‘Passaggio a Nord Ovest’, presented by Alberto Angela.

Translation of Video

For those who don’t speak Italian, such as myself, I asked an Italian friend to translate Alberto Angela’s video report and the other voice-overs in the report. The translation of the above video is as follows:

Banca D’Italia features a secret and extremely important place which represents Italy’s wealth: it’s our gold reserve.

We’ve had a special permission to visit this place, called “the sacristy of gold.” Here there’s a big protected door, and three high personnel from Banca d’Italia who are opening the door for me. Three keys are needed to open the door of the vault, one after the other and operated by three different people. Obviously we can’t show the security systems nor the faces of these men, but the door is huge, at least half a metre, and leads to another gate where again three keys must be used. Past this, that’s where our country’s gold is kept. 

Here we are. It’s exciting to get in here, the environment is simple, sober. [general commentary, then camera shows a large amount of gold]

This is not all the gold we own, as part of it is also stored in The Federal Reserve in the US, in the Bank of England in the UK and in Banca dei Regolamenti Nazionali in Switzerland. I’m speechless when exploring the sacristy, … you don’t see this every day. 

The value of all this gold is established by the  European Central Bank, that also establishes its price. The overall value appears in the end of year balance. In 2005 the gold was valued at 20 miliardi of Euros (billions)

There are three types of lingotti (square-shaped gold). {he says how much the bars weigh}

They feature some signs on them, to say that they have been checked. Some are almost 100% gold, pure gold. There’s also a serial number on the gold, and a swastika on some of them as the Nazi took away all our gold, transferring it first to the north of Italy and then to Germany and Switzerland. At the end of the war part of it came back featuring the Nazi sign.

This gold represents the symbol of our wealth, without this we wouldn’t be able to deal with the rest of the world, it’s a symbol for Italy, a guarantee, like a family’s jewelry. They can be used to get loans as happened when Italy asked for a loan from Germany and they demanded, as a guarantee, the value in gold. So the name Germany was put on this gold at the time.

{the reporter then talks about going from gold to notes and ‘convertibility’ – trust in the States is now the guarantee for exchanges, and not gold, says the voice. It’s a relation of trust … Banca d’Italia keeps an eye on this. After Maastricht, a lot of our gold has left Italy to join the other countries’ gold to create the communitarian reserve of the Euro}”

Note that the reporter, Angela, states that in addition to Rome, the Italian gold is stored at the Federal Reserve Bank in New York, the Bank of England in London, and at the Bank of International Settlements (BIS) in Switzerland. The reporter uses the exact words “Banca dei Regolamenti Nazionali”.

The BIS and SNB

This BIS as Italy’s gold custodian was also confirmed in 2009 by Italian newspaper “La Repubblica”, which published an article about Italy’s gold, stating that it was held in Rome, at the Federal Reserve in New York, in the ‘vaults’ of the BIS in Basel, and in the vaults of the Bank of England.

This apparent inconsistency between a) the Banca d’Italia’s report, which claims that its gold in Switzerland is at the Swiss National Bank (SNB) in Berne, and b) the RAI broadcast, which states that some Italian gold is stored with the BIS in Switzerland, is technically not a contradiction since the BIS does not maintain its own gold storage facilities in Switzerland. The BIS just makes use of the SNB’s gold vaults in Berne.

If you look on its website, under foreign exchange and gold services, the BIS specifically states that it uses ‘Berne’ as one of its safekeeping facilities for gold, i.e. it offers its clients “safekeeping and settlements facilities available loco London, Berne or New York”. Loco refers to settlement location of a precious metals transaction. By confirming that its Swiss storage is with the BIS, and that it also stores gold at the Swiss National Bank in Berne, the Banca d’Italia has, maybe inadvertently, confirmed that the BIS makes use of the Swiss National Bank’s gold vaults, and that the SNB vaults are in fact in Berne. while its knwn that the SNB gold vaults are in Berne, the SNB rarely, if ever, talks about this.

However, in 2008, Berne-based Swiss newspaper “Der Bund” published an article revealing that the SNB’s gold vaults are in Berne underneath the Bundesplatz Square. Bundesplatz Square is adjacent to the SNB’s headquarters at No. 1 Bundsplatz. BIS literature, such as the official BIS history publication “Central bank Cooperation at the Bank for International Settlements, 1930 – 1973” also confirms that the SNB gold vaults are in Berne and that the BIS and the Banca d’Italia have held gold accounts with the SNB in Berne since at least the 1930s. Note that the SNB actually has two headquarters, one in Berne, the other in Zurich at Börsenstrasse.Its quite possible that some of the SNB custodied gold is also stored in the vaults of its Zurich headquarters under Paradeplatz or Bürkliplatz.

Simple Questions met with Ultra-Secrecy

In April 2014, in two emails, I asked the Banca d’Italia’s press office specifically about this SNB / BIS situation, and also about the Banca d’Italia gold stored in New York, (and also about gold leasing – see separate section below). My questions were as follows:

“The Banca dItalia states in its April (2014) gold document that the Italian gold held in Switzerland is stored at the Swiss National Bank in Berne. Previous profiles of the Banca dItalia gold storage arrangements in an RAI TV broadcast in 2010 and in a La Republica newspaper article in 2009 state that the Italian gold in Switzerland is deposited with the Bank of International Settlements (BIS).

Given that the BIS use the SNB vaults in Berne to store gold deposited with them (since they don’t have their own gold storage facilities in Switzerland), then the reference to the SNB is not surprising.

However, my question is, does the Banca dItalia store its gold in Berne as gold sight deposits with the BIS or as earmarked custody gold with the SNB, or a combination of the two?”

“Is the gold of the Banca d’Italia that is held by the Federal Reserve Bank of New York held under earmark (custody), or held in a sight account?”

The Banca d’Italia responded (simultaneously on all questions):
“This is to inform you that unfortunately Banca d’Italia will not be giving information in addition to the website note.
Press and External Relations Division, Secretariat To The Governing Board And Communications Directorate, Bank of Italy”

By ‘website note’, the press and external relations division was referring to the 3 page report on gold reserves (see above) that the Bank published in April 2014.

Nazi Bars in Rome

The RAI television broadcast from 2010 was also notable in that it revealed that the Banca d’Italia holds bars of varied origins in its Rome vaults, including bars stamped with the official Bank of England stamp, and bars from the US Assay Office in New York including a featured bar from 1947. There are also Russian bars shown in the RAI video, one of which is shown in the video with the CCCP lettering, the hammer and sickle stamp, and the letters HKUM.

More surprisingly perhaps, is the fact that the Banca d’Italia also holds Nazi gold bars from the Prussian Mint in Berlin. The RAI broadcast video shows a 1940 Nazi bar from Berlin, stamped with the eagle and swastika insignia and with Prussian mint markings. The Nazi bar holdings can be explained by the fact that the Italian gold was confiscated by the Nazis during World War 2 and ended up being moved out of Rome up to the north of Italy and then most of it was transported onwards to Berlin in Germany or else to Switzerland. Following the war, some of the gold given back to the Italians as part of the Tripartite Commission payouts happened to be Prussian Mint bars stamped with the Nazi symbol (see below for historical account of Italian gold movements during World War 2).

riserve auree1
A view of the gold on shelves in the Palazzo Koch vaults, Rome

The Foreign held Italian gold

The Banca d’Italia gold document does not specify how much of the Italian gold is held in New York, London and Berne, apart from stating that most of the gold that is not stored in Rome is stored in New York. Note that this is even less transparent than the brief information that the Deutsche Bundesbank publishes about its gold reserves storage locations. However, the Banca d’Italia document does state that “the bulk” of foreign stored gold is in New York (“la parte più consistente è custodita a New York“), and that  “contingents of smaller size” are located in London and Berne (“Altri contingenti di dimensioni più contenute si trovano a Berna, presso la Banca Nazionale Svizzera, e a Londra presso la Banca d’Inghilterra“).

While one could argue about the meaning of ‘the bulk’ in terms of quantity, essentially the Banca d’Italia gold document implies that the London and Berne holdings are not very large. More specifically, it is possible using historical data and records of Italian gold movements to infer that there is little Italian gold in London and Berne.

Not a lot in London

It does not look like Banca d’Italia holds anything other than a very small amount of gold in London. During the late 1960s, mainly between 1966 and 1968, the Banca d’Italia transported most of the gold that it had stored at the Bank of England vaults back to Italy. Regular shipments were exported and delivered by MAT (the secure transport company) to the Banca d’Italia’s vaults in both Rome and Milan, sometimes about 4 tonnes at a time, sometimes 10 tonnes at a time. Historic Bank of England gold account “set-aside” ledger entries (C142/5 Bullion Office Set Aside Ledger, A-K, 1943-1971) show that by the end of 1969, the Banca d’Italia only held 988 gold bars in London, weighing 396,000 ozs,  or approximately 12.34 tonnes. In support of the veracity of this statement, see the specific ledger entry below.


During the Banca d’Italia’s gold transport period out of the Bank of England, various other transfers were also made from the Banca d’Italia gold account to the BIS gold account at the Bank of England. Since Italian gold reserves have not in total changed very much since December 1969, it is realistic to assume that the Banca d’Italia’s London gold holdings have not changed dramatically since December 1969, unless there have been location swaps executed since that time between London and New York or between London and Berne. This would generally only have been done for a specific reason such as to allow Italian gold lending through the London market. Significant gold lending only began in London in the mid-1980s, and the Banca d’Italia has never been on public record as having engaged in gold lending on the London Gold Lending Market.

Another possibility is that the Italians now use the BIS gold account(s) to hold gold in London in the same way that they do in Berne. This would allow the statement that some of the Italian gold is held in London to be true, even though the gold would, in this case, be held via the BIS gold account at the Bank of England, and not directly by a Banca d’Italia gold custody account in London.

Little in Berne

There does not appear to have been any Italian gold left in Berne after WWII (see historical details below), so whatever Italian balance is currently in Berne has been built up since 1946. Of relevance to the gold vaults in Berne, both the central banks of Finland (Bank of Finland) and Sweden (Riksbank) recently published the international locations of their gold reserves, and revealed that only very small percentages of their gold is kept in the Swiss National Bank vaults in Switzerland. Of the Riksbank’s 125.7 tonnes of gold reserves, only 2.8 tonnes (2.2%) is stored in the SNB vaults. For the Bank of Finland, only 7%, or 3.4 tonnes of its 49.1 tonnes of gold reserves are stored with the SNB in Switzerland.

Mostly in Manhattan

If this Swedish-Finnish 2-7% range of allocations held at the SNB was applied to the Italian gold that held outside Italy, it would result in between 25 tonnes and 87.6 tonnes of Italian gold being held at the SNB vaults in Berne. Factoring in 12 tonnes held at the Bank of England and a small amount held in Berne, this would imply nearly 1,200 tonnes of Italian gold at the Federal Reserve in New York.

There were at least 543 tonnes of Italian gold at the Federal Reserve in New York in the mid-1970s, since this was the quantity of Italian gold collateral that the Bundesbank held at the New York Fed during its first gold loan to Italy between 1974 and 1976 (see discussion below of the 1970s West Germany – Italy gold loan). If the quantities in London and Berne are as low as they appear to be, this 543 tonnes used as collateral might not have even been half the gold that Italy has custodied with the Federal Reserve Bank of New York.

A gold vault in Milan

It’s notable that the Banca d’Italia has used a vault in the city of Milan to store gold as recently as the late 1960s, although there is no mention of a Milan vault in the Banca d’Italia’s 2014 gold document. This would either imply that the gold stored in Milan in the 1960s was transported to Rome at a later date, or else that the Rome statistics may represent combined holdings stored in Rome and Milan, and are just rolled up to Rome for reporting purposes, since Rome is the head office of the Banca d’Italia. The Banca d’Italia’s Milan vault did feature as a key part of Italian gold movements during World War 2 (see below).

Historical Italian Gold

Like other central banks, the Banca d’Italia states that it uses 4 storage locations partly due to historical reasons and partly based on a deliberate strategy gold storage diversification strategy.

Although the Banca d’Italia held 498 tonnes of gold in 1925, Italian gold reserves fell to 420 tonnes in 1930, and continued to decline throughout the 1930s, falling to 240 tonnes in 1935, before another sharp fall to 122 tonnes in 1940 at the beginning of World War 2. With both Rome and Northern Italy under German occupation in 1943, the German occupiers pressurised the Banca d’Italia’s governor Azzolini to move the Italian gold north. Ultimately this led to 119 tonnes of Italian gold being transported by train from Rome to the Banca d’Italia’s vaults in Milan. But the transfer to Milan turned out to be just an interim stopover since the Germans continued to pile on pressure to move the Italian gold to Berlin.

The fascist government that controlled Northern Italy at that time initially resisted the German plan, but negotiated a compromise and agreed to move 92.3 tonnes of gold to a castle in Fortezza, in the far north of Italy near the Austrian border, close to the Brenner Pass and likewise very close (via Austria) to the German border.

Eventually the fascist government capitulated fully to the German demands and 49.6 tonnes of Italian was moved from Fortezza to the Reichsbank vaults in Berlin, followed by an additional transfer of 21.7 tonnes, so in total 71.3 tonnes of Italian gold ended up in the Reichsbank in Berlin. See here for graphic showing these wartime movements of Italian gold, and a comprehensive discussion (in Italian).

In the 1930s, the Bank for International Settlements Bank had invested substantially in Italian short-term treasury bills, which had a built-in gold conversion guarantee. Likewise, the Swiss National Bank held or was the representative for claims on some of the Italian gold. With the German pressure on the Italian gold in 1943, the BIS and SNB both became anxious about their investments and requested that their Italian gold-related be fully converted into gold with a view to moving the converted gold to the SNB vaults in Berne, Switzerland.

The Gold Trains to Berne

After intense negotiations, which the Banca d’Italia also supported (since it would allow some of the Italian gold to go to Switzerland and so avoid Berlin), the SNB and BIS succeeded in releasing the gold transfers, and over 72 years ago on 20th April 1944, 23.4 tonnes of Italian gold was sent by train from Como in Italy to Chiasso in Switzerland and then onwards by another train to Berne.

This required four railcars, two with 89 crates of gold weighing 12,605 kgs for the BIS (1,068 bars in total), and two other railcars of gold bars for the SNB which probably contained 9-10 tonnes – since this was the balance of Italian gold which did not go to Berlin or to the BIS but which had been moved to Fortezza from Milan.

A few days later on 25th April 1944, the Banca’Italia also executed an additional intra-account transfer in the Berne vault to the benefit of the BIS. This was part of a location swap with the BIS. To quote the official BIS historical narrative:

On 25th April 1944, the Bank of Italy transferred an additional 3,190 kgs of fine gold from its own gold account with the Swiss National Bank in Berne to the BIS gold account there.” (Central Bank Cooperation at the Bank for International Settlements, 1930-1973, Gianni Toniolo, BIS).

The actual transfer comprised 244 gold bars containing 2,966 kgs. An additional 233 kgs was debited from the Banca d’Italia sight account with the BIS, which suggests that the Italians only had 2,966 kgs in physical gold stored in Berne with the balance having to come from their sight deposit with the BIS (i.e. unallocated storage). (See “Note on gold shipments and gold exchanges organised by the Bank for International Settlements, 1st June 1938 – 31st May 1945.

The above suggests that the Banca d’Italia had no gold in Berne at the end of WWII. In fact, after WWII ended in 1945, the Italians essentially had very little gold anywhere except for small amounts that were left in Fortezza and found by the Allies, which was then returned to the Italians. Italy started buying gold again in 1946 with a 1.8 tonne purchase from the Banque de France. The Italians also began receiving gold back as reparations from the Tripartite Commission for the Restoration of Monetary Gold (TGC), getting 31.7 tonnes a few years after WWII ended, and another 12.7 tonnes in 1958. Since 71.4 tonnes had been taken by the Germans to Berlin, the Italians ended up with a net loss of about 27 tonnes due to theft and/or other war losses.

Some of these post-WWII gold reparations contained the Nazi Prussian Mint bars which are now stored in the Banca d’Italia’s Rome vaults. The initial gold bar reparations for Italy in the late 1940s came from the TGC account set up at the Bank of England. Records from the Clinton Library show that Italy received 575 Prussian bars set-aside from the TCG account in its early allocations. Prussian bars also made it to the Federal Reserve in New York. The same records show that were over 2,500 Prussian Mint bars held under earmark at the FRBNY for various customers as of January 1956 including the BIS, IMF, SNB, Bank of England, Netherlands and Canada among others. Some of these bars were later remelted into US Assay Office bars. (The Gold Report, Presidential Advisory Commission on Holocaust Assets in the United States, July 2000, Clinton Library).

In a similar way to other major European central banks, the Banca d’Italia’s gold reserves were mainly built up during the late 1950s and early 1960s. Although the Banca d’Italia was a relatively important official gold holder during the first half of the 20th century, it ‘only’ held 402 tonnes of gold as of 1957. But starting in 1958 and running through to the late 1960s, Italy’s gold reserves rose by nearly 600% to exceed 2,560 tonnes in 1970. See page 19 of “Central Bank Gold Reserves, An Historical perspective since 1845, by Timothy Green, Research Study No. 23, published by World Gold Council, for data on Italian gold reserve totals during the 1950s and 1960s.

Since 1970, Italy’s gold holdings have remained fairly constant, although at times some of the Italian gold has been used in various financial transactions such as:

  • gold collateral against a loan from Germany during the 1970s
  • contributions to the European Monetary Cooperation Fund (EMCF)
  • contributions to the European Central Bank (ECB)

The gold collateral transactions with Germany and the EMCF and ECB contributions explain why, in the absence of purchases or sales, Italy’s historic gold holdings statistics appear to fluctuate widely at various times since the mid-1970s.

l’Ufficio Italiano dei Cambi (UIC)

Until the 1960s, most, if not all of Italy’s official gold reserves were held not by the Banca d’Italia, but by an associated entity called l’Ufficio Italiano dei Cambi (UIC). In English, UIC translates as the “Italian Foreign Exchange Office”. The UIC was created in 1945. One of its tasks was the management of Italy’s foreign exchange reserves (also including gold).

Therefore the Italian gold purchases in the 1950s and 1960s were conducted for the account of the UIC, not the Banca d’Italia. However, during the 1960s there were two huge transfers of gold from the UIC to the Banca d’Italia, one transfer in 1960 and the second in 1965. In total, these two transactions represented a transfer of 1,889 tonnes from the UIC to the Banca d’Italia. The UIC’s main function then became the management of the national currency and not the nation’s gold. The UIC ceased to exist in January 2008 when all of its tasks and powers were transferred to the Banca d’Italia.


Gold Collateral for the Bundesbank – 1970s

In 1974, Italy required international financial aid to overcome an economic and currency crisis and ended up negotiating financial help from the Deutsche Bundesbank. This took the form of a dollar-gold collateral transaction, with the Bundesbank providing a US$ 2 billion loan secured on Italian gold collateral of equivalent value. On 5th September 1974, Karl Klasen, President of the Bundesbank, sent the specifics of the collateral agreement to Guido Carli, Governor of the Banca ‘dItalia. The details of the transaction were as follows:

US$ 2 billion was transferred from the Bundesbank to the Banca d’Italia for value date 5th September. Simultaneously, for value date 5th September, the Banca d’Italia earmarked 16,778,523.49 ounces of gold (about 522 tonnes) from its gold holdings stored at the Federal Reserve Bank in New York into the name of the Bundesbank, and received a gold claim against the Bundesbank for the same amount.  (2A96 Deutsche Bundesbank Files, 1974, Bank of England Archives).

The gold collateral was valued at $149 per ounce based on a formula of 80% of the average London gold fixing price during July and August 1974. The loan was for a six month maturity but could be rolled over up to three times, i.e. up to two years in total. It turns out that the loan was rolled over up to the maximum two years allowed. Not only that, but the entire gold-backed dollar loan was renewed in September 1976 with larger gold collateral of 17.5 million ounces or about 543 tonnes. This gold loan renewal in 1976 was underwritten by the UIC, and the 543 tonnes of gold was transferred from the Banca’Italia to the UIC prior to the loan renewal. Note that Paolo Baffi had become Governor of the Banca d’Italia in 1975, taking over from Guido Carli.

In September 1978, at the 2 year maturity date of the renewal, the 543 tonnes of gold was returned to the ownership of the Italians but instead of being transferred to the Banca d’Italia, the 543 tonnes was transferred to the balance sheet of the UIC, since the UIC had been involved in underwriting the entire loan agreement. This 543 tonnes of gold stayed on the UIC books and was revalued over the years, thereby creating a large capital gain for the UIC.

Gold capital gain Controversy – 1997/98

When the gold held by the UIC was sold to the Banca d’Italia in 1997, the UIC realised a capital gain of 7.6 billion Lira which then became taxable. The UIC then owed the Italian Exchequer 4 billion Lira, 3.4 billion Lira of which was transferred to the Italian State in November 1997. At the time in 1997, Italy was preparing for entry to the Euro, and needed to keep its deficit under the 3% ceiling required by the Maastricht Treaty criteria. Eurostat ruled that this windfall transfer to the Italian Exchequer was not allowed to be offset against the government deficit. See here for January 1998 statement from Eurostat.

However, a European Parliament parliamentary set of question in March 1998 to the European Council seems to suggests that the UIC tax payment to the Italian Exchequer was offset against Italy’s public sector deficit, and that it helped to keep the Italian deficit under the critical 3% Masstrict ceiling, thereby helping Italy to qualify for Euro membership. The parliamentary questions were from Italian politician Umberto Bossi:

“Does the Council intend to finally ascertain the nature of this transaction?

Does the Council intend to establish whether it is permissible to encourage tax revenues of this kind to be offset against the public sector deficit?

If not, does the Council not consider that this incident shows yet again that Italy has not changed its ways and is prepared to stoop to dubious accounting practices in order to enter Europe?”

The answer to this parliamentary question in June 1998 seems vague, but did not deny that the tax windfall generated by the capital gain on the 543 tonnes of gold may have helped improve the Italian fiscal condition in the run-up to Euro qualification and entry.


As referenced above, Italian gold has been contributed to various European monetary experiments since the 1970s. This explains why the yearly official total figures of Italian gold fluctuate widely over the 1970s-1990s period, and indeed have also fluctuated since 1999.

In 1979, Italy’s gold reserves dropped by 20% and stayed that way until 1998 when they increased again to the previous 1979 level. This was due to Italy contributing to the European Monetary Cooperation Fund (EMCF) which was a fund within the European Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). In exchange for providing 20% of their gold and dollar reserves to the EMCF, member countries received claims denominated in European Currency Units (ECUs). [The ECU was an abstract precursor to the Euro]. The gold that was transferred to the EMCF was accounted for as gold swaps, but there was no physical movement of gold, it was just a book entry to represent a change in ownership to the EMCF.

In 1999, with the advent of the Euro (initially as a virtual currency), central bank members of the Eurozone had to again transfer gold, this time to the European Central Bank (ECB). The ECB stipulated that each member had to transfer foreign reserves assets, and 15% of these transfers had to be in the form of gold. In Italy’s case it transferred 141 tonnes of gold to the ECB, so Italy’s gold reserves fell by this amount.

The gold owned by the ECB is not centrally stored and managed by the ECB. It stays wherever it was when transferred by each member country, and the ECB delegates the management of its gold reserves to each member central bank, so essentially, it’s just another accounting transaction. It’s unclear whether the ECB gold managed by the Banca d’Italia on behalf of the ECB is “managed” any differently to the non-ECB gold (i.e. its unclear whether the same investment policy always applies to both gold holdings). One person who would certainly know the answer to that questions is Mario Draghi, current president of the ECB, former governor of the Banca d’Italia, and also born in Rome, home of the Palazzo Koch gold vault.

Is any Italian Gold pledged or leased out?

Banca d’Italia annual reports follow International Monetary Fund reporting conventions and classify the gold in its balance sheet as ‘gold and gold receivables‘. In September 2011, when I asked the Banca d’Italia to clarify what percentage of the asset category ‘gold and gold receivables’ in its 2010 balance sheet referred to gold held, and what percentage represented gold receivables, the Bank’s press office replied succinctly that “it’s only gold, no receivables.”

Following the publication of the Bank’s three page gold document in April 2014, I asked the Banca d’Italia press office a number of questions (see above), one of which was about gold leasing:

Are any of the Bank’s gold reserves subject to lease agreements, and if so, what percentage of the gold is leased out? Is any of the Bank’s gold swapped or pledged in any other way?

As mentioned above, the Banca d’Italia’s response was:

This is to inform you that unfortunately Banca d’Italia will not be giving information in addition to the website note.
Press and External Relations Division, Secretariat To The Governing Board And Communications Directorate, Bank of Italy”


Gold Audits

The Banca d’Italia states in its 3 page gold document that external auditors verify the gold held in Rome each year in conjunction with the Bank’s own internal auditors. For the gold held abroad, the external auditors are said to audit this using annual certificates issued by the central banks that act as the depositories (the  depositories being the Federal Reserve Bank of New York, the Bank of England, and either the BIS or perhaps the SNB depending on the type of certificate that is issued for BIS deposits).

This approach is analogous to the methodology used to audit the German gold reserves stored abroad, i.e. there is no independent physical audit of the gold stored abroad by the Bundesbank. The paper-pushing auditors merely audit pieces of paper.

As regards the Banca d’Italia’s gold holdings at the Bank for International Settlements (BIS), these holdings could either be in the form of a “Gold Sight Account” or a “Gold Ear-Marked Account”, as explained here by the Bank of Japan in 2000 when it switched its gold holdings at the BIS from a gold sight account to a gold earmarked account:

“The Bank of Japan has recently transferred its claims against the Bank for International Settlements (BIS) embodied in a “Gold Sight Account” to a “Gold Ear-marked Account” with the BIS.” (July 2000)

If the Banca d’Italia’s gold holdings at the BIS are just in a sight account, then this is just a claim on a balance of gold, not a holding of specific gold bars.

It’s also surprising to me that the mainstream media have taken a significant, albeit superficial, interest in the Bundesbank’s ongoing exercise to repatriate 300 tonnes of its gold reserves from New York to Frankfurt, but zero interest in the fact that the Banca d’Italia supposedly has a huge amount of gold stored in New York that has never physically audited it and does not even see a need to repatriate it.

Banca d’Italia office in Manhattan

Like the Bundesbank,  the Banca d’Italia also maintains a representative office in New York, at 800 Third Avenue – 26th Floor, New York – NY 10022 (see representative office contact details here). The head of this representative office is Giovanni D’Intignano (see LinkedIn). Therefore, it should be very easy for the Banca d’Italia to ask the Federal Reserve Bank of New York to conduct an on-site physical gold audit of the Italian gold at the vaults of the New York Fed, all 1000 plus tonnes of it.

In fact, the Banca d’Italia also maintains another of its only 3 representative offices abroad in London at 2 Royal Exchange, London EC3V 3DG, which is right across the road from the Bank of England’s headquarters and gold vaults. It should therefore also be a simple matter for the Banca d’Italia to also organise a physical on-site audit of its gold reserves stored at the Bank of England in London, something the Bank of England has been allowing its gold storage customers to do since 2013.

Political Awakening

There has been a developing political trend recently in Italy for more transparency on the Italian gold and also calls for its ownership and title to be protected against control by outside entities.

In January 2012, Italian politican Rampelli Fabio (co-signed by Marco Marsilio) submitted some written questions to the Italian Ministry of Economy and Finance, a department headed at the time by Mario Monti (Monti was also simultaneously Italian Prime Minister at that time), asking the following questions about the Italian gold (questions 4-14567 : Italian version and English version):

“When and under what agreement or statutory provision were the storage location decisions (regarding New York, London and BIS Switzerland) taken and whether that strategic decision is still considered to serve the interests of Italy?

Who owns the gold reserves held at Palazzo Koch (in Rome) and the gold reserves held at the foreign locations?

Does Italy have full availability to the gold reserves held at the Bank of Italy and at the foreign locations?”

Even though these questions were submitted nearly 5 years ago, the official status of the questions on the parliamentary website still says “In Progress”,  suggesting that they have not been answered by the Ministry of Finance. I can find no other evidence elsewhere either that these questions were ever answered.

Senators visit Palazzo Koch vault

Three Italian senators of the political party Movimento Cinque Stelle visited the Banca d’Italia gold vaults in Rome on 31 March 2014 and are calling for the ownership of the gold to be transferred from the Banca d’Italia to the Italian public so that its control cannot be compromised. See video below of their before and after visit which was broadcast from outside the Palazzo Koch vault in Rome.

These 3 representative (in the above video) are Senator Giuseppe Vacciano, Senator Andrea Cioffi and Senator Francesco Molinari.  I do not have a direct English translation of this video, however, anyone interested can translate this page from Italian,  which was published on 3 April 2014, and features Senator Vacciano explaining the senators’ vault visit.

In his report, Vacciano confirm some interesting facts, such as that the Italian gold belongs to the Banca d’Italia and not the Italian State.  The ownership issue is also confirmed by the Banca d’Italia’s 3 page gold report (see above) which states:

“La proprietà delle riserve ufficiali è assegnata per legge alla Banca d’Italia” – (Ownership of official reserves is assigned by law to the Bank of Italy)

Unusually for a central bank, Banca d’Italia’s share capital is held by a diverse range of Italian banks and other financial institutions as well as by the Italian state

Vaccciano also confirmed that in the vault they saw some South African gold bars, many American gold bars, and “several bearing the Nazi eagle”. And in a similar way to the RAI reporter Alberto Angela, who said in 2010 that he was speechless when viewing the gold in the sacristy, Vacciano says:

from a purely human perspective, we could see with our own eyes a quantity of precious metal that goes beyond an ordinary perception … I must say that arouses feelings that are difficult to explain“.

Italian Citizens

The Italian business community and public appear to be quite aware of the importance of the country’s gold reserves. In May 2013, the World Gold Council conducted a survey of Italian business leaders and citizens which included various questions about the Italian gold reserves. The findings showed that 92% of business leaders and 85% of citizens thought that the Italian gold reserves should play an important role in Italy’s economic recovery. There was very little appetite to sell any of the gold reserves, with only 4% of both citizens and business leaders being in favour of any gold sales. Finally, 61% of the business leaders and 52% of the citizens questioned were in favour of utilising the gold reserves in some way without selling any of them. The World Gold Council interpreted this sentiment as allowing the possibility for a future Italian gold-backed bond to be issued with Italian gold as collateral. The Italian gold could thus play a role similar to that used to collateralise the international loans from West Germany to Italy in the 1970s.

Mario Draghi – Last Word

For now, the last word on the Italian goes to Draghi. Even Mario Draghi, former governor of the Banca d’Italia, and current president of the European Central Bank, has a similar view to the Italian public about not selling the Italian gold. In the video below of a 2013 answer to a question from Sprott’s Tekoa Da Silva, Draghi says that he never thought it wise to sell Italy’s gold since it acts as a ‘reserve of safety’. However, as would be expected from a smoke-and-mirrors central banker, Draghi doesn’t reveal very much beyond generalities, and certainly no details of storage locations or whether the Italian gold comprises gold receivables as well as unencumbered gold.


IMF Gold Sales – Where ‘Transparency’ means ‘Secrecy’

Welcome to the twilight zone of IMF gold sales, where transparency really means secrecy, where on-market is off-market, and where IMF gold sales documents remain indefinitely “classified” and out of public view due to the “sensitivity of the subject matter”.

Off and On Market

Between October 2009 and December 2010, the International Monetary Fund (IMF) claims to have sold a total of 403.3 tonnes of gold at market prices using a combination of ‘off-market’ sales and ‘on-market’ sales. ‘Off-market’ gold sales are gold sales to either central banks or other official sector gold holders that are executed directly between the parties, facilitated by an intermediary. For now, we will park the definition of ‘on-market’ gold sales, since as you will see below, IMF ‘on-market’ gold sales in reality are nothing like the wording used to describe them. In total, this 403.3 tonnes of gold was purportedly sold so as to boost IMF financing arrangements as well as to facilitate IMF concessional lending to the world’s poorest countries. As per its Articles of Agreement, IMF gold sales have to be executed at market prices.

Critically, the IMF claimed on numerous occasions before, during and after this 15-month sales period that its gold sales process would be ‘Transparent. In fact, the concept of transparency was wheeled out by the IMF so often in reference to these gold sales, that it became something of a mantra. As we will see below, there was and is nothing transparent about the IMF’s gold sales process, but most importantly, the IMF blocked and continues to block access to crucial IMF board documents and papers that would provide some level of transparency about these gold sales.

Strauss-Kahn – Yes, that guy

On 18 September 2009, the IMF announced that its Executive Board had approved the sale of 403.3 metric tonnes of gold. Prior to these sales, the IMF officially claimed to hold 3217.3 tonnes of gold. Commenting on the gold sales announcement, notable party attendee and then IMF Managing Director Dominique Strauss-Kahn stated:

“These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market.”

The same IMF announcement on 18 September 2009 also stated that:

“As one of the elements of transparency, the Fund will inform markets before any on-market sales commence. In addition, the Fund will report regularly to the public on the progress with the gold sales.”

DSK has left the building
DSK has left the building

On 2 November 2009, the IMF announced the first transaction in its gold sales process, claiming that it had sold 200 tonnes of gold to the Reserve Bank of India (RBI) in what it called an ‘off-market’ transaction. This transaction was said to have been executed over 10 trading days between Monday 19 November to Friday 30 November with sales transactions priced each day at market prices prevailing on that day. On average, the 200 tonne sales transaction would amount to 20 tonnes per day over a 10 day trading period.

Note that the Reserve Bank of India revealed in 2013 that this 200 tonne gold purchase had merely been a book entry transfer, and that the purchased gold was accessible for use in a US Dollar – Gold swap, thereby suggesting that the IMF-RBI transaction was executed for gold held at the Bank of England in London, which is the only major trading center for gold-USD swaps. As a Hindu Business Line article stated in August 2013:

“According to RBI sources, the gold that India bought never came into the country as the transaction was only a book entry. The gold was purchased for $6.7 billion, in cash.”

“The Reserve Bank of India bought 200 tonnes of gold for $1,045 an ounce from the IMF four years ago. The Government can swap it for US dollars,” said [LBMA Chairman David] Gornall.”

Two weeks after the Indian purchase announcement in November 2009, another but far smaller off-market sale was announced by the IMF on 16 November 2009, this time a sale of 2 tonnes of gold to the Bank of Mauritius (the Mauritian central bank), said to have been executed on 11 November 2009. Another two weeks after this, on 25 November 2009, the IMF announced a third official sector sales transaction, this time a sale of 10 tonnes of gold to the Central Bank of Sri Lanka.

Overall, these 3 sales transactions, to the Reserve Bank of India, Bank of Mauritius and the Central Bank of Sri Lanka, totalled 212 tonnes of gold, and brought the IMF’s remaining official gold holdings down to 3005.3 tonnes at the end of 2009, leaving 191.3 tonnes of the 403.3 tonnes remaining to sell. All 3 of the above announcements by the IMF were accompanied by the following statement:

“The Fund will inform markets before any on-market sales commence, and will report regularly to the public on progress with the gold sales.”

For nearly 3 months from late November 2009, there were no other developments with the IMF’s  gold sales until 17 February 2010, at which point the IMF announced that it was to begin the ‘on-market’ portion of its gold sales program. At this stage you might be wondering what the IMF’s on-market gold sales consisted of, which ‘market’ it referred to, how were the sales marketed, who the buyers were, and who executed the sales transactions. You would not be alone in wondering about these and many other related questions.

The IMF’s press releases of 17 February 2010, titled ‘IMF to Begin On-Market Sales of Gold’ was bereft of information and merely stated that the IMF would “shortly initiate the on-market phase of its gold sales program” following “the approach adopted successfully by the central banks participating in the Central Bank Gold Agreement“, and that the sales would be “conducted in a phased manner over time”. The third Central Bank Gold Agreement (CBGA) ran from September 2009 to September 2014. These CBGA’s, which have been running since September 1999, ostensibly claim to support and not disrupt the gold market but in reality have, in their entirety, been highly secretive operations where vast amounts of central bank and official sector gold is channeled via the BIS to unspecified buyers in the bullion banks or central bank space, with the operations having all the hallmarks of gold price stabilization operations, and/or official sector gold redistribution between the world’s developed and emerging market central banks.

The February 2010 announcement also made the misleading claim that “the IMF will continue to provide regular updates on progress with the gold sales through its normal reporting channels”. These regular updates have never happened.

An article titled “IMF ‘On-Market’ Gold Sales Move Ahead” in the ‘IMF Survey Magazine’, also dated 17 February 2010 reiterated this spurious transparency claim:

Transparent approach

The IMF publicly announced each official sale shortly after the transaction was concluded. A high degree of transparency will continue during the sales of gold on the market, in order to assure markets that the sales are being conducted in a responsible manner.”

However, following this February 2010 lip service to transparency, there were no direct updates from the IMF exclusively about the on-market gold sales, even after the entire gold sales program had completed in December 2010.

One further IMF ‘off-market’ gold sale transaction was announced on 9 September 2010. This was a sale of 10 tonnes of gold to Bangladesh Bank (the Bangladeshi central bank) with the transaction said to have been executed on 7 September 2010. Adding this 10 tonnes to the previous 212 tonnes of off-market sales meant that 222 tonnes of the 403.3 tonne total was sold to central banks, with the remaining 181.3 tonnes sold via ‘on-market’ transactions. The Bangladesh announcement was notable in that it also revealed that “as of end July 2010, a further 88.3 metric tons had been sold under the on-market sales announced in February 2010″. The addition of Bangladesh to the off-market buyer list that already consisted of India, Sri Lanka and Mauritius also resulted in the quite bizarre situation where the only off-market buyers of IMF comprised 4 countries that have extremely close historical, political, cultural and economic connections with each other. Three of these countries, India, Bangladesh and Sri Lanka, are represented at the IMF by the same Executive Director, who  from November 2009 was Arvind Virmani, so their buying decisions were most likely coordinated through Virmani and probably through the Reserve Bank of India as well.

On 21 December 2010, the IMF issued a press release titled ‘IMF Concludes Gold Sales’ which stated:

“The International Monetary Fund (IMF) announced today the conclusion of the limited sales program covering 403.3 metric tons of gold that was approved by the Executive Board in September 2009.”

“The gold sales were conducted under modalities to safeguard against disruption of the gold market. All gold sales were at market prices, including direct sales to official holders.”

‘Modalities’ in this context just means the attributes of the sales including the approach to the gold sales, i.e. the sales strategy. This brief announcement on 21 December 2010 was again bereft of any factual information such as which market was used for the ‘on-market’ gold sales, the identity of executing brokers, the identity of counterparties, transaction dates, settlement dates / deferred settlement dates, method of sale, information on whether bullion was actually transferred between parties, publication of weight lists, and other standard sales transaction details. Contrast this secrecy to the 1976 -1980 IMF gold sales which were conducted by a very public series auction, and which were covered in minute details by the financial publications of the time.

As usual with its treatment of official sector gold transactions, the World Gold Council’s Gold Demand Trends report, in this case its Q4 2010 report, was absolutely useless as a source of information about the IMF gold sales beyond regurgitating the press release details, and there was no discussion on how the gold was sold, who the agent was, who the buyers were etc etc.

Lip Service to Transparency

When the IMF’s ‘on-market’ sales of 191.3 tonnes of gold commenced in February – March 2010, there were attempts from various quarters to try to ascertain actual details of the sales process. Canadian investment head Eric Sprott even expressed interest in purchasing the entire 191.3 tonnes on behalf of the then newly IPO’d Sprott Physical Gold ETF. However, Sprott’s attempts to purchase the gold were refused by the IMF, and related media queries attempting to clarify the actual sales process following the IMF’s blockade of Sprott were rebuffed by the IMF.

A Business Insider article from 6 April 2010, written by Vince Veneziani and titled “Sorry Eric Sprott, There’s No Way You’re Buying Gold From The IMF”, lays out the background to this bizarre stone-walling and lack of cooperation by the IMF. Business Insider spoke to Alistair Thomson, the then external relations officer at the IMF (now Deputy Chief of Internal Communications, IMF), and asked Thomson why Sprott could not purchase the gold that was supposedly available in the ‘on-market’ sales. Thomson’s reply is summarised below:

“The IMF is only selling gold though a qualified agent. There is only one of these agents at the moment and due to the nature of the gold market, they won’t reveal who or what that agent is.”

“Sprott can’t buy the gold directly because they do not deal with institutional clients like hedge funds, pension funds, etc. The only buyers can be central bankers and sovereign nations, that sort of thing.”

The IMF board agreed months ago how they wanted to approach the sale of the gold. Sprott is welcome to buy from central banks who have bought from the IMF, but not from the IMF directly.”

While this initial response from the IMF’s Alistair Thomson contradicted the entire expectation of the global gold market which had been earlier led to believe that the ‘on-market’ gold sales were just that, sales of gold to the market, on the market, Thomson’s reply did reveal that the IMF’s ‘on-market’ gold sales appeared to be merely an exercise in using an agent, most likely the Bank for International Settlements (BIS) gold trading desk, to transfer IMF gold to a central bank or central banks that wished to remain anonymous, and not go through the publicity of the ‘off-market’ transfer process.

Although, as per usual, the servile and useless mainstream media failed to pick up on this story, the IMF’s unsatisfactory and contradictory response was deftly dissected by Chris Powell of GATA in a dispatch, also dated 6 April 2010. After discussing the IMF’s initial reply with Eric Sprott and GATA, Business Insider’s Vince Veneziani then went back to IMF spokesman Alistair Thomson with a series of reasonable and totally legitimate questions about the ‘on-market’ gold sales process.

Veneziani’s questions to the IMF are documented in his follow-up Business Insider article titled “Five Questions About Gold The IMF Refuses To Answer”, dated 27 April 2010. These questions included:

  • What are the incentives for the IMF not to sell gold on the open market or to investors, be it institutional or retail?
  • Did gold physically change hands with the banks you have sold to so far or was the transaction basically bookkeeping stuff (the IMF still holds the physical gold in this case)?
  • Are there available records on the actual serial numbers of bullion? How is the gold at the IMF tracked and accounted for?
  • Does IMF support a need for total transparency in the sale of gold despite the effects it could have on various markets?

Shockingly, Alistair Thomson, supposedly the IMF press officer responsible for answering the public’s queries about IMF finances (including gold sales), arrogantly and ignorantly refused to answer any of the questions, replying:

“I looked through your message; we don’t have anything more for you on this.”

Another example of the world of IMF transparency, where black is white and white is black, and where press officers who have formerly worked in presstitute financial media organisations such as Thomson Reuters fit in nicely to the IMF’s culture of aloofness, status quo protection, and lack of accountability to the public.

International Monetary Fund

Monthly Report on Sales of Gold on the Market

Fast forward to July 2015. While searching for documents in the IMF online archives related to these gold sales, I found 3 documents dated 2010, titled “Monthly Report on Sales of Gold on the Market“. Specifically, the 3 documents are as follows (click on links to open):

Each of these 3 documents is defined by the IMF as a Staff Memorandum (SM), which are classified as ‘Executive Board Documents’ under its disclosure policy. The IMF Executive Board consists of 24 directors in addition to the IMF Managing Director, who was in 2009 the aforementioned Dominique Strauss-Kahn. According to the IMF’s Executive Board synopsis web page, the board “carries out its work largely on the basis of papers prepared by IMF management and staff.

IMF SB March 2010

The most interesting observation about these 3 documents, apart from their contents which we’ll see below, is the fact that only 3 of these documents are accessible in the IMF archives, i.e. the documents only run up to May 2010, and do not include similar documents covering the remainder of the ‘on-market’ sales period (i.e. May – December 2010). Therefore there are 7 additional monthly reports missing from the archives. That there are additional documents that have not been published was confirmed to me by IMF Archives staff – see below.

Each of the 3 reports is only 3 pages long, and each report follows a similar format. The first report spans February – March 2010, specifically from 18 February 2010 to 17 March 2010, and covers the following:

summarizes developments in the first month of the on-market sales, covering market developments, quantities sold and average prices realized, and a comparison with widely used benchmarks, i.e., the average of London gold market fixings

‘Market developments’ refers to a brief summary in graphical chart of the London fixing prices in US Dollars over the period in question. Quantities sold and the currency composition of sales are notable:

Sales Volume and Proceeds: A total of 515,976.638 troy ounces (16.05 metric tons) of gold was sold during the period February 18 to March 17. These sales generated proceeds of SDR 376.13 million (US$576.04 million), based on the Fund’s representative exchange rates prevailing on the day of each sale transaction.

Currency Composition of Proceeds: Sales were conducted in the four currencies included in the SDR valuation basket …., with the intention of broadly reflecting the relative quota shares of these currencies over the course of the sales program.

The 4 currencies in which the sales were conducted during the first month were USD, EUR, GBP and JPY. See table 1 in the document for more information. Perhaps the most revealing point in each document is the confirmation of the use of an agent and specifically an arrangement that the sales prices included a premium paid by the agent:

Sales Prices compared with Benchmarks: The sales were implemented as specified in the agreement with the agent. Sales were conducted at prices incorporating a premium paid by the agent over the London gold fixing, and for sales settled in currencies other than the U.S. dollar, the sales price also reflects market exchange rates at the time of the London gold fixings (10:30 am and 3:00 pm GMT), net of a cost margin.

The use of a premium over the London fixing price is very revealing because this selling strategy, where the agent paid a premium over the average London gold fixing price, is identical to the sales arrangement which the Swiss National Bank (SNB) agreed with the Bank for International Settlements (BIS) when the BIS acted as sales agent for SNB gold sales over the period May 2000 to March 2001.

As Philipp Hildebrand, ex-governor of the SNB, revealed in 2005 when discussing the SNB gold sales strategy that had been used in 2000-2001:

“At the outset, the SNB decided to use the BIS as its selling agent. Between May 2000 and March 2001, the BIS sold 220 tonnes on behalf of the SNB. For the first 120 tonnes, the SNB paid the BIS a fixed commission while the performance risk resided with the SNB. For the next 100 tonnes, the BIS agreed to pay the average price of the AM and PM London gold fixing plus a small fixed premium.

My conclusion is therefore that the IMF also used the Bank for International Settlements in Basel, Switzerland  as selling agent for its ‘on-market’ gold sales over the period February to December 2010, with the sales benchmarked to average London fixing prices in the London Gold Market.

The pertinent details for the IMF’s March – April sales document are as follows:

“A total of 516,010.977 troy ounces (16.05 metric tons) of gold was sold during the period March 18 to April 16.” 

“Sales were conducted in three of the four currencies included in the SDR valuation basket” i.e. USD, EUR and JPY”

The relevant details from the April – May sales document are as follows:

“A total of 490,194.747 troy ounces (15.25 metric tons) of gold was sold during the period April 19 to May 18, 2010; no sales were conducted during the last two business days in April, owing to end of financial year audit considerations.”

“Sales were conducted in three of the four currencies included in the SDR valuation basket” i.e. USD, GBP and JPY

Purely a Pricing Exercise?

The entire ‘on-market’ gold sales program of 181.3 tonnes may well have been just a pricing exercise by the Bank for International Settlements gold trading desk to determine the market prices at which to execute the transfers, with the gold transferring ownership after the event as book entry transfers at the Bank of England in the same manner as was applied to the Indian ‘off-market’ purchase of 200 tonnes.

Taking the sales quantities in the 3 published monthly reports, and incorporating quarterly IMF gold holdings time series data from the World Gold Council, it’s possible to calculate how much gold was ‘sold’ each single day over the entire ‘on-market’ gold sales program. As it turns out, for much of the program’s duration, identical quantities of gold were sold each and every day.  The ‘on-market’ program commenced on 18 February 2010. Between 18 February and 17 March, which was a period of 20 trading days in the London gold market, the agent sold  515,976.638 troy ounces (16.05 metric tons) of gold. Between 18 March and 16 April, which was also a trading period of 20 trading days (even after factoring in 2 Easter bank holidays), the agent sold a practically identical quantity of 516,010.977 troy ounces (also 16.05 metric tons). This is a daily sales rate of 25,800 ozs or 0.8025 tonnes per trading day over these 40 trading days.

During the period from 19 April to 18 May 2010, which was 19 trading days excluding the 3rd May UK bank holiday and excluding the last 2 trading days of April on which the IMF program didn’t trade, the agent sold 490,194.747 troy ounces (15.25 metric tons) of gold, which again is…wait for it… 0.8025 tonnes and 25,800 ozs per day (0.8025  * 19 = 15.2475 tonnes & 25,800 * 19 = 490,200 ozs).

Following the combined Indian, Mauritian, and Sri Lankan ‘off-market’ purchases of 212 tonnes during Q4 2009, the IMF’s gold holdings stood at 3,005.32 tonnes at the end of 2009. Based on World Gold Council (WGC) quarterly data of world official gold reserves, the IMF’s gold holdings then decreased as follows during 2010:

– 24.08 MT (Q1) – 47.34 MT (Q2) – 67.66 MT (Q3) – 52.2 MT (Q4) =  – 191.28 metric tonnes (MT)

…resulting in total remaining gold holdings of  2,814.04 tonnes at the end of 2010, an IMF gold holdings figure which remains unchanged to this day.

These WGC figures tally with the IMF monthly report figures. For example, the IMF says that 16.05 tonnes was sold up to and including 17 March, and with another 10 trading days in March 2010, a further 8.205 tonnes (0.8025 daily sales * 10) was sold by the end of March, giving total Q1 sales of 16.05 + 8.025 = 24.075 tonnes, which is identical to the WGC quarterly change figure. The IMF was active on 59 trading days in Q2 during which it sold 47.34 tonnes, which…wait for it…was an average of 0.8024 tonnes per day (47.34 / 59 = 0.8024).

Therefore, over Q1 and Q2 2010 (i.e. between February and the end of June 2010), the ‘on-market’ sales program sold 71.42 tonnes at a consistent ~ 0.8025 tonnes daily rate. This would suggest an algorithmic program trade which offered identical quantities each and every day, or more likely just priced these quantities so as to arrive at a sales consideration amount so that the IMF would receive ‘market prices’ for its gold. Recall that IMF gold has to be sold at market prices according to the Fund’s Articles of Agreement.

Given that 88.3 tonnes had been sold ‘on-market’ by the end of July 2010 as the IMF revealed in its Bangladesh announcement, we can infer that 16.88 tonnes was sold ‘on-market’ during July 2010. This 16.88 tonne sale in July was actually at a slightly lower pace than previous months since there were 22 trading days in July 2010, however the figure was chosen due to the following: With 191.3 tonnes on sale at the outset of the ‘on-market’ program, and 71.42 tonnes sold by the end of June, this left 119.88 tonnes to sell at the end of June. Whoever was choosing the monthly sales quantities wanted to finish July with a round figure of 103 tonnes, and so chose 16.88 tonnes to sell in July (i.e. 119.88 – 16.88 = 103 tonnes). Subtracting the 10 tonnes that Bangladesh bought in September 2010 (which would have been also factored in at that time) left a round 93 tonnes (2.999 million ozs) to sell as of the beginning of August.

The Q3 2010 sales of 67.66 tonnes comprised the 10 tonne ‘off-market’ sale to Bangladesh on 7 September and 57.66 tonnes of on-market sales. Given 16.88 tonnes sold in on-market sales in July, there was therefore 40.78 tonnes sold over August – September, or an average of 20.39 tonnes in each of August and September (which represented a combined 43 trading days). Overall, there were 65 trading days in Q3 and 58 trading days in Q4 (assuming that the sales wrapped up on 21 December as per the IMF announcement). From the beginning of August to the 21 December, a period of 101 trading days, the IMF sold the remaining 93 tonnes, which would be a daily sales pace of 0.93 tonnes per day.

So overall, the IMF’s 403.3 tonnes of gold sales between November 2009 and December 2010 consisted of 222 tonnes sold ‘off-market’ to India, Bangladesh, Sri lanka, and Mauritius, 88.3 tonnes sold ‘on-market’ between February and July 2010, and 93 tonnes sold ‘on-market’ between August and December 2010′.

Given that the IMF’s 4 gold depositories are the Federal Reserve Bank of New York, the Bank of England in London, the Banque de France in Paris and the Reserve Bank of India in Nagpur India, and given that the IMF gold in New York is mostly in the form of US Assay Office melts, and the gold in Nagpur is a hodgepodge of mostly low quality old gold (read non-good delivery gold), then it would be logical for the IMF to sell some of its good delivery gold which is stored in London (which, until at least the late 1970s, was predominantly held in the form of Rand Refinery 400 oz gold bars), or even in Paris, since the Banque de France has been engaged in an ongoing program of upgrading the old US Assay office gold bars in its custody to good delivery bars.

As the Banque de France’s Alexandre Gautier commented in his 2013 speech to the LBMA annual conference in Rome:

“Our bars are not all LGD [London Good Delivery quality], but we have an ongoing improvement programme.”

This Banque de France gold bar upgrading program was also confirmed in February 2011 in a National Geographic Magazine article which stated:

“Buyers don’t want the beat-up American gold. In a nearby room pallets of it are being packed up and shipped to an undisclosed location, where the bars will be melted down and recast in prettier forms.”

Magic 7

Top Secret Foot Notes

There are 2 interesting footnotes on page 1 or each of the 3 above documents. The first footnote states that ‘The Executive Board was briefed on the plans for on-market sales prior to the announcement’, the announcement in question being the IMF’s 17 February 2010 announcement IMF to Begin On-Market Sales of Gold.

The second footnote, which is a footnote to a sales process and sales performance summary, refers to 2 further IMF papers as follows: “Modalities for Limited Sales of Gold by the Fund (SM/09/243, 9/4/09) and DEC/14425-(09/97), 9/18/09“.

Footnotes IMF SM gold sales on market
Footnote ‘2’ of IMF ‘monthly gold sales’ documents, February – May 2010

As mentioned above, SM are Staff Memorandums which are classed under Executive Board Documents. DEC series document are ‘Text of Board Decisions’ (hence the DEC) and these documents are also deemed to be Executive Board Documents. After searching for both of these documents (SM/09/243 and DEC/14425-(09/97)) in the IMF archives, it became apparent that they were not there, i.e. they were not returned and not retrievable under IMF archive search results.

This was surprisingly since the IMF claims to have what it calls its “IMF Open Archives Policy”, part of which is Article IX, Section 5, which is the “Review of the Fund’s Transparency Policy—Archives Policy“. This policy, prepared by the IMF Legal Department includes the following:

Access will be given as follows:

  • 2. (i) Executive Board documents that are over 3 years old

(ii) Minutes of Executive Board meetings that are over 5 years old;

(iv) Other documentary materials maintained in Fund archives over 20 years old.

  • 3. Access to Fund documents specified in paragraph 2 above that are classified as “Secret” or “Strictly Confidential” as of the date of this Decision will be granted only upon the Managing Director’s consent to their declassification. It is understood that this consent will be granted in all instances but those for which, despite the passage of time, it is determined that the material remains highly confidential or sensitive.

Given that the 2 above gold sales documents, as well as 7 other monthly reports about ‘on-market’ gold sales were missing from the archives, but all the while the IMF claimed its on-market gold sales to be “Transparent”, the next logical step was to contact the IMF Archives people and seek explanations. What follows below is the correspondence I had with the IMF Archives staff. The IMF Archives staff were very helpful and their responses were merely communicating what they had found in their systems or had been told ‘from above’. My questions and emails are in blue text. The IMF replies are in red text. My first set of queries were about the SM/09/243 and DEC/14425 documents:

02 August 2015: My first question

Hello Archives,

I’m looking for IMF document SM/09/243 “Modalities for Limited Sales of Gold by the Fund” (Sept 4th 2009) in the IMF Archives catalog (http://archivescatalog.imf.org/search.aspx). However, SM/09/243 does not appear to be in the online Archives.
But, for example SM/09/242 and SM/09/244 are both retrievable in the searchable archives, but not SM/09/243.
Can you clarify where SM/09/243 is?
02 August 2015: My second question
Hello Archives,

Could you clarify how to search for and retrieve a document in the IMF online Archives that has reference “DEC/14425-(09/97)”
This document is dated 9/18/09.  I cannot find it using any of the search parameters.

3 August: IMF Archives reply

Thank you for contacting the IMF Archives. Both documents you are referring to in your recent communication, SM/09/243 and DEC/14425, are not available to the public. Please visit our website to consult on IMF Policy on Access to the Archives.

3 August: me

Can you clarify why these documents are not available to the public? i.e. have they received a certain classification?

4 August: IMF Archives

You are absolutely right, despite the time rule, these two documents are still closed because of the information security classification.  We hope it answers your question.

4 August: me

Thanks for answer. Would you happen to know when (and if) these files will be available…..assuming it’s not a 20 year rule or anything like that.

5 August: IMF Archives

Could you please provide some background information about your affiliation and the need to obtain these documents.  Classified documents undergo declassification process when such a request is submitted.  It can be a lengthy process up to one year.

5 August: me

I was interested in these specific documents because I am researching IMF gold sales for various articles and reports that I’m planning to write.

6 Aug: IMF

Thank you for providing additional information regarding your inquiry.  Please send us a formal request for the declassification of these two documents specifying your need to have access to them.  We will follow through on your behalf and get back to you with a response.

Before I had replied with a formal request, the IMF archives people contacted me again on 12 August 2015 as follows:

12 Aug: IMF

While waiting for your official request we made preliminary inquiries regarding the requested documents. The decision communicated back to us is not to declassify these documents because of the sensitivity of the subject matter.

In the meantime, we want to make sure you have checked publicly available documents on the same topic accessible from the IMF.org: https://www.imf.org/external/np/sec/pr/2009/pr09310.htm

12 August: me

Thank you for the clarification. That’s surprising about the classification given that the IMF on-market gold sales were supposed to be transparent.

Was there any information fed back to Archives on why the ‘subject matter’ is deemed sensitive?

14 Aug: IMF Archives

“Thank you for your follow-up email.  Unfortunately, these particular documents are still deemed classified and no further explanation has been communicated to the Archives.

My next set of questions to IMF Archives in August 2015 addressed the 7 missing monthly gold sales reports that should have covered May – December 2010. Since there is a 3 year rule or maybe at max a 5 year rule under the IMF’s Transparency Policy (Archive Policy), I thought that maybe the May/June, June/July, and July/August 2010 files might be due for  automatic release under the 5 year rule by the end of August 2015.

22 August 2015: Me:

“I have a question about documents which appear in the online Archive after the 5 year schedule.

Is there a scheduled update or similar which puts newly available documents in the Archive when the 5 years has elapsed?

For example, I see some documents in the Archive from June 2010, but not July/August 2010. Is there an automated process that runs, but that hasn’t yet run for July/August 2010, that puts the latest documents into the publicly available Archive?”

24 August: IMF

“Thank you for your inquiry.  The review and declassification of eligible documents that meet the time rule is done by batches. Therefore, publication does not happen in real time.  It is a process that takes time and might cause a delay.  We will let you know when July and August documents are posted.”

2 October 2015: me

“Do you know when documents from June 2010 onwards will be added to the IMF online archive? I still don’t see any yet.

Is there a batch of declassifications for June 2010 / July 2010 / August 2010 happening soon?”

2 October: IMF

“Thank you for contacting the IMF Archives. Unfortunately, we are unable to speculate about the documents website availability and provide a more specific timeframe than the one already communicated in the attached correspondence. As already promised, we will let you know when July and August documents are posted.”

Then about 30 minutes later  (on 2 October 2015) the IMF sent me another email:

2 October: IMF

“Dear Mr. Manly,

I ran a sample search of Executive Board minutes available via IMF Archives catalog and was able to find minutes issued in June and July 2010. Is there a specific document you are looking for which you are unable to find?


2 October: Me

“I was searching for the next months’ reports in the below series, report name “Monthly Report on Sales of Gold on the Market” – see screenshot attached.

The current search retrieval brings back 3 reports spanning February- May 2010, but nothing after May 2010. Report names in the retrieved search results are:


I was wondering if a couple of months in this series after May 2010 are available now?”

5 October: IMF

The reports after May 2010 haven’t been declassified for public access because of the sensitivity of the subject matter, and therefore they are not available for retrieval.

We apologize for any inconvenience this may cause.”

5 October: Me

“Thanks for the reply. Out of interest, why were the reports from February to May 2010 declassified, since surely the June-December 2010 monthly reports are identical to the first three months in that they are also just providing monthly updates on the same batch of gold ~180 tonnes of gold which was being sold over the 10 month period?”

7 October: IMF

“Dear Mr. Manly,

This series of reports is under review at the moment, and according to security classification they are currently closed.


IMF Archives”

And there you have it folks. This is IMF transparency. As per the IMF Archive disclosure policy, only Christine Lagarde, current IMF Managing Director, has the authority to consent to the declassification of classified Executive Board documents.

Sensitivity of Subject Matter – China and Bullion Banks

The above IMF responses speak for themselves, but in summary, here we have an organization which claims to be transparent and which claims to have run a transparent ‘on-market’ gold sales program in 2010, but still after more than 6 years it is keeping a large number of documents about the very same gold sales classified and inaccessible to the public due to the ‘sensitivity of the subject matter’. What could be so sensitive in the contents of these documents that the IMF has to keep them classified? Matters of national security? Matters of international security? And why such extremely high level security for an asset that was recently described by the august Wall Street Journal as a ‘Pet Rock’?

The secrecy of keeping these documents classified could hardly be because of sensitivity over the way in which the sales were executed by the agent, since this was already revealed in the February – May reports that are published, and which looks like a normal enough gold sales program by the Bank for International Settlements on behalf of the IMF? Could it be to do with the identities of the counterparties, i.e. the buyer(s) of the gold? I think that is the most likely reason.

Two counterparties that spring to mind that might request anonymity in the ridiculously named ‘on-market’ sales process would be a) the Chinese State / Peoples Bank of China, and b) a group of bullion banks that were involved in gold swaps with the BIS in 2009/2010.

Chinese discretion – Market Speculation and Volatility

Bearing in mind another one of the IMF’s mantras during the 2009-2010 gold sales processes that it wanted to “avoid disruption of the gold market”, and the Chinese State’s natural surreptitiousness, the following information reported by China Daily on 24 February 2010 (which was the first week of ‘on-market’ sales) is worth considering. The article, titled ‘China unlikely to buy gold from the IMF‘, stated the following:

“Contrary to much speculation China may not buy the International Monetary Fund’s (IMF) remaining 191.3 tons of gold which is up for sale as it does not want to upset the market, a top industry official told China Daily yesterday.

It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility,” said the official from the China Gold Association, on condition of anonymity.”

To me, these comments from the ‘anonymous’ China Gold Association official are a clear indication that if China was the buyer of the remaining 181.3 tonnes (ie. 191.3 tonnes – 10 tonnes for Bangladesh), then China certainly would have conducted the purchase in secrecy, as ‘it does not want to upset the market’, and any purchase or even intent to do so would trigger market speculation and volatility”

In the same China Daily article, there was also a comment reported from Asian Development Bank economist Zhuang Jian, who was in favor of China buying the IMF gold, as he thought that “buying IMF gold would not only help China diversify its foreign exchange reserves but also strengthen the yuan as an international currency”, and that China would “have a bigger say in the IMF through the gold purchasing deal”.

Zhuang Jian also stated that “China can start with small purchases on the international market like the 191.3 tons of IMF gold. In the short-term, the market will see volatility, but in the long-term the prices will return to normal”.

BIS Swaps and Bullion Bank Bailouts

In late June 2010, the Bank for International Settlements (BIS) published its annual report to year-end March 2009. This report revealed that the BIS had, during its financial year, taken on gold swaps for 349 tonnes. The Wall Street Journal (WSJ) initially reported in early July 2010 that these swaps were with central banks, however the BIS clarified to the WSJ that the gold swaps were in fact with commercial banks. The Financial Times then reported in late July 2010 that “Three big banks – HSBC, Société Générale and BNP Paribas – were among more than 10 based in Europe that swapped gold with the Bank for International Settlements.” Notice that two of the named banks are French banks.

Since the BIS refuses to explain anything material about these swaps, which was most likely a gold market fire-fighting exercise, the details remain murky. But the theory that best explains what actually happened was advanced by the late Adrian Douglas of GATA in early July 2010. Douglas proposed that bullion bank gold bailout tripartite transactions actually created the BIS gold swaps. Since IMF gold is stored at both the Bank of England vaults in London and at the Banque de France vaults in Paris, IMF ‘on-market’ gold held in Paris or London would be very easy to transfer to a group of bullion banks who all hold gold accounts at the Bank of England and, it now appears, also hold gold accounts at the Banque de France.

In May 2012, George Milling-Stanley, formerly of the World Gold Council, provided some insight to the publication Central Banking about the role of the Banque de France in being able to mobilize gold. Milling-Stanley said:

“Gold stored at the Bank of England vaults … can easily be mobilised into the market via trading strategies, or posted as collateral for a currency loan”

‘Of the Banque de France, Milling-Stanley says it has ‘recently become more active in this space [mobilising gold into the market], acting primarily as an interface between the Bank for International Settlements in Basel [BIS] and commercial banks requiring dollar liquidity. These commercial banks are primarily located in Europe, especially in France’.”

It’s interesting that two of the three banks named by the Financial Times as being involved in the BIS gold swaps are French, and that Milling-Stanley mentioned that most of the commercial banks that interfaced with the BIS are French banks. Given that the then Managing Director of the IMF, Dominique Strauss-Kahn, is French, as is his successor Christine Lagarde, could some of the ‘on market’ IMF gold sales been a case of the French controlled IMF bailing out French bullion banks such as SocGen and BNP Paribas?

Applied to the IMF gold sales, and under a tripartite transaction, as I interpret it, the following transactions would occur:

IMF gold is transferred by book entry to a set of bullion banks who then transfer the title of this gold to the BIS. The BIS transfers US dollars to the bullion banks who then either transfer this currency to the IMF, or owe a cash obligation to the IMF. The sold gold is recorded in the name of the BIS but actually remains where it is custodied at the London or Paris IMF Gold Depositories, i.e. at the Bank of England or Banque de France vaults.

In this scenario, the IMF gold could have been transferred to bullion banks and further transferred to the BIS during 2009, with the ‘on-market’ pricing exercise carried out during 2010. With the BIS as gold sales agent, the entire set of transactions would be even more convenient since the BIS gold trading desk would be able to oversee the gold swaps and the gold sales.

So, in my opinion, the IMF ‘on-market’ gold on offer was either a) bought by the Chinese State, or b) was used in a gold market fire-fighting exercise to bail out a group of bullion banks, or c) a combination of the two.

Modalities of Gold Sales

As to why the IMF paper “Modalities for Limited Sales of Gold by the Fund” (Sept 4th 2009) SM/09/243″ is under lock and key and can only be declassified by the IMF Managing Director Christine Lagarde, the conclusion is that it too must contain references to something that the IMF are extremely worried about allowing into the public domain. For the simple reason is that a similarly named IMF paper from 25 June 1999, titled “Modalities for Gold Sales by the Fund” (EBS/99/110)” is accessible in the IMF Archives, and while revealing in a number of respects, it hardly contains ‘sensitive material’. This paper was prepared when the IMF had been thinking about conducting gold sales back in 1999 which never materialized, except in the form of an accounting trick to sell to and simultaneously buy back a quantity of gold to and from Mexico and Brazil. This 1999 paper “Modalities for Gold Sales by the Fund” is very interesting though for a lot of reasons as it sketches out the limitations on IMF gold sales, the approaches to the sales that were considered by the IMF at that time, and it’s also is full of pious claims that the gold sales process should be ‘transparent’, such as the following:

“it will be critical to ensure transparency and accountability of the Fund’s gold operations through clear procedures for selecting potential buyers and determining prices, and through public disclosure of the results of the sales after they have taken place. The need for transparency and evenhandedness, which is essential for an international financial institution, argues for providing as much information as possible to the public.”

On the actual approaches to gold sales, the 1999 Modalities paper introduces the topic as follows:

“This paper considers four main modalities for the sale of gold by the Fund: (i) direct sales to another official holder of gold; (ii) placements into the market through a private intermediary or a group of intermediaries, such as bullion banks; (iii) placements into the market through the intermediation of a central bank with experience in gold sales or the BIS; and (iv) direct sales to the market through public auctions, as was the case with the gold sales by the Fund between 1976 and 1980″

 On the topic of publication of sales results, the 1999 paper states:

Publication of results: In all cases, the Fund would make public at regular, say monthly, intervals the quantity sold and the prices obtained, as well as, depending on the modality decided by the Board, the names of the buyers. In the case of a forward sales strategy involving an intermediary, the Fund would make public the quantities and delivery dates of the forward sales. It would be for consideration whether the Fund would announce the names of the intermediaries selected by the Fund to sell the gold, if that modality would be chosen”

On the topic of limitations to IMF gold sales, the 1999 paper says:

“Under the Articles, the Fund is only authorized to sell gold; that is, to transfer ownership over gold on the basis of prices in the market, taking into account reasonable transactions costs. The Articles prescribe the objective of avoiding the management of the price, or the establishment of a fixed price, in the gold market (Article V, Section 12 (a)). This implies that the Fund “must seek to follow and not set a direction for prices in the gold market.“

Under the Articles, the Fund cannot engage in gold leasing or gold lending operations, enter into gold swaps, or participate in the market for gold options or other transactions that do not involve the transfer of ownership over gold.”

A second shorter 1999 IMF paper on the modalities of gold sales, titled “Concluding Remarks by the Chairman Modalities of Gold Sales by the Fund, Executive Board Meeting 99/75, July 9, 1999, BUFF/99/81″ gave some indication on which approach (modality) the Executive Board were leaning to at that time to execute gold sales:

“Directors generally expressed the view that private placements of gold, either through a group of private institutions or through the intermediation of central banks or the BIS, had many advantages in terms of flexibility, both in terms of timing as well as in the discretion that the Fund’s agents could employ in the techniques that they could use to channel gold into the market.

And from the discussion, using the services of the BIS (or another central bank) appeared to be most favorable option:

“Directors further noted that there would be considerable practical difficulties in the choice of the institution or group of institutions through which the sales of gold could be conducted, even though these would be limited-but not entirely eliminated-by choosing a central bank or the BIS.

IMF Comedians

In conclusion, for sheer comedy reading,  there is a tonne of material in the IMF’s latest ‘transparency’ smoke and mirrors claims, dated 24 March 2016, which contains such comedy gems as:

Greater openness and clarity by the IMF about its own policies and the advice it provides to its member countries contributes to a better understanding of the IMF’s own role and operations, building traction for the Fund’s policy advice and making it easier to hold the institution accountable. Outside scrutiny should also support the quality of surveillance and IMF-supported programs.”

“The IMF’s efforts to improve the understanding of its operations and engage more broadly with the public has been pursued along four broad lines: (i) transparency of surveillance and IMF-supported programs, (ii) transparency of its financial operations; (iii) external and internal review and evaluation; and (iv) external communications.”

The IMF’s approach to transparency is based on the overarching principle that it will strive to disclose documents and information on a timely basis unless strong and specific reasons argue against such disclosure.” 

Again, what could these “strong and specific reasons” arguing “against such disclosure” be for the 2010 IMF gold sales?

By now you will begin to see that the IMF’s interpretation of transparency on gold sales diverges massively from any generally accepted interpretation of transparency. The IMF appears to think that merely confirming that a gold sale took place or will take place is the epitome of transparency, when it would more accurately be described as obfuscation and a disdain for actual communication with the public. IMF transparency is anything but transparent.

Perhaps the usually useless mainstream financial media may finally sit up and next time they bump into the IMF’s Ms Lagarde at a press conference, ask her why the IMF continues to block access to its 2010 gold sales documents, which remain classified due to, in the IMF’s own words, “the sensitivity of the subject matter”. Here’s hoping.

The Charade Continues – London Gold and Silver Markets set for even more paper trading

Today the London Metal Exchange (LME) and the World Gold Council (WGC) jointly announced (here and here) the launch next year of standardised gold and silver spot and futures contracts which will trade on the LME’s electronic platform LMESelect, will clear on the LME central clearing platform LME Clear, and that will be settled ‘loco London’. Together these new products will be known as LMEprecious’ and will launch in the first half of 2017.

However, although these contracts are described by the LME as delivery type Physical, settlement of trades on these contracts merely consists of unallocated gold or silver being transferred between LME Clear (LMEC) clearing accounts held at London Precious Metals Clearing Limited (LPMCL) member banks (i.e. paper trading via LPMCL’s AURUM clearing system).

For example, the contract specs for the LME’s planned spot gold trading state that the LME’s proposed settlement procedure is one of:

“Physical settlement two days following termination of trading. Seller transfers unallocated gold to LMEC account at any LPMCL member bank, and buyers receive unallocated gold from LMEC account at any LPMCL member bank

The range of LME contracts for both gold and silver will consist of a trade date + 1 contract (T+1), aptly named TOM, as well as daily futures from T + 2 (equivalent to Spot settlement) out to and including all trade dates to T + 25. Beyond the daily futures, the suite of contracts also includes approximately 36 monthly futures contracts covering each month out to 2 calendar years, and then each March, June, September and December out to 60 calendar months. The LME / WGC press release also mentions plans for options and calendar spread products based on these futures.


As well as trading electronically on LMESelect, these precious metals futures will also be tradeable via telephone market (inter-office market). Trading hours for the daily contract (TOM) will be 1am – 4pm London hours, while trading hours for all other contracts will be 1am – 8pm London hours, thereby also covering both Asian and US trading hours. Detailed contract specs for these gold and silver contracts are viewable on the LME website. The trading lot size for the LME gold contracts will be 100 ozs, which is significantly smaller than the conventional lot size of 5000 -10,000 ozs for gold trading in the London OTC market (and conventional OTC minimum of 1000 ozs of gold). The planned lot size for the LME’s silver contracts is 5000 ozs, again below the conventional lot size of 100,000 – 200,000 ozs for silver trading in the London OTC market (and conventional OTC minimum of 50,000 ozs of silver).

These LME contracts are being pitched as a real alternative to the incumbent over the counter system of gold and silver trading in London which is overseen by the London Bullion Market Association, an association whose most powerful members are the clearing and vaulting banks in London, namely HSBC, JP Morgan, Scotia, and to a lessor extent UBS and Barclays, but increasing ICBC Standard bank as well. But given that the LME’s clearing will sit on top of the LPMCL clearing system and use unallocated transfers, the chance of any real change to the incumbent London gold and silver market is non-existent. Nor will the trading of these LME products give any visibility into the amount of physical gold and silver that is held within the London Market, nor the coverage ratio between ‘unallocated account’ positions and real underlying physical metals.

Five Supporting Banks

This new LME / WGC initiative is being supported by 5 other investment banks and a trading entity called OSTC. These bank backers comprise US banks Goldman Sachs and Morgan Stanley, French banks Natixis and Société Générale, and Chinese controlled bank ICBC Standard Bank. According to a Reuters report about the launch, the World Gold Council had approached 30 firms about backing the launch, so with only 5 banks on board that’s a 16.6% take-up ratio of parties that were approached, and 83.4% who were not interested.

Earlier this year in January, Bloomberg said in a report said that the five interested banks were “ICBC Standard Bank Plc, Citigroup Inc., Morgan Stanley, Goldman Sachs Group Inc. and Societe Generale SA“, so somewhere along the line Citigroup looks to have taken itself off the list of interested parties, while Natixis came on board. The World Gold Council’s discussions about a proposed gold exchange and its discussions with ‘5 banks’ appear to have begun as early as the 4th quarter of 2014 and were flagged up by the Financial Times on 02 April 2015, when the FT stated that:

“The WGC has hired a number of consultants and spent the past six months pitching a business case for banks to consider the alternative trading infrastructure”

“The World Gold Council…and at least five banks are participating in initial discussions”

Notably, this was around the time that LME found out it had not secured the contracts to run either the LBMA Gold Price or LBMA Silver Price auctions. Note, that all 5 of the LME supporting banks, i.e. Goldman, ICBC Standard, Morgan Stanley, SocGen and Natixis, are members of the London Bullion Market Association (LBMA), with Goldman, Morgan Stanley, ICBC Standard and SocGen being LBMA market members, and Natixis being a full member of the LBMA. Goldman, Morgan Stanley, ICBC Standard and SocGen are also direct participants in the LBMA Gold Price auction operated by ICE Benchmark Administration. None of these 5 banks are direct participants in the LBMA Silver Price auction. Notably, none of these banks except for ICBC Standard is a member of the precious metals clearing group LPMCL. ICBC Standard Bank also recently acquired a precious metals vault in London from Barclays and also joined the LBMA’s Physical Committee (see BullionStar recent blog ‘Spotlight on LPMCL: London precious MEtals Clearing Limited‘ for details). Therefore, ICBC Standard seems to have a foot in both camps.

Unallocated Balances, Unsecured Creditors

Given the long build-up to this LME / World Gold Council announcement, and the fact that these LME spot and futures products were supposed to be a genuine alternative to the LBMA bank controlled OTC trading system, the continued use of unallocated settlement and the use of LPMCL accounts by these planned LME contracts underscores that the LME contract do not represent any real change in the London Gold and Silver Markets.

As a reminder, the resulting positions following transfers of unallocated gold and silver through the LME Clear accounts of LPMCL members essentially means the following, in the words of none other than the LBMA:

“Unallocated account basis. This is an account where the customer does not own specific bars, but has a general entitlement to an amount of metal. This is similar to the way that a bank account operates” 

Additional LBMA definitions of unallocated transactions are as follows:

settled by credits or debits to the account while the balance represents the indebtedness between the two parties.

“Credit balances on the account do not entitle the creditor to specific bars of gold or silver or plates or ingots of platinum or palladium but are backed by the general stock of the precious metal dealer with whom the account is held: the client in this scenario is an unsecured creditor.

Alternatively, a negative balance will represent the precious metal indebtedness of the client to the dealer in the case where the client has a precious metal overdraft facility.

Should the client wish to receive actual metal, this is done by “allocating” specific bars, plates or ingots or equivalent precious metal product, the metal content of which is then debited from the unallocated account”.

LME bows to LPMCL

However, it should come as no surprise that these LME spot and futures contracts haven’t taken a new departure away from the entrenched monopoly of the London gold and silver clearing and vaulting systems, for the LME specifically stated in quite a recent submission to the LBMA that it will never rock the boat on LPMCL’s AURUM platform. When the LME presented to the LBMA in October 2014 in a pitch to win the contract for the LBMA Gold Price auction (which it didn’t secure), the pitch said that a centrally cleared solution “would only be introduced with market support and respecting LPMCL settlement“. [See right-hand box in below slide]:

LME potential credit models

In the same pitch, the LME also stated that:

LME Clear fully respects existing loco London delivery mechanism and participants

[See bottom line in below slide]:

LME Pathway to cleared solution

Interestingly, following the announcement from the LME and the World Gold Council, the LBMA provided a very short statement that was quoted in the Financial Times, that said:

“The LBMA saw the announcement with interest and reconfirms it has no direct or indirect involvement in this project”.

While that may be true, what the LBMA statement didn’t concede is that 5 of its member banks, 4 of which are LBMA market makers, do have a direct involvement in the LME / World Gold Council project. Nor did the LBMA statement acknowledge that settlement of the planned LME gold and silver contracts will use the LPMCL infrastructure, nor that the LPMCL is now in specific scope of the LBMA’s remit.

Recall that in October 2015, the LBMA announced that:

“the London Precious Metals Clearing company took part not only [in the LBMA] review, but we have now agreed to formalise our working relationship, with the LBMA providing Executive services going forward. I’m grateful to the LPMCL directors for their leadership and their support for removing fragmentation from the market.”

With the LME contracts planning to use LPMCL, this ‘new dawn’ view of the LME / World Gold Council initiative is in my view mis-guided.

Even COMEX has more Transparency

Anyone familiar with the rudimentary vaulting and delivery procedures for gold and silver deliverable under the COMEX 100 oz gold and 5000 oz silver futures contracts will know that at least that system generates vault facility reports that specify how much eligible gold or silver is being stored in each of the designated New York vaults, the locations of the vaults, and also how much of the eligible gold or silver in storage has warehouse warrants against it (registered positions). The COMEX ‘system’ also generates data on gold and silver deliveries against contracts traded.

However, nothing in the above planned LME contract specs published so far gives any confidence that anyone will be the wiser as to how much gold or silver is in the London vaults backing up the trading of these spot and future contracts, how much gold or silver has been converted post-settlement to allocated positions in the vaults, nor how much gold or silver has been delivered as a consequence of trading in these spot and futures contract, nor importantly, where the actual participating vaults are.

This is because the LMPCL system is totally opaque and there is absolutely zero trade reporting by the LBMA or its member banks as to the volumes of gold and silver trading in the London market, and the volumes of physical metals held versus the volumes of ‘metal’ represented by unallocated account positions. Furthermore, the LBMA’s stated goal of introducing trade reporting looks as dead as a dodo, or at least as frozen as as a dodo on ice.

LBMA stall on Trade Reporting, LPMCL clear as Mud

On 9 October 2015, the LBMA announced that it had launched a Request for Information (RFI) asking financial and technology providers to submit help with formulating solutions to deficiencies which regulators thought the London bullion market such as the need for transparency, and issues such as liquidity that had supposedly been recommended as strategic objectives by consultant EY in its report to the LBMA, a report that incidentally has never been made publicly available. On 25 November 2015, the LBMA then announced that it had received 17 submissions to its RFI from 20 entities spanning “exchange groups, technology firms, brokers and data vendors”.

On 4 February 2016, the LBMA then issued a statement saying that it was launching a Request for Proposals (rRfP) and inviting 5 of these service providers (a short-list) to submit technical solutions that would address requirements such as an LBMA data warehouse and that would support the introduction of services such as trade reporting in the London bullion market. The RfP statement said that the winning service provider would be chosen in Q2 2016, with a planned implementation in H2 2016.

However, no progress was announced by the LBMA about the above RfP during Q2 2016, nor since then. The only coverage of this lack of newsflow came from the Bullion Desk in a 27 May article titled “Frustration Grows over London Gold Market Reform” in which it stated that the 5 solution providers on the short-list were “the LME, CME Group, the Intercontinental Exchange (ICE), Autilla/Cinnobar and Markit/ABS“, and that:

“the pace at which the LMBA is moving forward are causes for consternation in some quarters of the sector”

A quote within the Bullion Desk article seems to sum up the sentiment about the LBMA’s lack of progress in its project:

“It’s not going to happen any time soon. Look at how long it’s been going on already,” another market participant said. “Don’t hold your breath. It seems like we still have a long way to go.” 

What could the hold up be? Surely 17 submissions from 20 entities that were whittled down to a short-list of 5 very sophisticated groups should have given the LBMA plenty of choice for nominating a winning entry. Whatever else this lack of progress suggests, it demonstrates that increased transparency in London gold and silver market trading data is not going to happen anytime soon, if ever.

Furthermore, the opacity of the London clearing statistics that are generated out of the LPMCL clearing system need no introduction to most, but can be read about here.


According to the LBMA, ‘Loco London’ “refers to gold and silver bullion that is physically held in London“, however, given the secrecy which surrounding trading data in the London gold and silver markets, and the lack of publication by any bank about the proportion of unallocated client balances in gold or silver that it maintains versus the physical gold or silver holdings that it maintains, this ‘loco London‘ term appears to have been abused beyond any reasonable definition, and now predominantly refers to debit and credit entries in the virtual accounting systems of London based bullion banks. Nor, in my opinion, will the LME contracts change any of this. One would therefore be forgiven in thinking that the real underlying inventories of gold and silver in the London market and their associated inverted pyramid unallocated account positions are too ‘precious’ to divulge to the market. The Bank of England is undoubtedly licking its chops to the continued opacity of the market.

And its not just my opinion. This latest LME / World Gold Council / investment bank announcement has generated other skeptical reactions. The last word goes to Jim Rickards, who tweeted this in reaction to the latest LME / World Gold Council news:

GLD Sponsor dodges disclosure details of Bank of England sub-custodian in latest SEC filing

In a July 11 BullionStar article, “SPDR Gold Trust gold bars at the Bank of England vaults”, I highlighted that the SPDR Gold Trust (GLD), in it’s Q1 2016 filing to the Securities and Exchange Commission (SEC), disclosed that during the January – March 2016 quarter, the GLD custodian HSBC had employed the Bank of England as a sub-custodian to hold some of the Trust’s gold bars, and that the largest quantity of gold that the Bank of England had held on behalf of GLD during the January – March 2016 period was 29 tonnes.

Note that the financial year-end for the SPDR Gold Trust is 30 September each year, so that its Q1 is October – December, its Q2 is January to March, its Q3 is April – June, and its Q4 is July – September with a year-end at the end of September.

The GLD disclosure for the calendar first quarter of 2016, which revealed details of sub-custodians that the SPDR Gold Trust uses, had begun to appear in the 10-Q filing specifically at the behest of the SEC, which on 29 March 2016 had sent a letter to the GLD Sponsor, World Gold Trust Services, directing the Sponsor to:

In future Exchange Act periodic reports, to the extent material, please disclose the amount of the Trust’s assets that are held by subcustodians.

The letter was sent to World Gold Trust Services by the SEC’s Senior Attorney Office of Real Estate and Commodities, Kim McManus.

To Recap, for the quarter ended 31 March 2016, (which is the SPDR Gold Trust’s Q2), the 10-Q report stated:

“Subcustodians held no gold on behalf of the Trust as of March 31, 2016. During the quarter ended March 31, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.

I also pointed out in my previous article that:

Note that the wording of the 10-Q is such that it does not preclude the possibility that the Bank of England also held GLD gold at other times during Q1 2016, since it states “the greatest amount of gold” that the Bank of England held for the Trust was 29 tonnes. This implies that the Bank of England vaults could, at other times during Q1, have held less than 29 tonnes of gold on behalf of GLD.

My early July article also documented that:

“The second quarter saw a 15 tonne shrinkage of GLD’s gold holdings in April, but a very large 64.5 tonne increase in May, and a 81.4 tonne increase in June, making for a Q2 increase in GLD’s gold bar holdings of 130.77 tonnes. Very large 1-day gold bar additions occurred on 24 and 27 June (18.4 tonnes and 13 tonnes respectively). Overall, that’s 307 tonnes added to GLD in the first half of 2016.”

Finally, I also looked forward to the release of the 2nd calendar quarter 10-Q filing with the SEC, saying:

“The SPDR Gold Trust 10-Q for the 2nd quarter of 2016 will be filed with the SEC in about 3 weeks time, at the end of JulyWith the continuing large inflows into GLD in Q2 2016 it will be interesting to see whether the name of Bank of England as subcustodian of GLD reappears in the Q2 filing?”

As it turns out, the Sponsor of the SPDR Gold Trust, World Gold Trust Services, which is a fully owned subsidiary of the World Gold Council, and which is responsible for compiling and submitting GLD quarterly and annual financial reports, actually filed its latest GLD 10-Q report (for the 3 months to June 30, 2016) on 2 August 2016, a few days later than it usually would do for a quarterly report.


Smoke and Mirrors

Quite shockingly and in my opinion misleadingly, this latest GLD 10-Q filing only says the following about sub-custodians:

“Subcustodians held no gold on behalf of the Trust as of June 30, 2016. During the nine months ended June 30, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.

This 10-Q report is signed by the CEO and CFO of WORLD GOLD TRUST SERVICES, LLC, Sponsor of the SPDR® Gold Trust, namely:

  • Aram Shishmanian, Principal Executive Officer (CEO)
  •  Samantha McDonald, Principal Financial and Accounting Officer (CFO)

In my opinion the latest sub-custodian statement by World Gold Trust Services is misleading in its entirety, as well as being evasive and disingenuous. By failing to address the quarter ended June 30 2016, the World Gold Trust Service CEO and CFO are avoiding disclosure of the quantity of gold that was held by subcustodians of the GLD during April, May and June 2016. Recall the ordinance from the SEC on 29 March:

In future Exchange Act periodic reports, to the extent material, please disclose the amount of the Trust’s assets that are held by subcustodians.

This latest 10-Q statement is not in compliance with the SEC’s directive. It also goes against the spirit of the SEC’s request – since it doesn’t address the holdings of sub-custodian during the quarter that’s being reported on, i.e. the April to June 2016 period. The language used in the latest 10-Q seems to conveniently circumvent the SEC’s disclosure request by using evasive phraseology.

For example, what if the Bank of England as GLD subcustodian held 28 tonnes or 20 tonnes of gold bars on a particular day during the second quarter of 2016, would  Aram Shishmanian and Samantha McDonald not consider this material enough to tell the SEC about. That’s what their signed statement would suggest. More importantly, what would the SEC think about such a non-divulgence of a 28 tonne or 20 tonne sub-custodied position during any day of the April to June 2016 period, when it had specifically asked to be informed of such occurrences via the 10-Q filing? Recall that there were very large increases in GLD’s holdings during May and June, and some huge one-day increases in GLD gold bar holdings on 24 June (18.4 tonnes) and 27 June  (13 tonnes).


Side by Side Comparison

Let’s take the latest quarter and previous quarter sub-custodian statements and compare them side by side.  For the quarter ended March 31,  2016, the 10-Q report said:

“Subcustodians held no gold on behalf of the Trust as of March 31, 2016. During the quarter ended March 31, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.”

 For the quarter ended June 30, 2016, the 10-Q report said:

“Subcustodians held no gold on behalf of the Trust as of June 30, 2016. During the nine months ended June 30, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.”

The very fact that the WGTS CEO and CFO revert to repeating a statement that was issued in the previous quarterly report and that applied to the first quarter of 2016, i.e. the statement in red above, shows that they are implicitly evading disclosure of new information from the April to June period. The statement in red is also irrelevant since it had already been disclosed in the previous 10-Q. By bundling it up and referring to the nine months ended June 30 2016, this smoke and mirrors tactic becomes obvious.

Given that it was only on March 29, 2016 that the SEC requested that WGTS disclose sub-custodian information, and that it requested “In future Exchange Act periodic reports … please disclose“ also underscores that the first three months of the nine-month period (i.e. October 2015 – December 2015) are irrelevant, and again highlights the deceptive nature of using a nine month time-frame in the latest statement. The SEC never asked for a disclosure about Q1 (October – December), just for disclosures about the quarters going forward.

Furthermore, the previous quarter disclosure specifically referred to “the quarter ended March 31, 2016”, and not the ‘six months’ ended March 31 2016. So why change the duration reporting to a “nine months ended June 30 2016” phraseology when it was previously a “quarter ended” phraseology? By moving to this ‘nine months’ misleading reporting device, it conveniently masks the disclosure of any sub-custodian details that might be applicable to the April – June quarter, such as Bank of England sub-custodianship of gold bars held within the SPDR Gold Trust.

And furthermore still, if you look at the latest 10-Q you will see that all of the other reporting in the 10-Q, such as financial highlights, divulges full data for three and nine month periods ended June 30, 2016. For example:

“Financial Highlights:

The Trust is presenting the following financial highlights related to investment performance and operations of a Share outstanding for the three and nine month periods ended June 30, 2016 and 2015.”

Therefore, the  financials in the latest 10-Q follow a reporting format of both 3 months and 9 months, but the WGTS does not see fit to report a statement about sub-custodian holdings during the latest 3 month period. This is inconsistent reporting and again points to a desire not to address sub-custodian activity during April – June 2016, specifically at the Bank of England.

Given that the revelation in the previous 10-Q report about the Bank of England being a sub-custodian of the SPDR Gold Trust was quite substantial news, surely the GLD Sponsor would want to address this topic in its subsequent 10-Q, even if it was to say that no GLD gold whatsoever passed through the Bank of England during the April – June period? However, it appears that they chose to construct and craft a selection of words through which to avoid addressing the issue.

Omission of Facts

Each 10-Q report submitted by World Gold Trust Services includes a number of appendices, one of which is an Exhibit 31.1, which is known as the “Certification of Chief Executive Officer, Pursuant to Rule 13a-14(a) AND 15d-14(a), Under the Securities Exchange Act of 1934, as Amended”. For the latest GLD 10-Q, this Exhibit 31.1 includes the statement that:

“I, Aram Shishmanian [WGTS CEO], certify that:

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

I would contend to the above certification, that the latest GLD 10-Q report does omit a statement of a material fact, i.e. disclosure of sub-custodians’ holdings as obligated by the SEC to disclose, or in the SEC’s words “the amount of the Trust’s assets that are held by subcustodians”; and that by omitting this information, the latest 10-Q report is “misleading with respect to the period covered”, which is the 3 months from 1 April 2016 to 30 June 2016.

The statement about sub-custodians in the latest 10-Q does not cover the period covered, i.e April – June 2016. It covers a nine month period. If none of the SPDR Gold Trust’s gold bars were held by sub-custodians during the April – June period, then why not say so?


It would be very interesting to see what the SEC thinks of this latest lack of disclosure from WGTS. It surely will raise some eyebrows at the SEC, since this is not what the SEC intended when it stated in its March 29 letter to WGTS that:

“Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.”

It also goes against the spirit of the request from the SEC’s Kim McManus, Senior Attorney Office of Real Estate and Commodities in her 29 March letter, and the promise by World Gold Trust Services’ CFO Samantha McDonald in her March 30, 2016 signed reply to the SEC that:

“We will, to the extent material, disclose in future periodic reports the amount of the Trust’s assets that are held by subcustodians”

I will contact WGTS directly and ask for their opinion on the above, and whatever response is received, if any, I will update readers via this forum.

SPDR Gold Trust gold bars at the Bank of England vaults

One of the most notable developments accompanying the gold price rally of 2016 has been the very large additions to the gold bar holdings of the major physically backed gold Exchange Traded Funds (ETFs). This is especially true of the SPDR Gold Trust (ticker GLD).

The gold bar holdings of the SPDR Gold Trust peaked at 1353 tonnes on 7 December 2012 before experiencing a precipitous fall in 2013, and additional and continued shrinkage throughout 2014 and 2015. On 17 December 2015, the gold holdings of the SPDR Gold Trust hit a multi-year low of 630 tonnes, a holdings level that had not been seen since September 2008.

GLD 5 year
SPDR Gold Trust – 5 year chart of gold holdings and gold price. Black line – gold holdings in tonnes. Source: http://www.goldchartsrus.com

By 31 December 2015, GLD ‘only’ held 642 tonnes of gold bars. See above chart. Then as the New Year kicked off in January 2016, something dramatic happened. The SPDR Gold Trust began expanding its gold holdings again, and noticeably so. By 31 March 2016, the Trust held 819 tonnes of gold bars, and by 30 June 2016, it held 950 tonnes of gold bars. The latest figure at time of writing is 981 tonnes of gold bars as of 8 July 2016. (Source: GLD Gold holdings spreadsheet).

This is a year-to-date net change of 338.89 extra tonnes of gold bars being held within the SPDR Gold Trust. See chart below. That’s a 52.8% increase compared to the quantity of gold bars the Trust held at the end of 2015, and a phenomenal amount of gold by any means, since it’s over 10% of annual new mine supply, and also a larger quantity of gold than all but the world’s largest central banks hold in their official gold reserves. Where is all of this gold being sourced from? That is the billion dollar question. Some is obviously being imported from Swiss refineries, but perhaps not all of it.

GLD 6 months
SPDR Gold Trust – 6 month chart of gold holdings and gold price. Black line – gold holdings in tonnes. Source: http://www.goldchartsrus.com

In January 2016, 26.8 tonnes of gold bars were added to the SPDR Gold Trust, while a massive 108 tonnes of gold bars were added in February 2016. The first quarter was rounded off with an additional 42 tonnes of gold bars added in March, bringing the Q1 additions held by GLD’s gold custodian HSBC London to 176.91 tonnes of gold bars. Noticeably, some large 1-day increases in GLD’s gold bar holdings occurred on 1 February (over 12 tonnes), 11 February (over 14 tonnes), 19 and 22 February (over 19 tonnes each day), and 29th February (nearly 15 tonnes), and also on 17 and 18 March (11.9 tonnes of gold bars added each day).

The second quarter saw a 15 tonne shrinkage of GLD’s gold holdings in April, but a very large 64.5 tonne increase in May, and a 81.4 tonne increase in June, making for a Q2 increase in GLD’s gold bar holdings of 130.77 tonnes. Very large 1-day gold bar additions occurred on 24 and 27 June (18.4 tonnes and 13 tonnes respectively). Overall, that’s 307 tonnes added to GLD in the first half of 2016.

Adding the 31.2 tonne addition for July to date gives the 338.89 tonnes addition figure quoted above. Most of this was due to a large 1-day inflow of 28.81 tonnes of gold bars reported on 5 July.

SEC – Reveal the subcustodians

I have detailed the above GLD gold bar holding changes to provide some background and put more color on the important discussion which follows.

While looking through SEC filings of the SPDR Gold Trust last month, I came across some interesting correspondence between the SEC and the sponsor of the SPDR Gold Trust, World Gold Trust Services. World Gold Trust Services is a fully owned subsidiary of the World Gold Council (WGC).

On 29 March 2016, the US Securities and Exchange Commission (SEC) sent a letter to the SPDR Gold Trust (c/o World Gold Trust Services, LLC) essentially telling the SPDR Gold Trust to in future specify in its SEC filings the identities of the sub-custodians that are storing any of the Trust’s gold bar holdings during each reporting period. The SEC’s letter stated:

“We understand that the Custodian may appoint one or more subcustodians to hold the Trust’s gold and that the Custodian currently uses a number of subcustodians, identified on page 18. You also outline risks that may arise in connection with the use of subcustodians. In future Exchange Act periodic reports, to the extent material, please disclose the amount of the Trust’s assets that are held by subcustodians.

The page 18 referred to by the SEC is page 18 of the annual 10-K filing of the SPDR Gold Trust for the year ended 30 September 2015, which includes the following paragraph:

The Custodian is authorized to appoint from time to time one or more subcustodians to hold the Trust’s gold until it can be transported to the Custodian’s vault. The subcustodians that the Custodian currently uses are the Bank of England, The Bank of Nova Scotia-ScotiaMocatta, Barclays Bank PLC, JPMorgan Chase Bank and UBS AG.

In accordance with LBMA practices and customs, the Custodian does not have written custody agreements with the subcustodians it selects. The Custodian’s selected subcustodians may appoint further subcustodians. These further subcustodians are not expected to have written custody agreements with the Custodian’s subcustodians that selected them. The lack of such written contracts could affect the recourse of the Trust and the Custodian against any subcustodian in the event a subcustodian does not use due care in the safekeeping of the Trust’s gold. See “Risk Factors—The ability of the Trustee and the Custodian to take legal action against subcustodians may be limited.”

LBMA above refers to London Bullion Market Association. Note that the SPDR Gold Trust prospectus defines subcustodian as:

“SUB-CUSTODIAN means a sub-custodian, agent or depository (including an entity within our corporate group) selected by us to perform any of our duties under this agreement including the custody and safekeeping of Bullion.”

The SEC letter was addressed to William Rhind who was CEO of World Gold Trust Services, but who actually had resigned as CEO on 9 February 2016, something the SEC should have known since the resignation statement was also filed with the SEC. After receiving the SEC’s correspondence, Samantha McDonald, CFO of World Gold Trust Services, responded by letter to the SEC the next day, 30 March 2016, confirming that:

We will, to the extent material, disclose in future periodic reports the amount of the Trust’s assets that are held by subcustodians. Please be advised that during fiscal 2015, no gold was held by subcustodians on behalf of Trust.

Note that filings with the US SEC use the naming convention 10-K for an annual filing, and 10-Q for a quarterly filing.

Following the stipulation from the SEC to World Gold Trust Services telling it to reveal its subcustodian holdings, its intriguing to note that when SPDR Gold Trust filed its next 10-Q on 29 April 2016 for the quarter ended 31 March 2016, page 15 of this filing revealed that the Bank of England, as subcustodian, had, during Q1 2016, held up to 29 tonnes of gold on behalf of the SPDR Gold Trust. The relevant section of page 15 stated the following:

“As at March 31, 2016, the Custodian held 26,484,117 ounces of gold on behalf of the Trust in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars including gold payable, with a market value of $32,760,852,177 (cost — $32,291,685,964) based on the LBMA Gold Price PM on March 31, 2016. Subcustodians held no gold on behalf of the Trust as of March 31, 2016.

During the quarter ended March 31, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.

As at September 30, 2015, the Custodian held 21,995,797 ounces of gold in its vault 100% of which is allocated gold in the form of London Good Delivery gold bars including gold payable, with a market value of $24,503,317,923 (cost — $27,103,546,125). Subcustodians held nil ounces of gold in their vaults on behalf of the Trust.”

Some Facts

From the above revelations, some facts can be stated:

  • The Bank of England held a maximum of 29 tonnes of gold on behalf of the SPDR Gold Trust on some date during Q1 2016.

Note that the wording of the 10-Q is such that it does not preclude the possibility that the Bank of England also held GLD gold at other times during Q1 2016, since it states “the greatest amount of gold” that the Bank of England held for the Trust was 29 tonnes. This implies that the Bank of England vaults could, at other times during Q1, have held less than 29 tonnes of gold on behalf of GLD.

  • As per the initial WGTS response to the SEC dated 30 March 2016, no gold was held by HSBC’s subcustodians on behalf of GLD throughout fiscal 2015 (1st October 2014 – 30 September 2015). Furthermore, GLD’s 10-Q to 31 December 2015 states that

To this can be added that according to the SPDR Gold Trust’s 10-Q for Q4 2015, “as at December 31, 2015…Subcustodians held nil ounces of gold in their vaults on behalf of the Trust

The GLD 10K (annual) for the year to 30 September 2015, filed on 24 November 2015, also contains a few statements addressing whether gold was held by subcustodians on year-end dates in 2014 and 2013. However, it states that subcustodians did not hold gold on behalf of the SPDR Gold Trust on these two dates. Page 44 states:

As at September 30, 2014, the Custodian held 24,867,158 ounces of gold in its vault 100% of which is allocated gold in the form of London Good Delivery gold bars including gold payable, with a market value of $30,250,898,159 (cost — $30,728,152,437). Subcustodians did not hold any gold in their vaults on behalf of the Trust.”

As at September 30, 2013, the Custodian held 29,244,351 ounces in its vault 100% of which is allocated gold in the form of London Good Delivery gold bars including gold payable, with a market value of $38,792,631,793 (cost — $35,812,777,235). Subcustodians did not hold any gold in their vaults on behalf of the Trust.”

How did Bank of England suddenly become a GLD subcustodian in Q1 2016?

As a member of London Precious Metals Clearing Limited (LPMCL), HSBC maintains gold bullion account facilities at the Bank of England which can be used within its LPMCL gold clearing role. All 6 LPMCL bullion bank members hold gold accounts at the Bank of England. The 6 LPMCL members can also all call on each other for physical delivery of gold and allocation of gold. All of these bullion banks except ICBC Standard are also Authorized Participants (APs) of GLD, i.e. Barclays, HSBC, JP Morgan, Scotia, and UBS. Other AP’s of GLD include entities of Credit Suisse, Goldman Sachs, Merrill Lynch and Morgan Stanley. Many of these bullion banks are also LBMA market makers in gold.

My view is that quite a number of other bullion banks that are members of the LBMA also hold gold accounts at the Bank of England, such as BNP Paribas, Natixis, SocGen and Standard Chartered, otherwise they would not be able to engage in the gold borrowing activities that they are on record of engaging in. If this is the case, then gold bars can easily be moved from central bank accounts at the Bank of England to bullion bank gold accounts at the Bank of England and vice-versa. Only APs of GLD are allowed to create baskets of GLD securities. This creation process requires that when GLD baskets created, APs have to deliver physical gold bars to HSBC.

There are therefore a number of  possibilities to explain how the Bank of England ended up being a sub-custodian for GLD in Q1 2016.

  1. An AP(s) had gold bars stored at the Bank of England, and delivered these gold bars to HSBC at the Bank of England in fulfillment of the GLD share creation process
  1. An AP(s) had an unallocated credit balance of gold with a LPMCL clearer or other entity which had gold stored at Bank of England or access to gold at the Bank of England, and as part of the clearing process the AP converted unallocated credit balances into allocated gold bars held at the Bank of England and delivered these gold bars to HSBC.
  1. An AP(s) borrowed gold from a central bank which had gold bars stored at the Bank of England and delivered these gold bars to HSBC as part of the GLD basket creation process.

The quantity of 29 tonnes is a lot of gold for an Authorized Participant or group of APs to have un-utilised in a vault at the Bank of England. It’s about 2320 large Good Delivery gold bars. Likewise, 29 tonnes is a lot of gold bars for LPMCL members to have as a clearing float at the Bank of England.

Furthermore, if an AP had acquired newly refined gold from a refinery with the intention of delivering it to HSBC as part of the GLD security creation process, why would this gold be delivered to the Bank of England vaults, and not directly to the HSBC vault? It would be more practical to have delivered that gold straight to the HSBC vault.

Therefore, its plausible that at least some of the gold being held by the Bank of England as sub-custodian on behalf of the SPDR Gold Trust was sourced from gold borrowed from central bank gold holdings at the Bank of England.

Bullion Bars Database

There is further support for borrowed gold bars being held by the SPDR Gold Trust during Q1 2016.

Warren James maintains a database of the identities of the gold bars held in the GLD over time which allows comparisons between the gold bullion coming in and out of the GLD. Each bar has a unique signature based on its brand, serial number, and weight. Gold bars coming into the SPDR Gold Trust can be tracked based on whether these bars were previously held in the Trust or whether they are bars coming in that have never been held by the Trust before. When a bar returns to the list after it was previously held but disappeared from the holdings, it’s called dark bullion since its identity is familiar but it’s not known where the bar has been since it left the GLD and re-entered.

Up until 10 February 2016, the percentage of dark bullion bars re-entering GLD that had previously been held by the Trust was about 30% of the inflows. As the inflows into GLD rose sharply from the second half of February, dark bullion entering GLD essentially stopped and nearly all of the bars being added to GLD were bars that had never been held by GLD before. These inflows were a combination of newly refined gold and older bars which are no longer produced. For example, gold bars coming into GLD in February 2016 have included hundreds of bars from the US Assay Offices and Mints, AGR Matthey, Johnson Matthey Plc (Royston), the Australian Branch Royal Mint – Perth, Engelhard, Kazzinc etc, all of which are no longer produced.

The fact that a large amount of older gold bars arrived into GLD from the second half of February onwards would suggest that these bars came long-held holdings in the vaults of the Bank of England, and consisted of borrowed central bank gold.

Some Questions

All of the above poses a number of questions:

  • If this known 29 tonnes of gold was held by the Bank of England as subcustodian for GLD during Q1 2016 but not held by the Bank of England as subcustodian at the end of March 2016, did it physically leave the Bank of England vaults, or was it just transferred to HSBC’s account at the Bank of England?

Note that nothing in the SEC filing rules or directives compels WGTS to specify if the GLD custodian HSBC is holding gold outside its own vaults, so in my view its possible that gold is held by HSBC on behalf of the SPDR Gold Trust at the Bank of England. Indeed, its possible that HSBC even leases vault space in the Bank of England vaults, a sub-leased vault facility. If the HSBC London gold vault is indeed in the location that’s documented here (HSBC’s London Gold Vault: Is this Gold’s Secret Hiding Place?), then it would appear that it’s not big enough to accommodate the entire gold bar holdings of GLD and all other HSBC customers’ gold, especially when GLD holding are and were over 900 tonnes.

  • Since the Bank of England didn’t hold any gold as subcustodian for GLD in fiscal 2015, but did in Q1 2016, how much of these large inflows of gold into GLD in Q1 and Q2 and July this year (documented above) involved metal stored in vaults at the Bank of England? And what changed in the London Gold Market to require gold held at the Bank of England to suddenly be needed to fulfill GLD gold delivery obligations?
  • Why are LBMA practices and customs so lax that it allows HSBC the custodian, not to have written custody agreements with the subcustodians. Surely the US SEC should have picked up on this?
  • Why did the SEC not ask iShares (IAU (which has 3 custodians) and ETF Securities to also alter their SEC filings to reveal subcustodians’ holdings. And for that matter why did the SEC not ask iShares to amend its disclosures to specify subcustodians in the Silver ETF – SLV.
  •  Why do central banks never publish gold bar lists detailing the serial numbers of their bars, and why is the Bank of England so against allowing central banks to do so. There are a number of FOIA requests (including one I made) providing evidence of the Bank of England’s refusal to allow central banks to publish weight lists / bar lists. Could it be that they do not want data on gold bar serial numbers entering the public domain as it would then show that leased and swapped gold is being held by commercial gold ETFs?

Audits of the SPDR Gold Trust’s gold bars

The SPDR Gold Trust ‘s gold bar holdings are physically audited twice per year. A partial physical audit is conducted in February/March of each year, and a full physical audit of the bars is done in September of each year. The current auditor is Inspectorate International Limited. In September 2015, Inspectorate conducted the 2015 full count of the Trust’s gold bullion held by the custodian HSBC London. That audit counted  54,807 London Good Delivery gold bars at the “London Vaults of HSBC Bank USA National Association”.  Note that the official custodian of the SPDR Gold Trust changed from HSBC Bank USA to HSBC Bank Plc in late 2014, so this audit should really state HSBC Bank Plc.

Inspectorate then conducted a random sample count audit in early Mach 2016 at the “London Vaults of HSBC Bank Plc” based on a date of 19 February 2016. As of that date, the “account (GLD) held title to 56,913 London Good Delivery, large Gold Bars“. However, this audit was “a statistically random count of 16,493 bars of gold”, based upon the gold inventory as at 19 February 2016, and it was carried out between 29 February and 11 March “at the Custodian’s premises“.

Given that the Bank of England acted as a subcustodian to the SPDR Gold Trust during Q1 2016,  the question arises as to whether  all of the other 40,420 (56,913 – 16,493) bars were at the “Custodian’s premises” during the audit,  or were some of these other bars being held in the Bank of England vaults. It’s not clear why a random sample of 16,493 bars (about 206 tonnes, and 29% of the total holding) was chosen, but it’s about 2/7ths of the gold bars held by GLD.

There is no mention of the Bank of England in Inspectorate’s latest audit report. However, there is nothing to say that some of GLD’s bars were not in the Bank of England at the time of the audit. The audit doesn’t say so one way or the other, and the way its worded means that it doesn’t say all of the inventory is at HSBC’s vault, just that the audit was conducted at HSBC’s vault.


Central banks continue to report leased and swapped gold (gold receivables) as an asset on their balance sheets. This accounting fiction, which doesn’t follow any international accounting standards is a sleight of hand that allows the same gold to appear to be in two places at once. If gold bars that have been leased from central banks are being held in the SPDR Gold Trust, then these gold bars are being double-counted, and GLD shareholders should be made aware that the Trust is holding gold that has been ultimately borrowed from central banks. Using borrowed central bank in an ETF doesn’t put the ETF on the hook, since the ETF owns this gold. But it does mean that the bullion banks will need to return the equivalent amount of borrowed gold to the lending central bank from other sources. Importantly though, this type of activity will overstate the amount of gold held by the combined official sector and ETF sector.

The SPDR Gold Trust 10-Q for the 2nd quarter of 2016 will be filed with the SEC in about 3 weeks time, at the end of July. With the continuing large inflows into GLD in Q2 2016 it will be interesting to see whether the name of Bank of England as subcustodian of GLD reappears in the Q2 filing?

And if gold bars held by GLD are actually stored at the Bank of England vaults when the  full physical gold bar audit is conducted next September, surely the full audit report should require a passage stating that some of the gold bars audited were held at the Bank of England, and not just at the ‘London Vaults of HSBC Bank’? Since the SEC have opened this ‘can of worms’ issue, and created more questions than answers, perhaps it is now in the SEC’s interests to go even further and ask World Gold Trust Services to fully clarify the matters raised above. Otherwise, the GLD gold bar holdings will continue to be a source of intrigue and debate in the gold world.

Central Banks and Governments and their gold coin holdings

Within the world of central bank and government gold reserves, there is often an assumption that these gold holdings consist entirely of gold bullion bars. While this is true in some cases, it is not the fully story because many central banks and governments, such as the US, France, Italy, Switzerland, the UK and Venezuela, all hold an element of gold bullion coins as part of their official monetary gold reserves.

These gold coin holdings are a legitimate part of gold reserves since under International Monetary Fund (IMF) definitions, “monetary gold consists of gold coins, ingots, and bars”. In central banking parlance, monetary gold is simply gold that is held by a central bank or government as a reserve asset. Other central bank reserve assets include foreign exchange holdings and holdings of IMF Special Drawing rights.

Elsewhere in IMF definitions, it is stated that “monetary gold is generally construed to be at least 995/1000 pure. Many government and central bank gold coin holdings consist of previously circulated gold coinage. Since gold coins often had  – and still have – a purity of less than 99.5% gold due to the addition of other metals for added durability, this ‘generally construed’ leeway in the IMF definition is undoubtedly a practical consideration that allows gold coins to be classified as monetary gold.

Central banks and governments hold gold for the same reasons that private citizens hold gold. Gold is real money with no counterparty risk, gold is a store of value, and gold is a safe haven asset. In general, central banks and governments are as happy holding bullion in gold bar form as in gold coin form. This is because physical gold is physical gold, and a gold coin and a gold bar will both provide their holders with the same benefits and protections. Only the physical form differs. In practice, the types and quantities of gold coins held by central banks and governments are extensive and varied as a quick tour d’horizon reveals.


Starting with the largest official sector gold holders, 3 of the top 5 gold holding countries have substantial gold coin holdings in their claimed reserves. The Banque de France, the guardian of France’s gold reserves, holds 2435.4 tonnes of gold consisting of a massive 100 tonnes of gold coins, and 2,335 tonnes of gold bars. Of these gold coins, 45% are French gold coins (probably Napoleans) and 55% are foreign gold coins, some of which are from the US. In the past, the Banque de France had melted part of its gold coin holdings into gold bars without considering their potential numismatic value. But after finding some US 20 dollar gold coins were worth USD 20,000 a piece, the Bank’s current policy is to scrutinise every coin.

Banca d’Italia stores approximately half of Italy’s 2451.8 tonnes of gold under its headquarters in Rome, with most of the other half stored at the Federal Reserve in New York. Of the 1199.4 tonnes of Italian gold in Rome, Banca d’Italia states that it holds 4.1 tonnes of gold coins, in the form of 871,713 coins. This would give each gold coin an average gold content of 0.151 troy ounces. This hoard most likely includes historic gold Italian 10 Lira and 20 Lira coins.

The US Treasury, the official holder of the US gold reserves, claims to hold gold coins containing 73,829.5 fine ounces of gold (2.3 tonnes) in the custody of the Federal Reserve Bank of New York. While a small subset of these coins weighing 377.4 ounces is on display in New York, the remaining coins, containing 73,451 fine ounces of gold, are held in The New York Fed’s vault compartment K in 384 bags weighing a gross 80,855.70 ounces. These coins are all either 0.9 fine or 0.9167 fine gold. For details see page 132 here. These US Treasury held gold coins at the Fed are in addition to the 2,783,218.6 (86.5 tonnes) of gold coins that the US Treasury claims to hold within the US Mint’s working stock.

Venezuela’s gold holdings, which have practically all been sold off or swapped for foreign exchange recently, also contain gold coin holdings in the form of historic gold US Eagles, as well as gold US Liberty and ‘Indian Head’ coins (see page 17 here). Notably, the Venezuelan central bank says that these coins would have a numismatic premium valuation depending on their scarcity, design and condition. Given the ongoing and deteriorating economic situation in Venezeula, expect these gold coins to be either sold on the market or else melted down and shipped out of the country, probably to Switzerland.

Speaking of Switzerland, the Swiss National Bank (SNB) in its publications, says that its “gold holdings are mainly in the form of gold bars, with the remainder in gold coins“. The SNB doesn’t elaborate on what type of gold coins it holds, and when asked recently, in the spirit of central bank secrecy, it not surprisingly declined to elaborate. Most likely this Swiss hoard includes historic Swiss Franc gold coins, and even old Latin Monetary Union gold coins.

The United Kingdom, through HM Treasury’s Exchange Equalisation Account (EEA), claims to hold 310.3 tonnes of gold in its reserves, all of which is held in custody at the Bank of England. The EEA 2014/2015 accounts states that “The gold bars and gold coin in the reserves were stored physically at the Bank’s premises“. As to what type of gold coins the UK holds, HM Treasury didn’t repond to a recent query, but undoubtedly, the Treasury holds gold Sovereigns as HM Treasury archives reveal.

Among other central banks, Romania holds 14% of its monetary gold in the form of gold coins, amounting to approximately 14.43 tonnes. The Central Bank of Peru includes 552,191 troy ounces (17.7 tonnes) of gold coins in its monetary gold holdings. These coins are described as “commemorative coins” and are held domestically “in the vault of the Central Bank”. Interesting the Peruvians apply a small valuation provision for “for cost of converting gold coins to high purity or ‘good delivery’ gold bars” for potential use on the wholesale gold market. The Central Bank of Ireland is custodian for Ireland’s circa 6 tonnes of gold, 5.7 tonnes of which is supposedly stored in bar form at the Bank of England in London, while approximately 10,000 ozs are in gold coin form stored at the Central Bank’s currency centre facility in Dublin.

Even Canada made headlines with its gold coin holdings recently when the Bank of Canada sold off the last of that country’s eventually tiny gold holdings which had been exclusively in the form of gold coins since the early 2000s. These gold coins were King George $5 and $10 Canadian coins, the best examples of which were sold to collectors with the rest melted down into gold bars by the Royal Canadian Mint and sold on the wholesale gold market, yet again highlighting gold’s high liquidity.

Central banks will always downplay the existence of gold on their balance sheets since gold competes against national fiat paper currencies. However, the actual course of action of central banks and governments in holding vast amounts of gold bars, as well as substantial quantities of gold coins, demonstrates that central banks and sovereigns continue to view gold as a strategic reserve asset and as the ultimate money. Luckily, private individuals too can replicate the holdings of these giants by also acquiring and accumulating gold bars and gold coins for the same reasons as sovereign entities and monetary authorities do. Doing as central banks do, not as they say, is certainly a better strategy than blind faith in today’s distorting and reckless centrally planned monetary policies.


HSBC’s London Gold Vault: Is this Gold’s Secret Hiding Place?

HSBC’s main gold vault in London regularly comes under the media spotlight for a number of reasons. These reasons include:

a) the HSBC London vault stores a very large amount of gold on behalf of gold-backed Exchange Traded Funds, primarily the well-known SPDR Gold Trust (GLD)

b) along with the Bank of England vaults and JP Morgan vault, the HSBC vault is one of the 3 largest gold vaults in London

c) the location of the HSBC vault in London is not publicised and so the secrecy creates intrigue

d) HSBC every so often throws out some visual or audio-visual media bait about the vault, most famously in the case of CNBC’s Bob Pisani and his camerman and producer visiting and filming inside the actual vault

Despite all of the above, no one seems to have ever tried to figure out where this gold vault is actually located. Until now.

In some ways HSBC has done a very good job keeping the location of its London gold vault under wraps. The main challenge is where does one begin to look for a vault in London from scratch. At first it would appear that there is nothing in the public domain pointing to the HSBC vault location. This is not entirely true however. The gold bullion activities of HSBC in London stem from two companies that over time became part of the HSBC group. My approach was to start by thinking about which London locations HSBC used to be based at. I took this approach because it became obvious that the HSBC London gold vault being used was still a battered looking old vault space in 2004 and 2005, which was after the entire HSBC company had moved to its spanking new London headquarters in Canary Wharf by 2003.

In New York, the location of the HSBC Bank USA precious metals vault in Manhattan is well-known and is even listed in CFTC documents such as here. The vault is at 1 West 39th Street, SC 2 Level , New York, New York 10018 , which is the same building as 450 Fifth Avenue, which is the former Republic National Bank building that HSBC took over in 1999-2000. This Republic building at 450 Fifth Avenue, when it was being built, “had special vault requirements that reportedly added significantly to the project’s cost“. So its hard to see why HSBC makes such a big deal of not revealing its London vault location.

History of HSBC gold operations in London

In 1993, HSBC Holdings plc relocated its headquarters to London after having acquired Britain’s Midland Bank the previous year. Midland in turn had fully acquired Samuel Montagu in 1974 to form Midland Montagu. Samuel Montagu & Co was a City of London bullion broker, and one of the 5 original gold fixing members of the London Gold Fixing, and in turn, Midland Montagu was also a Gold Fixer. In 1999, HSBC began using the name ‘HSBC’ for the Gold Fixing seat of Midland Montagu.

Between 1999 and 2000, HSBC completed the acquisition of Republic National Bank of New York. Republic National Bank of New York had been a big player in the world gold markets, and in 1993, Republic National had bought one of the London Gold Fixing seats from Mase Westpac, meaning that from 1993 both Republic National and Midland Montagu held Gold Fixing seats, and that HSBC ended up with 2 of the 5 Gold Fixing seats. Therefore, in 2000, following the Republic National takeover, HSBC in London sold one of its newly acquired seats to Credit Suisse.

I also have always thought that the HSBC vault is in central London, and not in some far-flung outer London location. The LPMCL website (www.lpmcl.com) still displays text that says that the bullion clearer’s vaults are in ‘central London locations':

“The five London bullion clearing members each maintain confidential secure vaulting facilities within central London locations, using either their own premises, or those of a secure storage agent…”

Anyone who knows London will understand that ‘central London’ refers to a small number of central districts, and not some broader inside the M25 (ring road) definition. Before moving to Canary Wharf in circa 2003, HSBC occupied a number of buildings clustered around the north bank of the River Thames, including 10 Lower Thames Street (the Banks’ Headquarters), 3 Lower Thames Street (St Magnus House), 10 Queen Street Place at the corner of Upper Thames Street (Thames Exchange – containing a trading floor), and Vintners Place (adjoined to Vintners Hall on the other side of Queen Street Place and Upper Thames Street).

HSBC Bank USA NA (London branch)

Until late 2014, the HSBC entity that was the custodian of the SPDR Gold Trust was “HSBC Bank USA NA (London branch)”. NA means National Association. On 21 November 2014, effective 22 December 2014, the custodian for the SPDR Gold Trust switched from HSBC Bank USA, National Association to HSBC Bank plc.

HSBC Bank USA NA (London branch), until 2015, was also the HSBC entity that was listed as a member of London Precious Metals Clearing Limited (LPMCL) on the LPMCL website. See, for example, September 2009 imprint of LPMCL website. The next step is therefore to see where HSBC Bank USA NA (London branch) was formerly located.

The Financial Services Register (FSA Register) lists HSBC Bank USA, Reference number: 141298, effective from 24 January 2000, with a registered address of Thames Exchange, 10 Queen Street Place, London EC4R 1BE. Recalling the Republic National connection, the previous registered name for this entity was “Republic National Bank of New York”, with the same address, effective from 18 December 1995 to 24 January 2000. The FSA Register entry also lists various well-known names of the HSBC gold world alongside this HSBC Bank USA entity, including Jeremy Charles, Peter Fava and David Rose.

Recalling the Samual Montagu / Midland Montagu connection to HSBC, an entity called Montagu Precious Metals is also listed with an old address at “2nd Floor, Thames Exchange, 10 Queen Street Place, London EC4R 1BQ.

An old gold information website called GoldAvenue from the year 2000, written by Timothy Green, also lists HSBC Bank USA (London branch) address as:

London branch
Thames Exchange
10 Queen Street Place
London EC4R 1BQ

That same Gold Avenue web page also correctly listed the HSBC New York vault address as:

452 Fifth Avenue
New York, NY 10018

which is the same building as West 39th Street, New York, in Manhattan.

The precursor to the SPDR Gold Trust was called Gold Bullion Ltd, a vehicle set up by Graham Tuckwell, promoted by the World Gold Council, and listed on the Australian Stock Exchange. Gold Bullion Ltd’s first day of trading was 28th March 2003. Following Gold Bullion Ltd’s launch, the SPDR Gold Trust (GLD) was then launched in 2004, but originally it was called STREETracks Gold Shares, and it even had another former working title of ‘Equity Gold Trust’ in early 2004.

A May 2003 Marketwatch article about Gold Bullion Ltd and the early incarnation of the SPDR Gold Trust (Equity Gold Trust) can be seen here, and a speech by Graham Tuckwell about Gold Bullion Ltd to the LBMA annual conference in Lisbon in 2003 can be seen here.  Most importantly, an early draft Prospectus of Gold Bullion Ltd (in MS Word), dated 10 February 2003, lists the Custodian of Gold Bullion Ltd as:

Thames Exchange
10 Queen Street Place
London EC4R 1BQ

Therefore, Thames Exchange goes to the top of the list for further consideration, as does it’s neighbour Vintner’s Place. Thames Exchange and Vintners Place were both HSBC buildings and both buildings are situated right across the road from each other, with Queen Street Place literally bisecting the 2 buildings. Queen Street Place is also the road that acts as the approach road to Southwark Bridge, with the 10 Queen Street Place building and the Vintners Place building literally creating a canyon either side of the road.

You will see below why Queen Street Place is interesting. Queen Street Place is very near the Bank of England and is in the City of London, so it’s under City of London Police protection. It’s also very near the River Thames, as is the JP  Morgan London vault. To get to the Bank of England from Queen Street Place, you literally walk a mintute north up Queens Street, and then a few minutes north-east along Queen Victoria Street and you’re at the Bank of England.

An official HSBC letter-headed note documenting the Thames Exchange address and proving HSBC occupied this building can be seen here. Similarly, an official letter-headed note documenting the Vintner’s Place address, and proving that HSBC occupied that building can be seen here.

HSBC moves out of the City of London – 2002/2003

A Property Week article from 20 April 2000, titled “JLL to mastermind HSBC’s City exodus“, covered the huge HSBC move out of the City to Canary Wharf in the early 2000s:

Army of firms called in to help co-ordinate bank’s relocation to Docklands by 2002

“HSBC has stepped up its retreat from the City of London by instructing agents to open negotiations on the disposal of its outstanding City liabilities.

In one of the most hotly contested pitches of last year, Jones Lang Lasalle has beaten rivals to secure the lead role as strategic adviser for the bank’s relocation to Docklands [Canary Wharf] in 2002.

In addition to JLL, the bank has instructed another seven firms to mastermind the disposal of its 121,000 sq m (1,302,445 sq ft) City portfolio.”

“HSBC has ruled out acquiring freehold or long-leasehold interests and has instructed agents to negotiate the best surrender or assignment of the occupational leases on its 12 City buildings.”

Morgan Pepper is advising on HSBC’s 17-year lease at Thames Exchange, 10 Queen Street Place, EC4. The Scottish Amicable building is currently under offer to Blackstone Real Estate Advisors for £73m.

Insignia Richard Ellis, Chapman Swabey, Strutt & Parker and Wright Oliphant have positions on the bank’s remaining interests in Vintners Place EC3; Bishop’s Court at Artillery Street, and HSBC’s 37,160 sq m (400,000 sq ft) office complex at St Magnus House and Montagu House.

By the time STREETracks Gold Trust (the original name for the SPDR Gold Trust) was launched in 2004, HSBC Bank USA’s address had moved to HSBC’s new headquarters in Canary Wharf, in the Docklands, east of the City of London. By early 2003, Equity Gold Trust also listed the HSBC custodian with the Canary Wharf address.

An article by engineering company Arup  HSBC Headquarters – Canary Wharf – Arup), describing the new HSBC Canary Wharf building, dated 21 April 2004 stated:

“The phased occupation of the [Canary Wharf] building was completed in February 2003 when the last of over 8000 staff moved in, with HSBC Group Chairman Sir John Bond officially opening the building as the Group’s new head office on 2 April 2003.”

However, the old HSBC gold vault did not ‘move’ at the time the rest of HSBC moved lock, stock, and barrel to Canary Wharf between 2002-2003. In fact, the HSBC vault remained where it was in a slightly rundown shabby space with cream-colored walls. See multiple photos of the vault space below. The HSBC vault did however transform from an ‘old’ vault into a ‘new’ vault sometime between 2006 to early 2007. My belief, which I’ll explain below, is that this vault didn’t move, it just received an extensive renovation.

A diagram of the HSBC headquarters in Canary Wharf where the whole London HSBC workforce moved to by early 2003 can be seen below. Notice the car parks in basements B2, B3 and B4. You can also read about the basement construction in the Arup document above. This is not the location for a beat-up old vault that can be seen in the below old gold vault shots. Besides, the vertical pillars/piles in the old and new HSBC vault are nothing like the huge structural pillars/piles found in the HSBC headquarters in Canary Wharf.

The pillars in the old HSBC vault photos are pillars that would be found in an old arched vault, while the support pillars in the new HSBC vault photos are those that would be found in relatively shallow spaces under a road, such as pillars/supports used in the cut and cover New York subway system.

HSBC Headquarters - Canary Wharf
Arup diagram of HSBC Headquarters, Canary Wharf. lower section and basement

HSBC Gold Vault Photos

December 2004:

Here you can see an early gold vault photo of Graham Tuckwell, joint managing director of Gold Bullion Securities, and Stuart Thomas, managing director of World Gold Trust Services, in the ‘old’ HSBC vault in December 2004 checking a HSBC bar list:


Source: https://web.archive.org/web/20051125081854/http://streettracksgoldshares.com/images/DSC_0130_800.jpg

And another photo, taken at the same time, of Stuart Thomas in the vault in December 2004:


Notice the very old piping around the top of the walls.


In fact, there are lots more photos of the inside of the ‘old’ vault on the StreetTRACKS website here https://web.archive.org/web/20060518124841/http://streettracksgoldshares.com/us/media/gb_media.php

June 2005:

See five photos below of vault in June 2005:


‘Old’ vault looks quite beaten with concrete pillars, old floor, old air conditioning unit, and awful decor, and some type of desk an chair and wiring on the very right hand side of the photo.






October 2005:

Managing Director Stuart Thomas, Director of Corporate Communications, George Milling-Stanley of World Gold Trust Services, and CFO and Treasurer James Lowe (wearing a gold tie) of World Gold Trust Services



6 more vault shots of gold bars stacked on pallets:






When the gold is stacked 6 pallets high, as in the above photo, it nearly reaches up to where the pillars start to broaden out. Recall for a moment the definition of a vault. A vault is any space covered by arches, or an arched ceiling over a void. This is why the Bank of England ‘vaults’ are called vaults, because in the old vaults of the Bank of England (before the Bank of England was rebuilt in the 1920s/1930s), the gold was stored in the arched vaulted basements. The pillars in the shots of this ‘old’ HSBC vault look like pillars/piles that are the lower parts of arches, since they taper outwards as they go higher and they are positioned in a grid like formation.




You can see how all the pallets of gold were located in a space with quite a lot of walls and chunky support pillars that broaden at the top (i.e. support pillars). Very similar pillars can be seen in old parts of the London Underground pedestrian tunnels, and also in the Vintner’s Hall wine vaults, which is next door to the vaults under Queen Street Place.

The NEW HSBC Vault 2007

During the second half of 2007, a series of 4 photos appeared on the STREETTracks website of a ‘New’ HSBC gold vault in London. The headline title of this series of images was

“The gold in trust at HSBC’s gold vault in London. The gold is being held in Trust for the shareholders of GLD. These images as at June 2007″

 This STREETTracks web page can be accessed via the following link, however, the photos don’t render properly.
June 2007 photos intro
However, I did source the photos in other dated instances from a similar link, and uploaded them. See below.

2007 George Milling-Stanley and possibly a bearded Stuart Thomas – June 2007


George Millin-Stanley’s watch puts the time at 11:45am.


Milling-Stanley and 3 others – probably from State Street and BONY – June2007



New vault – wide angle shot 2007



2nd wide angle new vault shot 2007



The MarketWatch website and a GLD SEC submission mentioned the ‘new’ vault move in an article on 11th January 2008:
“…StreetTracks Gold Shares, a wildly popular exchange-traded fund so awash in investor cash that its backers recently scrambled to find a bigger vault to accommodate their ever-growing horde of the precious metal, now valued at $18 billion.”
“Because the StreetTracks reserve expanded faster than expected, its managers had to move the stores to a bigger vault about six months ago to make more room, says George Milling-Stanley, a spokesman for the gold council.”
Graham Tuckwell, Chairman of ETF Securities, also referred to the ‘old’ and ‘new’ vaults at the LBMA Conference in Hong Kong in November 2012. On page 3, section C “Is the Gold Really There?”, Tuckwell shows 2 photos to the audience, one from “10 years ago” and one a recent photo. In the old photo, which is probably this photo
 he says “the fellow on the left is a 10-year younger version of me“. He also says: “That was the old vault when we started doing it, and you can see that we are doing a bit of a check“.
Then Tuckwell goes on to say: “This photograph was taken just over a year ago on a recent vault visit“… “Our gold, from the London product, the GBS, is on the left and the gold from the US product, the GLD, is on the right in this picture“. GBS was the Australian product and GLD being the State Street product, listed in November 2004.

As it turns out, there are vaults beneath the road under Queen Street Place, between 10 Queen Street Place (Thames Exchange) and Vintners Place, and these vaults were renovated during the period that would coincide with the HSBC London gold vault transforming from an ‘old’ vault to a ‘new vault’.

George Milling-Stanley in New Vault

Southwark Bridge and The Queen Street Place Vaults

Southwark Bridge is a bridge over the River Thames connecting the City of London (financial district) on the north bank of the river, to the area of Southwark on the south bank. The first Southwark Bridge (Queen Street Bridge) opened in 1819 and was an arched bridge with “vaults under the north abutment of the bridge“. There is also a reference to the vaults under Queen Street Place in a 1908 Corporation of London Record Office record.

A second bridge, the current Southwark Bridge, replaced the earlier bridge, and it opened in 1921.

A book titled ‘Design Applications of Raft Foundations‘, when discussing the development that became Vintners Place, mentions the vaults under Queen Street Place and shows that the vault space begins maybe 2.0 metres under the roadway, and with the vault space height being about 5 metres high which looks a very similar height to both the ‘old’ and ‘new’ HSBC vault spaces.

Q St Vaults

vintners and vaults


In fact, there were up to 17 vaults under Queen Street Place judging by a planning application from 1992 which listed a Vault Q (assuming Vaults A – Q), and the application said that the vaults had been used for storage.

Vault Q 1992


Alterations to Vaults under Queen Street Place

Keeping in mind that the ‘old’ HSBC gold vault became a ‘new’ HSBC gold vault sometime in 2006, or early 2007, then the following, in my view, becomes highly relevant. In September 2004, a building control planning application was submitted to City of London planning department for Alterations to Vaults in the Thames Exchange building at 10 Queen Street Place. See link for the application. See screenshots also.


10 Queen Street Place - Alteration to Vaults application - 15 September 2004

10 Queen Street Place - Alteration to Vaults application - Date 15 September 2004

Fit Out of Vaults under Queen Street Place

Following this in November 2005, another building control planning application was received by the City of London planning department for “Fit out of Vaults between 10 Queen Street Place and Vintners Place“. See link below and also screenshots.


Fit out of vaults between 10 Queen Street Place and Vintners Place - Vaults application - 4 November 2005

Fit out of vaults between 10 Queen Street Place and Vintners Place - Vaults application - Date 4 November 2005

Thames Exchange – 10 Queen Street Place

Blackstone bought Thames Exchange from Scottish Amicable in 2000 while it was still being leased to HSBC. HSBC then surrendered the lease of the building when it moved to Canary Wharf in 2003. Blackstone then renamed Thames Exchange to 10 Queen Street Place and began renovating it while leasing it to City law firm SJ Berwin for its new London headquarters. However, SJ Berwin only moved its London headquarters from Gray’s Inn Road to 10 Queen Street Place sometime between February and April 2006, so the renovations appear to have gone on during 2003-2005. Norwich Property Trust purchased 10 Queen Street Place from Blackstone in 2006, after it had been renovated. Notably, Norwich retained TFT Consultants to inspect 10 Queen Street Place. TFT Consultants states in a case-study on its website that:

 “We inspected this prominent riverside mixed-use building including extensive vaults underneath Southwark Bridge approach road and prepared a TDD report for Norwich Property Trust.”

Property investor Jaguar bought the 10 Queen Street Place building from Norwich in 2008, and then the Malaysian haji pilgrims fund purchased 10 Queen Street Place from Jaguar in September 2012.
Coincidentally, Vintners Place, which adjoins Queen Street Place on the other side of the vaults was also sold in September 2012 when Downtown Properties and a South Korean consortium bought it from Atlas Capital. The tenants at the time included Jefferies International, and Sumitomo and Thomson Reuters. Vintners Place also adjoins Thames House, Five Kings House, and The Worshipful Company of Vintners also has its headquarters in a building called Vintner’s Hall on the corner of Queen Street Place and Upper Thames Street.

The Plans of the Vaults under Queen Street Place

Detailed plans of the vaults under Queen Street Place before and after the ‘Alterations’ and ‘Fit Out’ can be seen here ( Vault Plans – Before 10 Queen Street Place – Vaults – Lower Ground Floor Plan – Before alterations) and here (Vault Plans – Proposed 10 Queen Street Place – Vaults – Lower Ground Floor Plan – After alterations). Both sets of plans were drawn up by Hurley, Robertson Architects. Click on the links to bring up the actual pdf files of the full plans.

vaults before a
Vaults under Queen Street Place – old layout – dated 28 November 2002


And more zoomed in. Notice all of the individual vaults and doors, and all of the walls with rows of pillars marked between the walls.


vaults before b
Vaults under Queen Street Place – old layout zoomed in


Compare the above plans to the ‘proposed’ plans. In the proposed plans, which are revision C08 dated 06 April 2006, all of the individual vaults have been removed by removing all the doors and walls, leaving just rows of pillars, and beams (given that it’s a top-down view looking down).

vaults after a
Vaults under Queen Street Place – proposed vaults – 2006 updates

You can see the changes a bit more clearly in the following slightly zoomed in version. Notice the facilities added on the right, such as toilets, kitchen, changing rooms, office, telecoms room etc, and also the rows of supports/ pillars on the left hand side, which is about 7 rows of supports / pillars in the open space, 5 of which run at the same angle, then there is a V shape where the pillars then run at a different angle.

vaults after b
Vaults under Queen Street Place – proposed vaults – 2006 updates – zoomed in

Anyone who has the inclination, given these sets of plans of the vaults under Queen Street Place, please check back over the photos of the ‘old’ HSBC vault and ‘new’ HSBC vault and decide for yourself if the photos in the ‘old’ cramped vault with the pillars and cream wall is reminiscent of the pre-alteration plans above. Likewise, decide for yourself if the ‘new’ HSBC London gold vault with the open plan design and layout of vertical steel support columns looks like the plans above of the ‘proposed’ alterations and ‘Fit Out’ of the vaults under Queen Street Place.

When G4S built its subterranean gold vault in Park Royal, London in 2013 / 2014, it fitted it out the area beside the vault with toilets and a kitchen – See second last sentence in red box below from the G4S building contractor document. Because, if you are working down in a vault all day, there will need to be toilets and a kitchen area, as well as changing rooms, phones and desktop computers etc. For background to G4S vault, see “G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out“.




The Pisani Files – “This is it folks, this is the Motherlode!”

Now we come to the Bob Pisani videos that were filmed by CNBC in the HSBC London gold vault in 2011. I say videos in plural because there are 4 video segments, and actually 5 segments in total including a trailer. The videos are quite exciting and fast-paced but frustrating because the camera is quite shaky and moves around rapidly for a lot of the vault segments, possibly on purpose. The background music is quite catchy also (at first).

1. The Motherlode

The first video is on a CBNC web page and embedded in an article titled “Gold’s secret hiding place”, however the video is titled “Gold Rush – The Mother Lode”. Its dated Wednesday, 31 Aug 2011 with a byline of “CNBC’s Bob Pisani recently got an exclusive inside look at the HSBC gold vaults in London, where the gold for the SPDR Gold Trust (GLD) is stored.” The video is  4:55 mins long, and introduced by Pisani from the New York studio. The vault shots begin at 1:18, and interestnigly, at 0:40 mins, the camera is in a vehicle travelling down Lower Thames Street.


2. Gold’s Secret Hiding Place

Let’s call this 2nd video “Gold’s Secret Hiding Place”. This version, which is different to the Motherlode, is on YouTube. I’m not sure of the official segment name. This version is 5:06 mins long, and Bob says the vault is “in a super-secret location only known to a few people”. This is also the version where Bob hands in his cellphone and travels in a blacked-out vehicle saying “we have no idea where we’re going. We only know our final destination. The vault!”

There is a neat online app called Pause House which allows you to look at any YourTube clip frame-by-frame, and can be used on the above clip for those who want to get a good look at the vault interior. (Pause House).

3. The Third version

Lets call this the Third version. Its 2:43 mins long. Pisani starts on Waterloo Bridge on the River Thames and he points towards Westminster Bridge (the exact opposite direction to Southwark Bridge). Then he is in the blacked-out vehicle, and then in the vault from 1:04 mins. At this stage the music might be annoying, so luckily, there is no background music when Bob talks in the vault.


4. Inside the Secret Vault

This clip is 2:42 mins long and is dated Thursday, 8 Mar 2012 with a byline of “CNBC’s Bob Pisani gets unprecedented access inside the largest private gold reserve in the world.” Its slightly similar to version 3 above


5. Version 5 is just a 31 second trailer about the CNBC 2011 gold series, published in March 2012, with gold vault footage only appearing for a few seconds.


2005 vs 2011

There is one sentence in both “Motherlode” and “Gold’s Secret Hiding Place” that I consider very interesting. And it relates to the ‘old’ and ‘new’ vaults. What Bob Pisani says has obviously been told to him by someone at HSBC, since he would not know anything about the vault in advance.

At 3:37 mins in Motherlode, Pisani says  “In 2005, there was less than 200 tonnes of gold here, now there’s 6 times as much“. 

At 4:05 mins in  Gold’s secret hiding place, Pisani says “In 2005, there was less than 200 tonnes of gold in this vault backing the GLD. Now there’s 6 times as much.”

Pisani is essentially saying, probably without realising, that it is the same vault. i.e. that the vault in 2005 is the same vault as in 2011. However, given that the vault in 2005 was the ‘old’ vault, and that the vault in 2011 was the ‘new vault’, this suggests that it is the same space, and that the vault space was just renovated. It therefore supports the view that the vaults under Queen Street Place are a very strong candidate to be the HSBC London Gold Vault that stores the GLD gold and the ETF Securities gold.

Fruiterers Passage

You might have spotted above that one of the existing vaults under Southwark Bridge was turned into a riverside walkway. This was probably vault Q, which looked to be the vault nearest the river. This walkway runs under the beginning of the abutment on the north of SouthWark Bridge and is called the slightly humorous name ‘Fruiterers Passage’. The Passage was opened circa the year 2000 (and named after the Worshipful Company of Fruiterers), and is ornately tiled with ceramics, even around its pillar enclosures. Take a look at a photo of Fruiterers Passage and compare it to a photo of the new ‘HSBC’ gold vault that features the yellow-painted steel support pillars. The dimensions and spacings of the pillars in both photos look very similar, even identical.



A video walk-through (2:45 mins) of Fruiterers Passage can be seen here. The first 20-30 seconds shows Southwark Bridge, and then the walk through the Passage begins:

Although there are lots of security cameras around the City of London, the cameras in Fruiterers Passage and security warnings near the entrance to the Passage seem particularly explicit.



Size Matters

A MarketWatch article from 11 January 2008 quoted  George Milling-Stanley as saying that the vault was sizable but “not quite as big as a cricket pitch.” On another occasion, Milling-Stanley used another sporting analogy and described the ‘new’ vault as “about the size of a football field“. Can a sporting analogy (or two) help determine the size of the HSBC London gold vault? Possibly, but it’s not as clear-cut as you might think.

Notwithstanding that a ‘cricket pitch’ is the (smallish) 22 yard strip between the wickets, the quotation was presumably referring to a ‘cricket field’.  However, there is no standard shape of a ‘cricket field’, let alone standardised dimensions, since the ICC rules only state that the field can be circular or oval with a variable diameter of between 450 and 500 feet on the ‘long’ side (sometimes giving 16,000 sq yards). Regarding Milling-Stanley’s ‘football field’, analogy, it’s not clear whether this analogy was intended for a US audience or non-US audience. So it could mean ‘American’ football, or soccer or rugby.

In soccer, there is no standard size ‘field’. The sidelines (touch lines) have to be between 100 and 130 yards (110 to 120 yards for international matches), while the goal lines (end lines) must be between 50 and 100 yards (70 to 80 yards) in international matches. This could result in over 7000 sq meters or over 1.75 acres. The American football field is thankfully standardised, being 120 by 53.33 yards or 6400 sq yards.

Overall, Milling-Stanley’s descriptions give a flavour for permissible dimensions, but based on Bob Pisani’s video tour, I see the vault as a rectangular space but not quite as big as a soccer pitch. So lets look at the space in Google Earth. I’ve just added a yellow rectangle for illustrative purposes to show where the vaults under Queen Street Place are located.

Bird’s Eye View – Queen Street Place looking north from Southwark Bridge – 10 Queen St Place on right, Vintners Place on left

See also some cross-sectional plans that were part of the 2004 Blackstone Thames Exchange planning applications (Cross Section width 10 Queen St Place – from river view and Cross Section length 10 Queen St Place).

QSP night shot
Night shot – Queen Street Place without traffic

The Marketwatch January 2008 article also said that the HSBC vault was “located on the outskirts of London” but how would the journalist know this since the same article also said that “a spokeswoman for HSBC declined to provide vault details, citing security policies”. As financial journalists mostly repeat what is told to them, I think this “located on the outskirts of London” bone was thrown out as a red-herring, and means the exact opposite.


At its peak holdings in December 2012, the SPDR Gold Trust stored 1353 tonnes of gold. Some observations from looking at the vault space in the Pisani videos and from talking to other people, are that:

a) the HSBC vault looks quite full in 2011, but it still looks like the space would be hard pushed to store the 1200 tonnes of gold that Pisani says were there

b) based on modelling the number of realistic-sized pallets that could conceivably fit into the Queen Street Place vault space (as per the vault plans), it also seems that it would be hard pressed to store 1,200 tonnes, unless they were crammed in. And the pallets in the CNBC segments are not fully crammed in to the space.

Remember also that the 1200 tonnes of gold reference only referred to the SPDR Gold Trust holdings in mid-2011 around the time the CNBC video segment was filmed. See blue line in chart below (chart from www.sharelynx.com) for GLD holdings over its lifetime. HSBC is also the gold custodian for ETF Securities’ gold-backed ETF which held about 170 tonnes at the time of Pisani’s visit. That would be nearly 1,400 tonnes of gold just between the GLD and ETFS holdings, which would be about 228 piles of pallets stacked 6 high crammed in. Furthermore, that’s not even taking into account any gold holdings of other HSBC customers, and Pisani also says in the videos that HSBC confirmed to him that its vault also stores gold for a range of clients.


When GLD held 1353 tonnes in December 2012, this in itself would be 225 piles of pallets, each 6 high. ETFS held about 170 tonnes in December 2012 also, which would be another 28 piles of pallets stacked 6 high. If this location is the famous storage area for the SPDR Gold Trust then possibly during the boom times when GLD holdings peaked, the HSBC vault may not have been big enough to accommodate the GLD gold let any other gold. Which would mean that HSBC was storing GLD gold elsewhere such as at the Bank of England vault,  or the JP Morgan vault, both very close to Queen Street Place. It would also mean that GLD sources new gold inflows from gold that is at the Bank of England, i.e. leased central bank gold.

Another point to consider is that if the vaults under Queen Street Place are the correct location for the HSBC vault, then where did the gold that was being stored there in late 2005 / early 2006 go to during the vault alterations? This would have been at least 200 tonnes of gold as of late 2005, rising to over 350 tonnes of gold by late 2006. As the Bank of England is literally up the road from Queen Street Place,  moving it to the Bank of England vaults would be the most likely option during the renovation.

In summary, using publicly available information and evidence, I have described where I think the HSBC London gold vault may be located. Whether I am correct is another matter.


The Gold Vaults of London: Malca-Amit

Following on from the recent blog post “G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out“, which discusses the G4S precious metals vault located on Abbey Road in the Park Royal area of London, its instructive to also look at where the other London Gold Market vaults are located.

According to the vaulting pages on the London Bullion Market Association (LBMA) website:

“There are seven custodians offering vaulting services in the London bullion market, three of whom are also clearing members of the LBMA (Barclays, HSBC and JP Morgan). There are also four other security carriers, who are also LBMA members (Brinks, G4S Cash Solutions (UK), Malca Amit and Loomis International (UK) Ltd). The Bank of England also offers a custodian service (gold only).”

These 8 custodians are then listed in a pdf document on the LBMA website with their head office addresses, but not the vault addresses. So where are the actual vaults?

Having looked at G4S, let’s continue by examining the London vault of Malca-Amit. On its website page which featuring its London vault, Malca-Amit states that:

The London-based Malca-Amit vault is conveniently located close to Heathrow airport. The vault is graded at level XII CD EX, the highest European Vault classification and is complemented by the most up to date security systems including the Avigilon CCTV suite with cameras capturing 29 megapixels per frame.

The vault is authorised by the members of the London Clearing Company and has LBMA approval for the weighing and inspecting of precious metals.

Notice the reference to London Clearing Company. This is a reference to the London Precious Metals Clearing Limited (LPMCL), a private precious metals clearing consortium comprising HSBC, JP Morgan, Barclays, The Bank of Nova Scotia – ScotiaMocatta, and UBS.

Driving around in Circles?

The London Bullion Market Association (LBMA) actually featured Malca-Amit’s London vault in a slightly tongue in cheek article by Aelred Connelly titled “Visit to Malca-Amit’s New Vault” which appeared in Issue 68 of the LBMA’s Alchemist magazine in October 2012.

The article begins:

“It was a balmy day when we arrived at Feltham station where we were warmly greeted by our host for the day, Allan Finn, Global Commodities Director for Malca-Amit. Allan told us that the location of the vault was top secret so he deviously drove his car round in circles until we were so disorientated we had no idea where he had taken us.”

And ends with:

“Our tour came to an end. Allan drove his car round in circles again until we were so disorientated that we didn’t know where we had come from. But he made up for it by taking us for a nice lunch on the river at Richmond.



Apart from driving around in circles between Feltham Station and the vault destination, the article also tells us that:

Malca-Amit became a member of the LBMA in March 2012 and shortly afterwards completed the building of a new vault facility close to Heathrow airport..

…the new secure storage facility was opened in April 2012 near Heathrow airport.

So it seems that Malca-Amit was granted Ordinary membership status of the LBMA just prior to its new vault becoming operational. The granting of Ordinary membership was probably a precursor to the Malca-Amit vault being, in the words of Malca-Amit, “authorised by the members of the London Clearing Company ..[with].. LBMA approval for the weighing and inspecting of precious metals.

The LBMA Alchemist profile goes on to say:

Built above ground, the Malca-Amit vault is one of a number of new facilities that either have been built or which will be opened shortly within the perimeter of the M25….. Proximity to an airport is an advantage.

On 20 September 2012, the LBMA issued an advisory document titled “Best Practice Guidelines; Used by “Loco London” Vaults Opening a new vault for the storage of precious metals“, in which it was advised that “If you wish to store the higher value precious metals then you may find that insurers insist that your vaults are subterranean“. This obviously wasn’t an issue for Malca-Amit’s insurers, since the Malca-Amit vault is in a building that’s above ground.

The Alchemist continues:

“When we eventually arrived at our destination only the sound of planes overhead gave any indication as to where we were.”

“Before we went in to the building Allan explained that the perimeter fencing can withstand a 7.5-ton vehicle at 50 mph and the internal shutter anti-ram barrier which is located behind the entrance gates can withstand a 7.5-ton vehicle at 30 mph.”

“But the thing that strikes you most is the vault. Allan explained that it is a Chubbsafe
grade XII which offers the highest possible level of security and provides capacity for more than 300 metric tonnes of gold and 1,000 tonnes of silver.

“Gold and silver are not the only precious items in storage: there are also diamonds and other precious stones and jewellery which are kept in storage on behalf of clients.”

Where then could Malca-Amit’s recently opened gold and silver vault be located?


Arena plane

Arena Building, Parkway

It turns out that in a similar manner to G4S when it made a planning application amendment for its new vault building at Abbey Road in Park Royal, Malca-Amit was also not shy of listing its building location on the internet, for it too listed the location of its new vault in a planning application amendment submission dated July 2013.

This planning document is posted on the www.gov.uk website, and on page 10, it states:

OK0230285 SN


(0 vehicle(s), 0 trailer(s))
New authorisation at this operating centre will be: 4 vehicle(s), 2 trailer(s)


Which leads us to the questions: what is and where is this Arena Building?


In 2011, the already completed Arena Parkway building,  profiled in a glossy brochure, was marketed on a UK commercial real estate website called NovaLoca commercial property finder. This brochure pdf file was created on 14 July 2011. So although Malca-Amit may have “completed the building of a new vault facility” as the LBMA stated, it did not build the building in which the vault is located. The building had already been built prior to 2011.

The ‘Arena’ building is in the ‘Parkway Heathrow M4′ industrial estate off Cranford Lane, in Heston, in the Hounslow area to the north-east of Heathrow airport.  Anyone who knows that area around Hounslow will know that the one of the landing routes into Heathrow Airport is a very low approach along a route right above where this building is located.

According to the brochure:

“The Arena provides a modern detached warehouse unit of 23,660 sq ft with a self-contained secure yard and benefits from 24-hour security, an on-site management team and surveillance cameras.”

“The unit is available on a new Full Repairing and Insuring lease basis.”

Additional information in the 2011 brochure includes such facts as:

“NEW DISTRIBUTION/WAREHOUSE UNIT 23,660 sq ft (2,198 sq m)”

The Arena is a new high quality warehouse suitable for production, storage, research and development, laboratories and general distribution. It has an impressive reception leading to first floor fully fitted offices. The property is constructed of brick and profile metal composite cladding with double glazed windows fitted with solar shading.

The property provides the following approximate gross external floor areas:
Warehouse 20,430 sq ft 1,898 sq m
FF Offices 3,230 sq ft 300 sq m
Total 23,660 sq ft 2,198 sq m

Warehouse, 8m clear height, Two up and over electric loading
doors, 200 kVA 3 Phase power supply, Roof lights to 10% of warehouse
floor area, Floor loading of 50Kn/m2

Open plan layout, Full access raised floor, Suspended ceilings with recess
lighting, Gas central heating, Double glazed windows, Passenger lift
Reception area

Self-contained property, Large secure yard, Access for articulated lorries
Allocated parking

Given that this Arena building was being marketed from July 2011 onwards, and that Malca-Amit began operating the vault facility from April 2012, then it would suggest, as would be expected, that Malca-Amit took possession, and then fitted out the building to its own specific requirements, including the vault, before opening for business in April 2012.

The Arena building is in the London Borough of Hounslow, so it is instructive to examine planning applications made for this building in and around the dates that Malca-Amit took occupancy.

A planning search for TW5 9QA on the Hounslow planning website reveals that plans for this Arena Parkway building were submitted from as early as December 2007, but there seems to have been a long drawn out series of planning applications and amendements made for the construction, the latest being submitted in December 2008 and approved by Hounslow Council in February 2009. Therefore, construction of the building would have commenced sometime after February 2009.

The planning applications for the Arena building, which were submitted by CGNU Life Assurance Ltd / Aviva Investors, summarise the project as follows:

System Reference: P/2008/3669

Planning Reference: 00315/F/P59(6)

Following approval for demolition of the existing office building and construction of new industrial and warehouse unit with ancillary office accommodation, new entrances off existing access road, car parking, landscaping and roof mounted photo-voltaic panels details submitted pursuant to Condition 6 (waste and recycled materials storage) of permission dated 18/03/08


Name Mr Mark Nevitt CGNU Life Assurance Ltd

 Address C/O Aviva Investors No.1 Poultry London EC2R 8EJ

Architect     LDA Ltd Chartered Architects, Surrey”

The Arena drawings document submitted with the most recent building application shows a layout in keeping with the size and shape of the structure that was actually built, so it looks like the development was completed in accordance with the last approved set of plans.


Malca Amit Arena Parkway TW5 9QA
Malca Amit Arena Parkway TW5 9QA



Following occupancy by Malca-Amit, the only planning application submitted for the Arena Building since then is application “Planning Reference: 00315/F/P61″ which addressed improved fencing around the site.

System Reference: P/2013/1670

Planning Reference: 00315/F/P61


Date received 31/05/2013

Details: Erection of security fencing and bollards along perimeter of site with sliding gate at yard entrance and rising barrier at car park

Ward: Heston West   [note that a ward is a sub-unit of a borough]


Name     Malca Amit

Address   100 Hatton Garden EC1N 8NX

Architect          Pinnegar Hayward Design, Birmingham

Application Received 31/05/2013

Decision Approved 13/09/2013

The ‘delegated report’ submission states that:

“The application seeks to improve the existing security around the site. The existing bollards around the site would be made good to existing low-level shrub planting. The fencing around the part of the site would be a 2.4m high 358 mesh panel fence powder 600 mm high electric fence above. This fencing would be on the north, south and west parts of the site. There would be a 6m cantilevered sliding gate, which would be 2.4m high with serrated top – RAL 9005 (black) finish.

In order to secure parking on site a car park gate has been proposed which runs off the access road. This would be 3m wide rising barrier which would be 1m high, RAL 9003 (white) finish with contrasting red banding. There would be 1m wide exit gate which would be next to the unit.”

The Site Plan and Elevation for the above application put some visuals on the above delegated report text. This fencing is therefore the fencing that Allan Finn of Malca-Amit was referring to when he told the LBMA that the”perimeter fencing can withstand a 7.5-ton vehicle at 50 mph and the internal shutter anti-ram barrier which is located behind the entrance gates can withstand a 7.5-ton vehicle at 30 mph.”


The Edinburgh Assay Office and UKAS

Not only is Malca-Amit located in this Arena Parkway Building, but so is the Edinburgh Assay Office.  Although the Edinburgh Assay office has its headquarters in Goldsmiths Hall, Edinburgh, in Scotland, it also operates a laboratory at a Heathrow Sub Office where it is accredited for “Chemical Tests for the purpose of hallmarking”.

This fact is revealed in a series of United Kingdom Accreditation Service (UKAS) reports that were posted on the UKAS website in June 2015. On 8 June 2015, UKAS posted a report about the Edinburgh Assay Office on its website titled “The Edinburgh Assay Office Issue No: 010 Issue date: 08 June 2015″. This report lists a ‘Heathrow Sub Office’ for the Edinburgh Assay Office without specifying its address.



However, 4 days earlier on 4 June 2015, UKAS posted a report titled “The Edinburgh Assay Office Issue No: 009 Issue date: 04 June 2015” in which the Heathrow Sub Office was listed with an address of  “1st Floor,  Arena Parkway, Cranford Lane, Heston, TW5 9QA”.

Although the Issue 010 report from UKAS replaced its Issue 009 version a few days later, the Issue 009 version remained in the Google cache as a Google search result and also as a complete cached document:

Edinburgh Assay Office Heathrow sub office 1st floor Arena Parkway

Cached version of Issue 009

UKAS Issue 009 4 June 2015 Edinburgh Assay Arena Parkway

The commercial logic for the Edinburgh Assay Office having a presence in Malca-Amit’s Arena building seems to be that, in addition to Malca-Amit storing precious metals and precious stones and jewellery in the building, the location is also convenient for the rest of the Heathrow area where precious metals and jewellery are constantly arriving into and departing from. This is the ‘Hallmarking in Transit’ service offered by the Edinburgh Assay Office, offered in conjunction with Malca-Amit, and explained on the Assay Office website here, and also on Malca-Amit’s website here.

The Edinburgh Aassy Office’s Heathrow sub-office was profiled in January 2015 in an article on website Jewellery Focus, complete with photo of the office in the Arena building. Notice the Malca-Amit warehouse floor in the background of the photo with the office on the 1st floor. The one year anniversary of the Edinburgh Assay Office sub-office in the Malca-Amit premises was also recorded in an end of January 2016 article from Professional Jeweller titled “Edinburgh Assay Office celebrates one year of Hallmarking in Transit at Heathrow”.

This is not the only UK-based assay office to maintain a sub-office in the premises of a secure precious metals transport and secure storage operator near Heathrow Airport. The Goldsmiths Company – Assay Office, which is headquartered in the City of London, also operates a Heathrow Sub Office in “Unit 7, Radius Park, Faggs Road, Feltham, Middlesex, TW14 0NG”. This is listed in a UKAS report “The Goldsmiths’ Company – Assay Office Issue 016 Issue Date 05 August 2014″. This ‘Unit 7 Radius Park’ is a Brinks building and it too contains a vault, but that’s another vault profile for another day.


From Good Delivery bars to Kilobars – The Swiss Refineries, the GFMS data, and the LBMA

In early September 2015, I wrote an article titled “Moving the goalposts….The LBMA’s shifting stance on gold refinery production statistics”, in which I explained how the London Bullion Market Association (LBMA) had, on Wednesday 5 August, substantially lowered its 2013 gold and silver refinery production statistics literally a few days after I had commented on the sizeable figure of 6601 tonnes of 2013 refined gold production that the LBMA had previously published in May 2015.


  • On 5 August, the LBMA substantially altered and republished Good Delivery List gold and silver refinery production statistics in two of its published files: LBMA Brochure Final 20120501.pdf and LBMA Overview Brochure.pdf
  • For gold, the alterations were most pronounced in the 2013 refined production figure which was reduced from 6601 tonnes to 4600 tonnes, i.e. a 2001 tonne reduction
  • Other years’ figures for refined gold refinery output (2010-2012) were also reduced, with the 2008-2009 figures being increased
  • As part of the update, the LBMA linked its amended figures solely to GFMS estimates of gold mining and scrap output,  adding the words ‘estimated to be‘ in front of the 4,600 tonnes figure, and the words ‘owing to recycling of scrap material‘, thereby framing the revised figure solely in terms of scrap gold in excess of 2013 gold mining supply. This use of GFMS data is bizarre because all refiners on the LBMA’s Good Delivery List provide exact refinery production statistics to the LBMA Executive as part of the LBMA Pro-Active Monitoring programme, so there are no need to reference estimates from external data providers
  • In the updated versions of the brochures, the LBMA made no reference to why the gold figures had been reduced, nor what the original figures referred to, particularly for the huge difference of 2,000 tonnes of gold refinery output in 2013 between its two sets of figures
  • By 12 August, the LBMA had again updated its 2013 gold refinery output figure to 4579 tonnes

In my Part 1 article, I had concluded that:

“There are 2,300 tonnes of 2013 gold refining output in excess of combined mine production and scrap recycling being signalled within the  6,601 tonnes figure which was removed from the LBMA’s reports on 5 August 2015.

Could it be that this 6,601 tonne figure included refinery throughput for the huge number of London Good Delivery gold bars extracted from gold ETFs and LBMA and Bank of England vaults and converted into smaller gold bars in 2013, mainly using LBMA Good Delivery Swiss gold refineries? And that maybe this 6,601 tonne figure stood out as a statistical outlier for 2013 which no one wanted to talk about?”

Note that for 2013, Gold Field Mineral Services (GFMS) estimated gold mining production to be 3,022 tonnes, and gold scrap supply to be 1,280 tonnes for 2013, so in total GFMS estimated gold mining + scrap supply at 4,302 tonnes in 2013. Therefore, the LBMA’s original figure for 2013 gold refinery production of 6,601 tonnes exceeded the combined GFMS mine and scrap supply by 2,300 tonnes.

Whose interests are served by replacing actual refinery output figures with far lower estimates comprising GFMS gold mine production and scrap recycling data? What happened to the third major source of gold supply to refineries during 2013, i.e. London Good Delivery gold bars, and why won’t the LBMA reference this? Why would the LBMA go to great lengths to de-emphasise the huge volume of Good Delivery gold bars being sent to gold refineries (especially in 2013) for conversion into 9999 fine kilobars, when its obvious for all to see that this huge migration of bars happened?

This article, which is Part 2 of the analysis into the LBMA’s 2013 gold refinery statistics, looks into this 6,601 tonne number and the 2,300 tonne delta compared to GFMS estimates, specifically examining the mountain of evidence that highlights the huge volume of Good Delivery bars that were processed through the Swiss gold refineries in 2013, and the huge associated shipments of gold from the UK to Switzerland, and onward from Switzerland to Asia.

Part 2 also looks at the extent to which GFMS and the World Gold Council, through their report text and data, addressed, and did not address, the non-stop processing of Good Delivery gold bars into smaller finer kilobars during 2013.

When Part 1 was written, I had also planned that Part 2 would examine the 2013 gold withdrawals from the London-based gold ETFs, and the 2013 withdrawal of gold from the Bank of England, however, these topics were subsequently addressed in a separate piece titled “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“.

That article itself had found a lot of interesting information including:

  • that the entire London LBMA vault network (including the Bank of England) lost 1,500 tonnes (120,000 bars) between 2011 and early 2014, shrinking from 9,000 tonnes to 7,500 tonnes
  • Between the end of February 2013 and the end of February 2014, the amount of gold in custody at the Bank of England fell by 755 tonnes
  • In 2013, the large physically-backed gold ETFs which store their gold in London saw a 720 tonne outflow of gold (GLD 561, IAU 60, ETF Securities’ PHAU 52, ETS Securities GBS 42, ‘Source’ Gold 31)
  • The full set of gold ETFs storing their gold in London can, nearly down to the exact tonne, account for all of the LBMA vaulted gold held outside the Bank of England vaults (See  start of my article titled “Central bank gold at the Bank of England” for an explanation of this)

Note: Deutsche Bank gold ETFs and an ABSA gold ETF also store their gold in London, and during 2013, these 2 sets of ETFs lost approximately a combined 12 tonnes of gold (~9 tonnes from Deutsche and ~3 tonnes from ABSA, so this would increase the 720 tonne ETF loss above, to about 732 tonnes.


Yet another Change to the LBMA Brochure in September 2015

On 29 September 2015, the LBMA made a further alteration to the 4-page LBMA Overview Brochure, the brochure that had featured the shifting gold and silver refinery output statistics.

On this occasion, although the data in the table remained unchanged, some unusual footnotes were added underneath the table of refining statistics. The text, table and the new footnotes are as follows:

LBMA brochure refining Sept 2015 text

The footnotes are highlighted as per yellow box:

LBMA brochure refining Sept 2015 footnotes and table

Let’s look at these 3 footnotes one by one.

Note 1): The data for 2008-2013 contains estimates which will be updated when actual data becomes available.

This note is illogical, since the LBMA already has all of the exact data of gold and silver output per refinery. This was stated in the previous versions, and it’s all detailed in my previous article.

Also, specifying ‘Figures correct as at September 2015’ is illogical since the LBMA states that the data is ‘estimates’ and not ‘actual data’. Correct relative to what? How can ‘estimates’ be deemed to be correct if the ‘actual data’ is not published?

That would also explain the bizarre note number 2.

Note “2) Refined production should include only the refinery’s output that has gone through a refining process”.

Footnotes to tables are normally used to explain data, not to justify the data. This Note 2 sounds more like a pronouncement or a direction from a LBMA communication to the refineries rather than an explanatory footnote.

In English grammar, ‘Should‘ means to give advice, a recommendation or a suggestion, and to express obligation or expectation. This footnote looks like it has been lifted out of a directive from the LBMA to the member refineries.

Converting a 995 fine Good Delivery ~400oz bar into a series of 999 kilo bars does involve a a chemical refining process in addition to melting and pouring. The transformation by the refineries of large bars into smaller bars is still throughput, and is a refinery process (as you will see below).

Also problematic to the LBMA’s footnote is that converting 9999 fine scrap (in the form of old bars) to new 9999 bars, which sometimes happens, would not necessarily be captured in the above LBMA footnote, so this approach to seemingly attempt to tie in the LBMA data to GFMS mining and scrap refining data opens up a can of worms.

Note 3): the production of newly accredited refiners excludes production in the years prior to accreditation.

Note 3 should be obvious, and besides, it wouldn’t change much in terms of the huge gaps in the numbers between 6601 tonnes in 2013, and the GFMS figure of 4302 tonnes.


Macquarie 2013 – Where has the ETF gold gone

In August 2013, Macquarie Commodities Research, in its report “Where has the ETF gold gone” commented that:

“over 1H 2013 it [the UK] has exported 797 tonnes [of gold], equivalent to 30% of annual gold mine production”

“…gold bars from ETFs have gone to Switzerland, where most of the world‟s gold refining capacity is, to be remelted into different size bars and coins and then sold on end consumers, predominantly in Asia, specifically China and India.

“Trade data also backs up this movement of gold – Hong Kong customs reported imports of gold from Switzerland of 370t in 1H 2013, up 284t on 1H 2103 (fig 3), while Indian imports from Switzerland appear to have risen by more than 100t YoY.

It is not really very surprising that the gold has found its way from vaults in London (and most likely the US and Switzerland) to Asia via Swiss refineries. We have repeatedly noted that gold ETFs are part of the physical gold market and if investors don’t want the gold it has to go somewhere else.”

Since the four large Swiss gold refineries account for the lions share of worldwide annual gold refinery output (See my article “Swiss Gold Refineries and the sale of Valcambi“), its important to examine what the Swiss gold refineries had to say about the smelting of London Good Delivery gold bars into smaller bars in 2013, as well as their comments about the dramatic reduction in gold scrap coming into the refineries during that time.

Note that London Good Delivery gold bars are variable weight bars that weigh about 400oz each (12.5kgs). These are the standard type of gold bars stored in central bank vaults and held in physically backed gold Exchange Traded Funds (ETFs) such as the SPDR Gold Trust (GLD).

 Swiss Gold Imports from the UK: 2013

In 2013, Switzerland imported more than 2,600 tonnes of gold and exported approximately 2,800 tonnes of gold. That year’s gold import and export totals were the highest ever annual totals recorded for Switzerland. See chart below from Nick Laird’s Sharelynx.

Although Switzerland doesn’t possess any major gold mines, it does host one of the largest physical gold markets in the world, which regarding investment gold, primarily comprises the large Swiss gold refineries along with some bullion banks (including UBS and Credit Suisse), the Swiss National Bank and the Bank for International Settlements (BIS), and the Swiss wealth management and private banking sector. But the throughput and precious metal processing of the four large gold refineries accounts for nearly all the country’s gold imports and exports.


The UK is consistently the largest import source of gold into Switzerland. In 2013, Switzerland imported nearly 1,400 tonnes of gold from the UK during the year, with hardly any gold moving back in the opposite direction. Notwithstanding the fact that the UK does not have any producing gold mines, 1,400 tonnes is 46% of GFMS 2013 global gold mining production estimate of 3022 tonnes. And despite the fact that GFMS itself stated that the UK only contributed 41 tonnes of gold scrap to the 1280 tonne global gold scrap total in 2013, 1400 tonnes of UK gold exports to Switzerland is 109% of GFMS’s 2013 global gold scrap estimates.

So why is the LBMA not including all of this 1400 tonnes of UK to Switzerland gold exports in its 2013 gold refinery production statistics?


Even Swiss gold imports from the United States in 2013, at 267 tonnes, paled into comparison compared to Switzerland’s imports of 1,373 tonnes of gold from the UK, and left all other import sources such as Italy and France in a distant third.


Thanks to Nick Laird of Sharelynx for permission to use the above 3 charts.

Swiss Refineries – From the Horses’ Mouths

Let’s look at what the Swiss gold refineries had to say about the conversion of Good Delivery gold bars into smaller bars during 2013. You will see that the large Swiss refining companies treat Good Delivery bars as one of three sources of supply coming in to their refineries.

It’s important to note that the transformation of London Good Delivery bars of 995 fineness into, for example, kilobars of 9999 fineness, still involves the use of chemicals in reactions, albeit smaller amounts than when refining mining ore, and is not just a simple melting and re-casting exercise.

Argor-Heraeus’s perspective on Good Delivery bars in 2013

In its 2013 Corporate Sustainability Report, Argor-Heraeus had the following comments to say about the 400oz bar to smaller bar transformations:

In 2013, we consumed 3,120,603 kg of chemicals, 4% less than in 2012, despite a slight increase in precious metals processing. This decrease derives from the fact that a large percentage of gold processing involved the re-smelting of metal already in circulation (Good Delivery) to obtain high-fineness ingots, which are in great demand. The processing of a metal that is already pure requires smaller amounts of chemicals in reactions, as opposed to the refining of raw materials from mines.”

Argor-Heraeus even divides the gold inputs that go into its refining process into three distinct categories, namely, a) Scrap, b) Mines and c) Good Delivery, such is the importance of the Good Delivery refining activity to the refinery. See the following graphic from the Argor-Heraeus 2013 Sustainability report, complete with descriptive icons of the three input sources inputs of metal:

AH flow


The text box from the left-hand corner of the above graphic has been zoomed in and magnified below to aid readability:

AH text

Elsewhere in the same report, Argor-Heraeus reiterates the same 3 sources of gold supply that come in to its refineries for ‘Transformation and Processing‘.

AH graphic

Argor-Heraeus picks up the Good Delivery bar theme again in its 2014 Corporate Sustainability Report, where it produces a similar but slightly more detailed graphic, complete with the icons, and which explains that the Good Delivery bars can be either ‘grandfathered or non-grandfathered‘ and that the materials are ‘already certified Good Delivery, or already high-quality‘. High quality but not good delivery could be signifying gold bar brands on the former London Good Delivery list, or else lower grade coin bars, that had originally been made from melting down and casting into bars the gold coins that were previously  in circulation. Coin bars were at one time on the London Good Delivery list up until 1954.

Grandfathered is a term used by the LBMA in its discussions of ‘Responsible Gold Guidance‘ and is defined as:

Grandfathered Stocks: Gold investment products (ingots, bars, coins and grain in sealed containers) held in bullion bank vaults, central bank vaults, exchanges and refineries, with a verifiable date prior to 1 January 2012, which will not require a determination of origin. This includes stocks held by a third-party on behalf of the listed entities.

 The Argor-Heraeus 2014 graphic referencing Good Delivery bars is as follows:

AH 2014 graphic1


Metalor’s information on Good Delivery bars in 2013

In its 2013 Annual Report (large file 3.4 MBs), within the review of 2013 performance section, large Swiss based gold refinery Metalor Technologies highlights a steady demand for ‘recasting of gold bars for banks':

“Full-year net sales in the Refining business unit declined by 16 percent as precious metal prices remained low, reflecting a weak global economy. The drop in prices negatively impacted the price/volume mix, as reduced quantities were retained at lower prices. This was partly offset by steady demand in less profitable activities, such as the recasting of gold bars for banks.”

Metalor also provided a host of pertinent insights into other drivers of the 2013 gold market:

“The spot-price of gold and silver declined by more than 30 percent over a six-month period, and this prompted sharp sell-offs of the gold stored in ETF (Exchange-Traded Funds) vaults. The consensus is that this surplus was absorbed by strong China based bullion purchases, while price-dependent scrap flow fell rapidly.”

High grade precious metal bearing scrap flows worldwide dropped sharply due to sustained price erosion. This market development created an overhang in refining capacity, and a much more competitive pricing environment, although some of the volume reduction in scrap flows was offset by new mining doré contracts. The drop in price led to strong bullion purchases, mainly driven by China.”

The Refining business unit saw a challenging 2013, due to reduced gold prices. This resulted in a continuous slowdown in the scrap market. …….a decreasing volume of mining doré coming from abroad, due to changes in country regulations.”

“In Asia, the Hong Kong refinery was able to sustain a high level of activity due to strong demand and a high premium on bullion products.”


Valcambi on refining of Banks’ gold

Valcambi has an annual refining capacity “in excess of 1,200 tons for gold and 400 tons for silver“, so is known for having potentially unused refining capacity.

Following the July 2015 Valcambi acquisition by Indian company Rajesh Exports, the acquirer clarified to Indian newspaper ‘Business Standard’ that it was a regular activity for Valcambi to use its excess capacity to meet “emergency” refining requirements for gold held by bullion banks.

In fact, on the recently updated Valcambi website, an entire web page is now devoted to describing how transportation works for banker clients, in addition to clients that are miners, scrap dealers, other refineries, and watch makers. See ‘Transportation for Bankers‘ web page which details the import and exports procedures which the Valcambi refinery offers its banker clients.

Valcambi bankers

Valcambi 1

Under its Assaying web page, Valcambi even sees fit to specifically explain the process for the incoming ‘shipments of Good Delivery (GD) bars‘ which are merely checked to confirm that they haven’t been tampered with, as opposed to the shipments of ‘Non Good Delivery (NGD) precious metals‘, which are subjected to homogeneity checking, sampling and analysis. This shows that the volume of Good Delivery bar shipments into Valcambi is significant enough to warrant specific coverage on its website.

Valcambi Assaying

Valcambi good delivery

Under its Refining web page, Valcambi again details its ‘3’ sources of incoming gold, namely “primary doré supplied by mines”,  “industrial scrap and recycling“, and “metals invested and owned by financial and governmental institutions“, i.e. London Good Delivery Bars.

Valcambi refin

Valcambi refining

On the phenomenon of a low gold price leading to a decline of gold scrap coming into Valcambi, the CEO, Michael Mesaric, recently had the following to say while talking with Indian publication Bullion Bulletin at the India International Gold Convention (IIGC) 2015 in Goa:

Bullion Bulletin: The gold price is coming down continuously, is there any impact on the refinery segment?

Michael Mesaric: There is a small impact as well because if the gold price is very low there is very little scarp coming in.”


Argor-Heraeus interviews -They’re bringing in good delivery bars”

On 4 December 2013, Alex Stanczyk from Anglo Far-East group, in an interview with Koos Jansen published on his BullionStar blog, said that he (Stanczyk) and colleague Philip Judge, accompanied by Jim Rickards, had just returned from a visit to Switzerland where they had met with the managing director of one of the large Swiss refineries. Although the identity of  the refinery was not revealed, Alex Stanczyk said that the refinery MD informed them that there was huge demand for fabrication at his refinery and that:

“They put on three shifts, they’re working 24 hours a day, and originally he (the MD) thought that would wind down at some point. Well, they’ve been doing it all year. Every time he thinks its going to slow down, he gets more orders, more orders, more orders. They have expanded the plant to where it almost doubles their capacity. 70 % of their kilobar fabrication is going to China, at a pace of 10 tons a week.”

They’re bringing in good delivery bars, scrap and doré from the mines, basically all they can get their hands on.”

“…sometimes when they get gold in, it’s coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the (nineteen) sixties.”

The same Swiss gold refinery executive was interviewed by Jon Ward of the Physical Gold Fund in September 2015, with the interview published as a podcast and as a transcript.

Jon Ward: In 2013, I recall you commented on the tightening of physical supply in the gold market and even the difficulties you were having in sourcing material. In fact, as I remember, you remarked that in 30 years, you’d never seen anything like it.”

The exact identify of the Swiss refinery executive was also not revealed in the September 2015 interview, however the executive is most certainly from the Argor-Heraeus refinery. Why? Because, the introduction to the 2015 interview states that:

“The gentleman we are interviewing  is part of senior management of one of the largest Swiss refineries.  His refinery is one of only 5 global LBMA referees…”

The LBMA appoints 5 refinery assay laboratories to help it to maintain the Good Delivery system. These appointees are known as ‘Good Delivery Referees’ and they meet on a quarterly basis at the LBMA. The 5 Good Delivery Referees are Argor-Heraeus, Metalor Technologies and PAMP (all from Switzerland), Rand Refinery (South Africa), and Tanaka Kikinzoku Kogyo (Japan).

Therefore, the interviewee has to be from one of three Swiss refineries, namely, Argor-Heraeus, Metalor or PAMP.

Furthermore, and this is the critical point, during the interview, the refinery executive states that his company has just opened in Santiago, Chile.

“Head of Refinery: ..looking at mining partnerships, we are expanding in Latin America. We have just opened in Santiago, Chile, and are trying to provide even more competitive services for the Latin American mining industry.”

Out of the short-list of Argor-Heraeus, Metalor, and PAMP, the only one of the three to open an operation in Santiago, Chile in 2015 (and the only one of the three to even have an operation in Chile) is Argor-Heraeus. See Argor-Heraeus new item below from the news page of its website dated 16 September 2015:

AH Santiago

The press release for the above Chilean plant announcement is only in Italian, but can be read here.

Lets look at what the Argor-Heraeus refinery executive says about conversion of Good Delivery bars to kilobars, both in 2015 and during the few years prior to that. From his September 2015 interview:

Jon Ward: Over the last couple of years, has this meant that you actually had to melt down and re-refine a whole lot of 400-ounce bars for China? If you have, I’d like to know where the bars come from.

Head of Refinery: The bars are coming from what you could call “the market.” Looking back, there were all these ETF liquidations, and the ETFs were holding bars in the form of 400-ounce bars. At that time a lot of the physical liquidity maintained in the London gold market was actually in 400-ounce large bars. The final customers were not interested in 400-ounce bars, so it was one of our jobs to take these bars, melt them down, refine them up to the 999.9 standard, and cast them into kilo bars.

Jon Ward: Were a whole lot of these bars coming from London?

Head of Refinery: Regarding the ETF liquidations, this gold had to go somewhere, and that was all converted. This is a thing you see every year. You also see some liquidations of physical gold held with COMEX and NYMEX. More or less, these are the sources of gold other than newly mined.

 PAMP – Three Shifts and Full Capacity – Barkhordar

In January 2014, in an article titled “Gold Flows East as Bars Recast for Chinese Defying Slump“, Bloomberg highlighted that the PAMP refinery, owned by MKS (Switzerland) SA, was at full capacity during parts of 2013,  and the article quoted PAMP Managing Director Mehdi Barkhordar as saying that they had to add production shifts to cope with processing demand:

“Gold’s biggest slump in three decades has been a boon for MKS (Switzerland) SA’s PAMP refinery near the Italian border in Castel San Pietro, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry.”

To keep up with orders, MKS added shifts at the PAMP refinery, located about 4 miles (6.4 kilometers) from the Italian border, Barkhordar said in November…”

Furnaces that can process more than 450 tons a year were at full capacity from April to June, melting mined metal, scrap jewelry and ingots at 1,000 degrees Celsius (1,832 degrees Fahrenheit) into the higher purities and smaller sizes favored by Asian buyers.”

“The surge in orders meant some parts of the refinery worked three shifts instead of the usual two, Barkhordar said.”

Again, you can see that there were three sources of supply for the PAMP refinery in 2013, i.e. mining, scrap and ingots (bars). According to GFMS, global scrap gold supply fell by 354 tonnes (21%) from 1634 tonnes in 2012 to 1280 tonnes in 2013, so this did not account for the ‘surge in orders’ and the need to add extra refinery shifts. Likewise, global gold mining output only increased by 160 tonnes (5%) from 2860 tonnes in 2012 to 3022 tonnes in 2013, and much of this increase was in China, Russia, Australia, Kyrgyzstan, and Indonesia which refine their own gold domestically, so this would also not explain the surge in orders, which therefore can only be attributable to recasting existing large gold bars into “smaller sizes favored by Asian buyers“.

Therefore, all 4 of the 4 large Swiss gold refineries are on the record that London Good Delivery gold bars were a very significant source of gold supply into their refineries during 2013 and even since then. So why did the LBMA amend its 2013 gold refining production statistics and seek to purely link its revised ‘estimate’ numbers to GFMS estimates of gold mine supply and gold scrap supply? There is an entire third source of gold supply to the refiners being overlooked because the LBMA dramatically reduced its 2013 gold refining production figure of 6,601 tonnes. Classifying Good Delivery bars as a supply source for refining is as legitimate as classifying gold scrap as a supply source for refining, and both come from above ground gold stocks.


GFMS and the World Gold Council

The well-known gold research consultancy GFMS, as well as gold mining lobby group the World Gold Council, between them produce a number of gold supply and demand reports each year. [Note: GFMS, formerly known as Gold Fields Mineral Services, is now part of Thomson Reuters].

Each year GFMS publishes a gold survey and related update reports later in the year. In 2013, this GFMS gold survey included two update reports. The 2013 survey and its updates were sponsored by Swiss refiner Valcambi and Japanese refiner Tanaka, with ‘generous support‘ from a selection of entities including Swiss refiner PAMP (part of the MKS Group),  South African refiner Rand Refinery, US gold mining companies Barrick and Goldcorp, bullion bank Standard Bank, US futures exchange CME Group, and the gold mining sector backed World Gold Council.

Its notable that the GFMS reports are ‘sponsored’ by some of the large Swiss gold refiners, yet there is nothing in the GFMS reports that puts cold hard factual numbers on the amount of Good Delivery bars processed through the refineries. As you will see below, GFMS mentions the good delivery bar processing in passing in its text, but not in its 2013 gold supply-demand ‘model’.

What, if anything, did GFMS have to say about conversion of London Good Delivery gold bars into smaller gold bars, such as kilobars, during 2013?

In its GFMS Gold Survey for 2013 – Update 1 (large file 11MBs) report, published in September 2013, the report states that:

“Strong trade flows were recorded between the UK and Switzerland, where Good Delivery metal was refined to smaller bars and shipped to India and China.”

The GFMS Gold Survey for 2013 – Update 2 (large file 9.8 MBs), published in January 2014, reiterated this point about large bar to small bar refining. On page 5 of the Update 2 report it states:

The duality of disinvestment in the developed world and an increase in physical demand from Asia was witnessed by the largest movement of gold, by value, in history as bars were shipped to Asia, often being melted down into smaller bars en route.

Notice that not all Good Delivery bars were converted to smaller bars before shipment to Asia. Some shipments went straight to Asia without being melted and converted.

And on page 9 of the same Update 2 report, the source of some of these smaller bars is given, i.e. the source was UK ETF gold holdings:

As a consequence, UK-led ETF outflows found their way to Switzerland, where refiners melted the metal into smaller bars, and shipped them East, in order to satisfy the surge in demand.”

The World Gold Council (WGC), regularly issues its own gold supply demand reports called ‘Gold Demand Trends‘, and publishes these reports in the form of an annual version, followed by shorter quarterly updates. In ‘Gold Demand Trends Q3 2013′, published in November 2013, the WGC said:

“Gold continued to work its way through the supply chain, to be converted from London Good Delivery bar form, via the refiners, into smaller Asian consumer-friendly kilo bars and below. This process is borne out by recent trade statistics. Data from Eurostat show exports of gold from the UK to Switzerland for the January – August period grew more than 10 fold to 1016.3 tonnes. This compares to a total of just 85 tonnes for the same period in 2012.”

In its Full Year 2013 edition of ‘Gold Demand Trends’, published in February 2014, the World Gold Council had this to say about the London Good Delivery bar shipments going to refineries, being transformed into smaller bars, and then recommencing their onward journey to the East:

No review of 2013 would be complete without a mention of the unprecedented flow of gold from western vaults to eastern markets, via refiners in North America, Switzerlandand Dubai.”

These shifts resulted in the shipment and transformation – on an epic scale – of 400oz London Good Delivery (LGD) bars into smaller denominations more suitable for consumers’ pockets.”

Notice the reference to refiners in North America and Dubai also, in addition to Switzerland.

In its ‘Gold Demand Trends Q1 2014‘ published in May 2014, the WGC stated that:

As illustrated last year when gold flowed out of western ETFs, through refineries in Switzerland and to consumers in the East, official trade data can provide insights into global gold flows.”

The full GFMS Gold Survey for 2013 (large file 6.2 MBs), i.e the report before the 2 updates, was originally published in April 2013, and was written too early in 2013 (probably written in March 2013) to really capture the flows of Good Delivery gold bars from the UK to Switzerland that were smelted into smaller bars. This was before the massive gold price smash of April 2013 that got the ETF gold sales going. That report mentions ETF gold outflows of 148 tonnes up to 11th March 2013, including 111 tonnes from the SPDR Gold Trust (GLD), but the 2 GFMS update reports from September 2013 and January 2014 were written at a later date, with a better vantage point, when the 400oz bar to smaller bar trend had gathered momentum.

Where was the Swiss refinery output going to in 2013?

On the outbound export route, Swiss gold exports of 2,800 tonnes in 2013 went primarily to Hong Kong (939 tonnes), India (520 tonnes), China (254 tonnes), Singapore (179 tonnes), Thailand (149 tonnes), Turkey (147 tonnes) and the United Arab Emirates (125 tonnes), with the residual 500 tonnes going to other destinations as detailed in the below chart from Nick Laird’s Sharelynx.




GFMS – Masking the Swiss refining of Good Delivery Bars?

Given that the LBMA decided to compare its amended gold (and silver) refinery production statistics against GFMS ‘estimates’ of gold supply (especially out of sync for 2013), then its important to look at what GFMS claimed gold supply and demand to be in 2013. This may help in determining a possible rationale the LBMA had for reducing its refinery output figures.

So, does the 2013 GFMS gold supply and demand data model show this “largest movement of gold, by value, in history” “on an epic scale” phenomenon from the UK to Swiss refiners to Asia? The answer is explicitly NO, neither in 2013, nor in any prior year, but to a limited extent yes, but only after drilling down into the sub-components of an obscure GFMS balancing items within the GFMS supply-demand equation.

But GFMS precious metals supply data and the way it’s presented does not seem to want to highlight the ‘largest movement of gold, by value, in history‘. So even though GFMS mentions (in passing – see above) the historically important 2013 movement of 400oz bars to refineries through places like Switzerland and their transformation into smaller bars by the large gold refineries, the GFMS gold supply statistics keep some of the relevant numbers locked away and jumbled up within a rather odd rolled up figure that it calls “implied net (dis)investment“. Other relevant data, such as OTC demand data, is not even detailed by GFMS, it’s just assumed.

 GFMS gold supply – Disaggregating the implied figure

Here is how GFMS gold supply statistics looked for 2013, taken from the GFMS Update 2 2013 report published in January 2014. In 2013 GFMS used 4 supply categories, namely, ‘Mine production‘, ‘Old gold scrap‘, ‘Net producer hedging‘ and ‘Implied net disinvestment‘.

GFMS-style gold supply and demand figures, 2013 - from GFMS Update #2 report
GFMS-style gold supply and demand figures, 2013 – from GFMS Update #2 report

The first thing to notice is that there is no GFMS supply category called ‘Good Delivery bars’, unlike the large Swiss gold refiners themselves which actually list Good Delivery bars as a distinct gold supply category, such is the importance of that supply source.

Neither is there any category for Gold ETF outflows. So even though 6,600 tonnes of gold came out of LBMA gold refineries in 2013, if you looked at a GFMS supply demand model from 2013, you would never know this. Apart from gold mine production of 2,982 tonnes and old scrap supply of 1,371 tonnes (which together totalled 4,353 tonnes), the only other non-zero supply figure in the GFMS model was ‘implied net investment’ of 383 tonnes.

On the demand side in 2013, GFMS listed jewellery fabrication (2,198 tonnes), other fabrication (792 tonnes), central bank purchases (359 tonnes), physical bar investment (1338 tonnes), and producer de-hedging of 50 tonnes. Again, looking at this demand side, you would not know that gold refinery output in 2013 reached 6,600 tonnes, and that this figure was 2,300 tonnes more than combined mine production and scrap recycling.

There was also a footnote to the above GFMS supply and demand summary table which defines the GFMS definitions of ‘Net producer dehedging‘ and ‘Implied net disinvestment/investment‘.

GFMS defines ‘Implied net disinvesment‘ or “Implied net investment‘ as a residual figure in its supply-demand table (i.e. a plug figure), and states that this “captures the net physical impact of all transactions not covered by the other supply/demand variables“, So basically, it’s a catch-all plug figure. GFMS says that “the implied net (dis)investment  figure is not independently calculated, but derived as the item which brings gold supply and demand into balance.” See full GFMS explanation below:

GFMS disclaimer

This ‘Implied net’ (investment/disinvestment)’ figure is where the 2013 GFMS supply and demand figures become, in my view, completely convoluted and opaque. GFMS says, in both its 2013 Update 1 and Update 2 reports that:

“It is interesting to examine how the implied figure compares to information on activity within the different arenas of investment over the year, (although given aforementioned limitations in this information, it is not possible to dis-aggregate accurately the implied figure into these components)”.

How GFMS exactly makes sense of its ‘Implied net’ (investment/disinvestment)” figures is hard to fathom because there is no proper explanation of the ‘aforementioned limitations‘ that GFMS alludes to except the fact that it doesn’t seem to be able to offer estimates for physical bar movements in Comex nor physical bar movements in OTC activity, part of which it considers the bar shipments to Switzerland to be.

GFMS could also maybe ask the gold refineries in Switzerland and elsewhere for the throughput figures on what they refined in 2013, be it gold mine doré, scrap metal, or Good Delivery bars, and then use that data also. And GFMS could also ask the SPDR Gold Trust Authorised Participants how much gold each of them took out of the GLD in 2013 and how this gold made its way to Switzerland and elsewhere, did the banks send the gold to Switzerland themselves using secure transporters such as Brinks, or did they sell it to other parties who then sent it to the refineries etc etc. The same question could be asked of the Bank of England and the amount of gold withdrawn from its gold vaults and the bullion bank identities of who withdrew it.

In the GFMS world, demand has to equal supply, so whichever side of the equation is greater, the other side has to have a plug figure. In 2013, GFMS put the above items into the demand side, and arrived at an estimate of 4,737 tonnes for demand. It then did an estimate for supply using only 2 components (mining and scrap), and arrived at 4,353 tonnes for supply. Since demand did not equal supply, GFMS then said that implied dis-investment was 383 tonnes. (The figures are 1 tonne out due to what must be a rounding error).

Here is my quick and easier to read version of the GFMS 2013 gold supply – demand table:

gfms 2013 reformat

GFMS then takes the plug figure of 383 tonnes and thinks about an explanation for it.

In its 2013 gold surveys, GFMS also produced another figure which it called ‘World Investment‘, which it defined as “the sum of implied net investment, physical bar investment, and all coins“. It provided this ‘world investment’ figure for both H1 and H2 2013.

This ‘world investment’ figure includes investment demand for physical gold bars and coins, gold medallions, and imitation coins (made of gold), but it also includes investment in products such as gold-backed ETFs. So if there is a huge outflow of gold from the gold ETFs, as there was in 2013, GFMS did not consider this to be gold supply, but rather, GFMS considered it to be negative demand, that it then buries in the implied net investment category.

Since the Authorised Participants of the large gold ETFs redeemed huge amounts of gold from these ETFs in 2013, especially in the first half of 2013, GFMS refers to this as gold ETF ‘investors’ redeeming gold from the ETFs. This is not entirely true because only large investors can redeem from an ETF such as GLD. Small investors just sell their shares in GLD. GFMS calls these 2013 ETF redemptions ‘implied disinvestment’, and it is this phenomenon that caused the GFMS ‘implied disinvestment’ category to be negative in the first half of 2013, but not in the second half of 2013, when GFMS insists that there was positive ‘implied net investment’.

GFMS calculated that there were 550 tonnes of gold outflows from ETFs in the first half of 2013, and 330 tonnes of gold outflows from the same ETFs in the second half of 2013, making a total outflow of 880 tonnes for 2013. Somehow, although the 550 tonnes of gold that left ETFs in H1 2013 caused the H1 implied net investment to be a negative 613 tonnes (as would be expected), the 330 tonnes of outflow from gold ETFs in H2 2013 did not, in GFMS’s eyes, have the same effect, and GFMS’s implied net investment in H2 2013 was a positive 230 tonnes, meaning that although ETFs had an 880 tonne outflow for the full year 2013, the GFMS implied net investment was only -383 tonnes. This then creates another residual number which would have to have been a positive 497 tonnes from some other type of investment demand.

gfms world inv 2013

What else is buried in this GFMS implied net investment apart from ETF flows? It seems to have been Comex exchange activity and OTC activity that is within this implied figure, but GFMS avoids putting numbers on it, hence the confusion.

The reason given by GFMS for a positive net investment of 230 tonnes in the second half of 2013, which cancelled out approximately 500 tonnes of the ETF gold outflows, was what it calls  “significant net buying” in the OTC market.

GFMS refers to its implied net investment figure as “a proxy for institutional investor activity” and said that it “shifted to negative territory” in H1 2013. I’ve included the GFMS 2013 discussion below, just to should how convoluted and unsatisfactory this GFMS logic was. Firstly, the GFMS Update 1 report discussion on ‘implied net investment':

“The implied net (dis)investment figure is not independently calculated, but derived as the item which brings gold supply and demand into balance. The figure should therefore not be seen as an exact tonnage equivalent but instead an indication of investment activity separate from retail bar and coin demand. Additionally, although a substantial majority of this tonnage will reflect such activity, implied net (dis)investment could also include other flows that, technically, are outside the definition of investment. One example is the impact of any central bank activity that is not being picked up in our official sector figures and that would, as a result, be absorbed within our implied net (dis)investment category.”

“Despite this caveat, implied net (dis)investment typically does provide a clear indication of the overall impact of investor activity on the market for the period discussed. Furthermore, using information collected through field research and publicly available data, Thomson Reuters GFMS performs a ‘reality check’ on these values.”

“It is interesting to examine how the implied figure compares with information on activity within the different arenas of gold investment (although given aforementioned limitations in this information, it is not possible to disaggregate accurately the implied figure into these components).

Due to the nature of gold ETFs and other similar products, we are certain that the near 580-tonne decline in ETF holdings had a one-to-one impact on the volume of investment. The picture is somewhat more opaque when it comes to the futures and OTC markets. As for the former, at end-June, noncommercial and non-reportable net positions in Comex futures were 477 tonnes lower than the end-2012 figure. Turning to the OTC market, however, the first half-year saw robust volumes of investment.

 “As a shortage of bullion rapidly developed in many regional markets and local premia jumped, transactions that were related to physical gold transfer jumped in the London market. Feedback from our contacts, gold trade data and clearing statistics published by the LBMA indicate that a substantial amount of large gold bars (from redemptions of ETFs and sales from unallocated accounts) were shipped to Switzerland from mid-April to be converted to small bars for markets in Asia and the Middle East”.

In its 2013 Update 2 report, GFMS then stated the following. Notice how a lot of the text is copied over from the previous Update 1 report. Update 2:

GFMS update 2 implied

Therefore, GFMS throws a number of items into its OTC category but steers clear from committing itself to really explaining what it means by OTC activity. It states that “the OTC
market is dominated by institutional investors“. It states that  “a substantial amount of large gold bars (from redemptions of ETFs and sales from unallocated accounts) were shipped to Switzerland from mid-April to be converted to small bars for markets in Asia and the Middle East“.

It alludes to “direct shipments, albeit more restrained, from the United Kingdom to the Far East also jumped, as refineries reached full capacity.”

GFMS hazily refers to ‘metal accounts’, which I would consider to be unallocated accounts, and not directly related to absorbing physical ETF gold outflows. GFMS says in its 2013 Update 1 report that “Metal accounts held by western high-net-worth investors also posted a net rise, largely reflecting gold’s traditional role as a means of wealth preservation. This was also partly related to the ongoing shift out of gold ETFs, as metal accounts offered lower fees, while transactions in the OTC market were less transparent than in ETFs.

By the time it wrote its Update 2 report for 2013, GFMS had concluded that:

GFMS update 2 otc

So an 880 tonne outflow of gold from the large ETFs (which are predominantly based in London), as well as hundreds of tonnes of gold outflows from the Bank of England, that led to 1373 tonnes of gold being exported from the UK to Switzerland in 2013, the lions share of which were transformed into kilobars and then shipped to the Asian markets, somehow, according to GFMS, turned into only a negative 383 tonne implied net investment due to “significant net buying for the year as a whole” in the OTC market. There is no attempt to explain the 1373 tonnes of gold exported from the UK to Switzerland in 2013.

If you classify gold ETF outflows as a distinct supply category of gold, which seems logical to me and which the large Swiss gold refineries also consider it to be, then a GFMS supply-demand model would look like this:

gfms 2013 reformat ETFs

The trouble (for GFMS) then is, that the model doesn’t balance, and they are left with a 496 (or 497 tonne) item on the demand side that they can’t explicitly explain what it refers to.

World Gold Council version of GFMS 2013 data

The World Gold Council (WGC) also publishes gold supply and demand data in its annual and quarterly ‘Gold Demand Trends‘ publication. Until 2015, the WGC used GFMS data as a data source, after which it switched to using gold supply and demand data from the Metals Focus consultancy (see below for discussion of the WGC – Metals Focus switch). The WGC uses a different (and easier to understand) layout format for presenting the gold supply and demand data, but for the 2013 format, it still subscribed to the approach of putting ETF withdrawals in the demand category as a negative number.

In its ‘Gold Demand Trends – Full Year 2014′ report, which has the most complete data for 2013, the WGC states in a footnote that the source is

“Source: GFMS, Thomson Reuters; The London Gold Market Fixing Ltd; World Gold Council. Data in the table are consistent with those published by GFMS, Thomson Reuters in their Gold Survey but adapted to the World Gold Council’s presentation

WGC 2013 table

The above WGC model puts gold ETF outflows (Good Delivery bars) into its own line item, but instead of including it as Supply, the WGC puts this in a negative demand. There is also another line item under demand that the WGC calls ‘OTC investment and stock flows‘, which it defines as “Partly a statistical residual, this data is largely reflective of demand in the opaque over-the-counter (OTC) market, with an additional contribution occasionally from changes to fabrication inventories.

GFMS changes its Supply-Demand Methodology in 2014

When the GFMS 2014 Gold Survey was published in April 2014,  GFMS had surprisingly altered the methodology and formatting of its supply-demand data model to include gold ETF outflows as an explicit line item. GFMS also ditched the implied investment concept, but came up with a physical surplus /deficit plug figure instead. I say surprisingly because GFMS had used its previous supply-demand model for a long number of years. GFMS did not dwell on why this had not been done earlier, choosing instead to highlight the benefits of such a change:

GFMS 2014 methodology

Could it be that GFMS subscribers questioned as to why the huge ETF withdrawals were not explicitly listed in the 2013 GFMS supply-demand model, that forced the change? Perhaps.

The inclusion of ETF gold flows (and gold flows from gold futures exchanges) were explained as follows. The OTC category continued to seem to cause problems to GFMS. See below:


gfms meth 3

The actual re-gigged GFMS supply-demand model, redone for 2013 was as follows. The figures for 2013 are slightly different from the ones that GFMS published during 2013, since the table below was published in April 2014 when GFMS probably had updated data about 2013 compared to the reports it published during 2013:

gfms 2014

The above GFMS revised model can also be reformatted as below, moving ETF and Exchange ‘build’ to the supply side, since they are supply and not demand:

gfms 2013 using its 2014 formatting

How the 99 tonnes of Exchange Inventory supply is calculated is not clear. Net Balance of 277 became 276 due to rounding differences. Even including ETFs and Exchange Inventory, there is no explanation by GFMS of what the Net Balance referred to beyond a vague reference to OTC activity.

This GFMS 2014 Survey report was sponsored by Swiss refiner Valcambi, and Japanese refiner Tanaka, with support from Swiss refiner PAMP, the CME Group, the World Gold Council, German refiner Heraeus, Italian refiner Italpreziosi (Italy), Rand Refinery of South Africa, and Istanbul Gold Refinery. Again my question would be why not ask all of these refiners (especially the Swiss refiners) what their throughput of Good Delivery bars was during 2013.

Instead, GFMS still seemed to struggle with explaining what it calls ‘OTC trade’. It even discussed (with a straight face) the huge London gold market clearing volumes of paper gold in 2013, seemingly trying to use this as some sort of vague connection to physical bar movements:

gfms otc

As to GFMS’ assessment (on page 26) of OTC activity, there is nothing concrete offered by GFMS as to what the OTC investment consists of. It mentions bars being shipped to Switzerland and on to Asia, but why is this activity not captured in physical demand?

However, GFMS does have a section in its 2014 (discussing 2013) titled “Supply from Above-Ground’ Stocks”.

“If we include the sales of ETF holdings, then the visible supply of gold to the market from above-ground stocks was 2,160 tonnes, equivalent to 42% of total demand in 2013. The figure comprises 1,280 tonnes of scrapped fabricated products and 880 tonnes of sales from ETF stockpiles.”

And it also included a table of ‘Visible Supply’ in which it did add ETF withdrawals of 880 tonnes to the ‘SUPPLY’ side for 2013, which created a total of 5,182 tonnes of gold supply for 2013. So this is further proof that the amended LBMA gold refinery figures for 2013 are completely out of sync with reality, since even GFMS now includes this ETF supply.

GFMS Visible Supply 2013

But still, 5182 tonnes of supply does not explain 6600 tonnes of gold refining output for 2013. What about all the gold that was withdrawn from the Bank of England in 2013 and shipped to Switzerland? Does GFMS capture this central bank related flow?I can’t see anywhere in the GFMS model where these type of gold flows are captured.

GFMS claims that for official sector transactions, it uses sources such as the IMF and central bank websites, and also “our own proprietary data on undeclared central bank activity, compiled using information collected through field research“. Then why does it not capture all the gold at the Bank of England that has been lent by central banks to bullion banks which has then been withdrawn from the vaults of the Bank of England and flown to Zurich during 2013?

And even for some central bank purchases that it has learned about, GFMS won’t reveal who the purchasers were due to ‘respect of confidentiality’. What does this say for accuracy of a supply-demand model if the nontransparency of central bank transactions prohibits gold transactions being publicised? See example from GFMS Update 1 report 2013:

“South Korea raised its bullion holdings by 20 tonnes in March. The balance of gross buying in the public domain consisted of small gains in gold reserves in a handful of countries. The overwhelming majority of these purchases were made by Asian countries, including Nepal, Mongolia, Brunei and Indonesia. Apart from the aforementioned buyers, over 40% of gross purchases or some 80 tonnes were accounted for by undeclared transactions, details of which cannot be released in respect of confidentiality. In some cases, gold was added quietly in the local market.”

 By the time it wrote its Update 2 report for 2013, GFMS listed some additional central bank buyers during 2013, and then stated that:

“Apart from the aforementioned buyers, over 60% of gross purchases or some 225 tonnes were accounted for by undeclared transactions, details of which cannot be released in respect of confidentiality. In some cases, gold was added quietly in the local market.”

That’s more than 135 tonnes of central bank purchases during 2013 that were not captured in the GFMS model.


Borrowing Gold in London

In my 7 September article “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“, I included a quotation from the Financial Times on 2nd September 2015 which stated:

“The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.”

And I concluded that:

“it begs the question, why do the dealers need to borrow, and who are they borrowing from. And if the gold is being borrowed and sent to Swiss refineries, and then shipped onward to India (and China), then when will the gold lenders get their gold back?”

Scotia Mocatta, a bullion bank which is very active in the Indian and Hong Kong/Chinese gold markets, vindicated this point in its ‘Metals Monthly September 2015‘  (page 3):

“The recent low Gold price has spurred physical buying interest to the extent that lease rates have climbed as metal is borrowed and delivered to refineries to be melted into the required bar sizes (such as kilobars) before being shipped to its final destination.

 So, where in the GFMS and World Gold Council data models is this “metal that is borrowed and delivered to refineries to be melted into the required bar sizes (such as kilobars)” being reflected? It appears that these gold bar movements are not being reflected at all.


World Gold Council switch from GFMS to ‘Metals Focus’

Earlier this year, the World Gold Council (WGC) switched from using GFMS as a data provider of gold supply and demand data. In an announcement, the WGC said:

“Starting in May 2015, we will be publishing gold supply and demand data provided by Metals Focus, a leading precious metals consultancy. These data will feature in Gold Demand Trends First Quarter 2015 onwards. Previously, we sourced gold supply and demand data from GFMS Thomson Reuters. The decision to change data providers was based on rigorous market research and a competitive pitch process. For more information, please see the focus box in Gold Demand Trends First Quarter 2015”

The focus box in Gold Demand Trends First Quarter 2015 states:

When new data sets become available and new methodologies are developed, we review how these might complement and advance our own methods. To that end, in 2014 we conducted a rigorous assessment of the gold market data landscape – a process which involved an in-depth review of a number of leading data providers. Following this review we appointed Metals Focus as the provider of our core demand and supply statistics.

“The World Gold Council is committed to publishing the most accurate gold demand data available. We are confident that the move to Metals Focus supports this aim.”

What the WGC didn’t mention in its press release nor in its Gold demand Trends Q1 2015  report is that in October 2013, the WGC purchased a 50% shareholding in Metals Focus Data Limited via its subsidiary WGC (UK) Ltd. The other 50% is owned by Metals Focus Limited. Surely this 50% shareholding is material information that should have been divulged by the WGC in its ‘focus box’ statement above? With its recent emphasis on costs savings, the WGC may have opted for switching from GFMS to Metals Focus partially because it may save money by using a data provider that it has an ownership interest in.

From the WGC 2014 financial statements:

WGC Metals Focus

WGC (UK) Ltd (Company No. 07867682) is a fully owned subsidiary of the World Gold Council, operating out of the same address as the parent company, 10 Old Bailey, London.

Metals Focus Data Limited is a joint venture for “the collection of data relating to the supply and demand for precious metals and licensing of data to third parties”.

What is Metals Focus Limited?

Metals Focus Ltd (Company No 08316950) was incorporated in December 2012, and was founded by Nikos Kavalis, Charles de Meester and Philip Newman, all of whom have previously worked at GFMS. Kavalis (through Premier Metals Consulting Ltd), de Meester and Newman each own a 28.87% shareholding in Metals Focus according to CompanyCheck. Metals Focus 2013 accounts can be seen here.

Metals Focus Data Limited, the 50-50 joint venture between the World Gold Council and Metals Focus Ltd, whose latest accounts can be seen here, has the following directors: Nikos Kavalis, Philip Newman and Lisa Mitchell of Metals Focus, and Terry Heymann, an MD at the World Gold Council.

Some of the sponsors of Metals Focus and its reports include Swiss refiners Valcambi and PAMP/MKS PAMP, other refiners Asahi Refining,  TCA (Italian precious metals refining), the World Gold Council (obviously), Brady Commodity Software Solutions, the CME Group, and G4S. So Metals Focus could also obtain very direct data from at least these Swiss refineries as to their throughput of Good Delivery gold bars.

Although the World Gold Council has now switched data suppliers to Metals Focus since earlier this year, in its 2015 Q1 Gold Demand Trends, it still uses the same supply-demand presentation format as previously,  with ETFs in 2013 being classified as negative demand and not supply. Interestingly, in the Metals Focus data, the ETF line item for 2013 has now risen to 916 tonnes.

wgc metals focus pres



With 6,600 tonnes of Good delivery refinery gold refining production confirmed by the LBMA to have taken place during 2013 (before the LBMA altered its data), you can see in the above analysis that this is problematic for the models of GFMS, the World Gold Council and possibly the model of Metals Focus too. Since the LBMA is sent refining data by its members, then, if it chose to, the LBMA could generate very accurate data for gold and silver refinery output for all of 2014 and nearly all of 2015.

Almost all other industries are able to publish accurate industry production figures with a minimal lag of maybe 2-3 months that provide an up-to-date snapshot of that industry’s activity. This is also true of economic data such as labour statistics and housing starts. Why then is it so hard for the LBMA to publish full and comprehensive gold refinery output data on a quarterly basis?

If this reporting procedure was put in place, the global gold industry would have far more clarify and insight into the huge flows of kilobar gold that are, on a daily and weekly basis, now being flown from Switzerland into Delhi, Ahmedabad, Chennai, Bangalore, Hyderabad and Kolcata in India, and that are also flowing at a torrential rate through Brinks vaults in Hong Kong and on into China.