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

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

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

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

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

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

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

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

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

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

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

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

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


Using Gold for Foreign Exchange Interventions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Auditing of the Swedish Gold

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

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

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

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

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

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

Questions to the Swedish Riksbank – February 2017

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

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

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

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

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

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

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

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

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

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

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

Official Secrecy about Swedish Gold Reserves

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

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

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

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

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

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

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

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

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

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

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

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

A Proposal to the Oldest Central Bank in the World

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

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

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

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

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

1. Bank of Mexico

Most recently in 2017, Bank of Mexico has released a weight list of its earmarked gold bars stored at the Bank of England. This list in pdf format can be downloaded here – > http://www.guillermobarba.com/assets/uploads/2017/03/LT-BM-18703-ok.pdf

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

See also https://www.bullionstar.com/blogs/ronan-manly/mexicos-earmarked-gold-bars-bank-englands-vaults/

 2. Reserve Bank of Australia

In July 2014, the Reserve Bank of Australia (RBA) released a weight list of 6313 gold bars (about 79 tonnes) that it has stored at the bank of England in London. See  http://www.rba.gov.au/information/foi/disclosure-log/rbafoi-131418.html

The weight list in Excel format can be downloaded here http://www.rba.gov.au/information/foi/disclosure-log/xls/131418.xls

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

3. US Treasury

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

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

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


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


Deutsche Bundesbank

The Bundesbank weight list which you know about. The most recent version of this list was published on 23rd February 2017 and can be downloaded here http://www.bundesbank.de/Redaktion/EN/Downloads/Bundesbank/Organisation/bar_list.pdf?__blob=publicationFile

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


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

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

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

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

Lars Schall Matterhorn Interview with Ronan Manly

I was recently interviewed by financial journalist Lars Schall on behalf of Swiss based Matterhorn Asset Management. Our interview covered the German and Russian gold markets, Venezuela’s official gold reserves, the secrecy of the London gold market, and the outlook for the gold price, among a number of other topics. Matterhorn kindly granted me permission to post the audio interview and transcript below. The original interview titled  “Economics will dictate that the price of gold is going to rise” can be found on the GoldSwitzerland website.

Interview Transcript

Lars Schall: Howdy ladies and gentlemen, I am connected right now with Ronan Manly at the London Business School. BullionStar and Ronan have just recently published a major work of research related to the gold markets all around the world. Before we’ll talk about this let me ask you, Ronan, to give us some background on you. When, how, and why did you become interested in the precious metal markets to start with?

Ronan Manly:  Hello. Yes, I think I became first interested in precious metals around 2003-04, when there was a bull gold market in precious metals mining stocks. About that time I was interested in investing in equities. And it was from the perspective of the bull market in gold and silver stocks catching my eye that I started reading about gold. And that really led me into thinking about gold as an investment asset class. In 2005 and 2006, when I was in the London Business School as a student, I did a research paper on adding commodity assets to existing portfolios of bonds and equities as a diversification technique.  So it was during that time again I did a little bit more research about precious metals, and gold, and silver as an asset class.

And then I was working in the City of London in the equity investment management space for a few years. And I actually forgot about precious metals, because it wasn’t really on my radar at that time. When I left that role in 2011 I had some free time, and I started going to the Bank of England archives to start to research in gold again. I’d gone to a GATA conference in the summer of 2011 in London, and that sparked my interest in gold.  And I thought well, because I’m living in London, with the Bank of England just down the road, I might as well go and have a look at their archives. So that started really me on the road of doing research about monetary gold. And I went on a number of occasions to the Bank of England. And I even went across to Paris to the Bank of France archives. And that again was very eye-opening.  Because of the nature of archives, there’s a 30 year, or 35 year [access] rule.  So you can’t really look at anything beyond say the 1980s, early 80s.  But even then I could start piecing together the importance of gold, and the monetary system, and it just fed my interest, and the fact that gold was at the front and center stage of the financial system. But this role has unfortunately been lost.

Myself and a lot of other people who grew up  being educated in the 1980s and 1990s thought gold had somehow fallen off the financial curriculum. And it was really, because I started realizing that gold was a fascinating area that was interconnected with so many other areas like economic history, the IMF, the financial system, and various industries, like banking and mining, that it attracted my attention. And also the fact that it was quite opaque. In a very strange way it was a challenge, because it’s difficult to find out information about the gold market without really putting in a lot of effort. But it’s very rewarding when you do find information that other people don’t have.  And I think that’s what I’m trying to get across in my blog, sharing information that maybe is there, it’s available in public, but it’s very difficult to get. So once I find some good information I like to share it.

LS:  Yeah.  And as already mentioned you did something like that, because at BullionStar you’ve published recently some sort of an encyclopedia of gold markets around the world.  Now, why did you consider it necessary to do this at BullionStar, and what is the purpose?

RM: That’s a good question, because we’ve actually just launched this a week, or two ago – BullionStar Gold University. It took a few months to get all the research together. The concept was one that BullionStar devised as a way of sharing information with the general public. You can look at it more as a portal of precious metals information, more time independent information, and factual information. You can even look at it as like a Wikipedia of up-to-date information on precious metals.

It’s actually a group effort. I was doing a lot of the writing. But various other people in BullionStar have been part of the project from day one including I.T. developers and graphic designers, and the BullionStar CEO who devised the whole concept.

So the first phase of this is a profile of gold markets around the world. It includes about 21 different profiles covering 25 markets, really captures the essence and characteristics of each of those markets from some of the very large ones the people know about to less well-known ones. So it includes markets like London, New York, Shanghai, India, Hong Kong, Japan, down to probably less well-known markets, like Malaysia, Thailand, Indonesia. And there’s a slight regional focus on Asia, because BullionStar is based in Asia. But it includes markets like South Africa, Germany, Italy, France, Saudi Arabia, Dubai, Turkey. So there’s really something there for everybody.

And the main reason was to create up-to-date information that people can go to as a source of reference if they’re writing articles. Journalists, for example, can use it as a source of reference. Because there was nothing really up-to-date in one place that captured that information. So really what we’re trying to do is make it easy for people to – if they have a question about one gold market in a different place they can go and consult the Gold University. This is only the first phase. We’re going to be having a lot of other topics and concepts rolled out as part of this umbrella information portal in the near future starting with precious metal vaults, central band gold policies, refineries and mints, then down the road adding other areas such as if you want to find out about the tax on precious metals in a certain area or jurisdiction, or the legal / legislative [position] of  various governments, what their view is on allowing their citizens to purchase precious metals. So it’s really a wide coverage.

LS: Now, talking about those profiles, according to your analysis, which is the most credible gold market that you’ve seen as part of your research?

RM: Well, after 25 different markets I actually think that the German gold market is a very deep and thorough markets with a lot of liquidity. It’s very accessible to the public. Now, I have to say that I didn’t really know much about the German market before I began researching it. I was pleasantly surprised to learn there were so many different participants in the German market from commercial banks down to wholesalers, down to large retailers. And the German public really seems to get gold as an investment asset class.

But I started looking at Germany, literally I knew that maybe a few large banks were involved. But as I did more research I realized that there’s a lot of different levels of participants in the German market, starting with the Landesbanks, the Bayern Landesbank, LBBW, and Helaba, and some of the other regional banks. And there’s Reiffeisenbank, and Commerzbank, even though it’s based in Luxembourg, you could classify that as a German bank. And as you know, Lars, the customers of the Sparkasse savings banks can go in and buy gold quite easily. And Germany has like over 100 tons of consumer gold demand each year. So I really think that the market hangs together very well. It’s very deep and liquid. It’s interconnected with Austria, and Switzerland, and you’ve also got at least five or six very well-known and well-regarded gold refineries like Heraeus, and now Degussa has bought a new refinery in there. Is it Pforzheim?

LS: Yes.

RM: So I think the German psyche for a number of reasons has a very good understanding, grasp, and respect for gold. And I think this is exemplified by the very deep and widespread network within the German gold market. It’s one that I would never have thought about six months ago if you would’ve ask me. But now it’s definitely one of the more intriguing markets out there.

LS: Yeah. And your positive impression of the German gold market was also supported by a recent trip that you took to Berlin.

RM:  That’s right, yeah. At the beginning of February I was invited by BullionStar to what’s called the World Money Fair in Berlin. This is an annual fair that takes place in February at which all the big refineries and mints from around the world go to exhibit. There’s a lot of numismatic dealers as well. But more interestingly it seems to be the event of which a lot of precious metal participants go to meet each other for commercial meetings, and to just meet, and greet, and update each other.

So for example, the reason I went there was to meet up with my colleagues from Singapore. But we were introduced to a lot of heads of refineries, heads of mints, some of the large wholesalers from the US. And it as a great to see the precious metals markets in action. The fact that it was in Berlin again, I think highlights the fact that Germany is a very important gold market, and people don’t really seem to realize that. If you asked a lot of people on the street outside of Germany they probably wouldn’t realize that Germany is such a buoyant gold market.

LS: And which of the markets that you examined will be the most interesting to watch going forward?

RM: I think there are quite a few interesting markets. But the one that fascinated me the most, and that I think will be very important going forward: Russia. And it’s more because the Russian gold market for the last number of years has been dominated by central buying purchases from the Russian Central Bank. And it’s sister organization called the Gokhran, which is the state fund for precious metals. And again, I wouldn’t have really thought about this until I started researching it. But at the moment the majority of the gold production that comes out of Russia every year is purchased by the central bank. But they do via a very clever process, where the commercial banks intermediate. So the commercial banks finance gold producers who mine the metal, which is then sent to the refineries, but it’s purchased by commercial banks like Sperbank, NOMOS, VTB, Gazprombank. And then they sell it on to either the Gokhran, or to the central bank.

So what you see is that, for example, seven or eight years ago in 2007, the Russian Central Bank only had 400 tons of gold in its official reserves, and now 10 years later it has just over 1,400 tons. And I think another part of the equation that people don’t seem to grasp, and it’s quite opaque, is the fact that the Gokhran is also purchasing gold. So I think what is happening is that sometimes if the central bank reserves are being updated it transfers from the Gokhran, like the way that we suspected maybe the PBoC in China is transferring metal from other Chinese state entities.

So from a supply perspective it’s also interesting because if the Russian state system is gobbling up a lot of Russian gold output, that means there’s less gold at the margin for world supply. So I think it’s going to be really important to look at this continued trend where a lot of Russian gold production is being taken by the state. And that will definitely have an impact on world gold supply if demand continues to outstrip supply.

LS: Yeah. Now, when it comes to the market that you look at in the most critical way I think the candidate could be London, correct?

RM: Yes. I think that’s because London is the largest market. So in one way you think that there is a lot of information out there about the London market. And in some ways there is, but in other ways there’s not, because it’s quite opaque, and the people who run the London gold market choose not to divulge very much information about it – be it the Bank of England, or the Bullion banks that are represented by the LBMA. So again, it’s because London is one of the two centers for gold price discovery that in some ways it’s so important and critical to world gold market that it makes sense to critically analyze it. And over the last number of years there’s been numerous times where I’ve become frustrated where I’m trying to do some research on the London market, and I just can’t get anywhere, because there’s a lack of data there. And that’s the biggest question, why is that? And I think it’s because the LBMA, and the banks that they represent do not really want anyone poking around and finding out what’s really going on in the London gold market.

And you and I, Lars, know both that because it’s such an important market for price discovery that if there’s any, for example, large transactions that are going on that aren’t in the public domain that’s quite important, because it is affecting the price globally, and it’s affecting every participant in the larger global market. So it’s something I think is worth putting a lot of effort into it to try to find out as much as possible about.

LS:  Yeah, worth noting is also what you wrote recently about the gold of Venezuela. Can you tell us about this please, and why is this of significance?

RM: Like a lot of research that I do, it started off as a small focus. I found some information that had come out about the repatriation of Venezuela’s gold back in 2011-12. And for people who maybe don’t recall exact details Hugo Chavez wanted to repatriate all of his gold that was held internationally, which is about 210 tons. Eventually he repatriated 160 tons, and left 50 in London. And they added the repatriated gold to what was already held in Caracas, Venezuela, which was about 150 tons. So it made a very good case study, because very few central around the world will ever divulge information about gold. But Venezuela at that time chose to do so.

The Bank of Central Venezuela was quite forthcoming in telling people about how much gold they have, where it was located, how much they wanted back. And that in itself was a good case study. But what has happened more recently with all the economic problems in Venezuela is that a lot of that gold has started to go to where it probably was held originally. Some of it’s being flown into Switzerland; various banks like Citibank, Deutsche are supposedly doing swaps with some of that gold giving U.S. dollar financing to the Venezuela government.

And I think that particular set of episodes is very good as a case study, because what it applies to is that there could be a lot of similar for example swaps going on with Central American banks and international Bullion banks. And I know that there are a few. But that doesn’t get written about. Because again the information is withheld. So I think the repatriation and the subsequent re-export of Venezuelan gold back to Europe serves as a reminder that gold is a liquid asset, and that it is a very important asset in the financial system. But for whatever reason central banks and governments always try to downplay it.

LS: Yeah. But given that we have a debt crisis you think that gold will be a winner of this crisis?

RM: Yeah, I do think that it will start to become – to play a more central role in a future monetary system. As regards what exact role that will play it’s difficult to know, but I definitely think that I see gold really emerging to the front stage of a revised, or a reset monetary system. Because gold doesn’t have any counterparty risk. It doesn’t have any default risk. We’ve seen before though a stable international monetary system that had gold playing an important role.

LS: Yeah. But do you think that we will then see more efforts to repatriate gold from New York and London to the original countries?

RM: I don’t really think so, unless it’s done in a very gradual way. I think the Chavez episode was more of a nationalistic triumphalist symbolic exercise. And it backfired. Not because of the actual repatriation, but because of unfortunately for Venezuela, its economic standing has gone down. But I tend to think that all the different central banks around the world cooperate so closely that they wouldn’t really put pressure on each other in that regard by pulling out gold that might make it look like they’re unhappy with either the Bank of England, or the Federal Reserve. I think if it’s being done, it’s being done in a very surreptitious way.

LS: Yeah, just as the Germans do?

RM: Well, that’s a very strange one. I still haven’t understood fully what they are doing. Is it more of a gesture to the population, or – they could’ve easily done this without telling anybody, like they did in the early 2000s when Bundesbank repatriated, what was it, 900 tons from the Bank of England? Nobody knew about that.

LS: Yeah. Yeah. Okay, let’s come to our final point, and that would be the question what are your overall expectations for gold in 2016?

RM: Well, you know, that’s a good question. Seeing that we’re nearly at the end of the first quarter, and that’s been one of the best quarters in a long time. I still think that the gold price in USD terms will end the year higher than it is now. And I say that, because I think that there’s such a huge excess demand for physical gold for various places like China. If you look at the supply side there isn’t a huge supply increase. There’s a lot of gold gone through gold refineries in places like Switzerland, and unless there is some hidden source of supply that we don’t know about, simply economics will dictate that the supply outweighing demand would mean that the price is going to rise.

I was talking to Koos Jansen from BullionStar yesterday, and he’s actually working now doing estimates of Chinese gold importation from 2015 where he takes various trade statistics from Switzerland, U.K., Australia, and Hong Kong, and he’s coming up with a figure of 1500 tons are being imported last year into China. And if you add to that the Chinese domestic production of around 450 tons, and then some scrap recycling, that’s over 2,000 tons of gold. And the World Gold Council are only saying there’s a 1,000 tons of domestic demand. But if you also take the annual gold-mining output say for example 3,000 tons, if you take away China’s 415, you take 200 and something tons from Russia, then the rest of world is having to compete for dwindling physical annual gold-mining output. And really just from a simple economics point of view I think that the gold price should end up higher at the end of this year. Whether it will is a different question.

LS: Of course.

RM: I’m not really qualified to answer that. I think it’s very dangerous speculating on gold prices in general, because there seems to be a lot in the price action of the gold market that doesn’t follow common sense.

LS: Yeah. But you would say in the long run gold is a good investment?

RM: I think it is a good investment to have some of a total investment. And what I mean is that it’s a good investment to have, and to diverse my portfolio.  And I think it’s also from a collector’s point of view, it’s nice to have some of your assets in a physical tangible substance that is nice to own. And you still have it at the end of the day even if it’s changed in fiat currency terms.

LS: Yeah. But we would like to underline this again: Gold has no counterparty risk.

RM: That’s  right, yeah. And so for example, any gold products that may involve a few different layers of counterparties like an ETF, for example, physical gold doesn’t have that. As long as you have it in your possession, or store it in a reliable storage space.

LS: Okay. Thank you very much for this interview.

RM: My pleasure. Thanks Lars.

LS: Thank you.


SGX Kilobar Gold contract vs Trading with BullionStar

When Singapore Exchange (SGX) launched a physically-delivered gold kilobar contract in October 2014, there was much fanfare from the contract’s promoters (SGX, World Gold Council, IE Singapore and the Singapore Bullion Market Association) that the SGX Gold Kilobar would kick-start exchange-based gold kilobar trading in the Singapore gold market, while providing liquidity, price discovery and a gold price benchmark for the Singapore region.

The Demise of SGX’s Kilobar Gold Contract

However, these much-hyped benefits never materialised, since despite a relatively active start, trading in the kilobar contract never gained traction and is now essentially flat-lining at zero trading volume, even after some supposedly volume boosting changes introduced by the SGX in December 2015. In SGX Kilobar Gold Contract trading, 6 consecutive business day contracts trade at any one time, and when one contract expires, another is added. Settlement can occur on a daily basis, which, for each lot, consists of delivery and receipt of a batch of 25 kilobars of gold.

At launch in mid-October 2014 through to end of December 2014, the SGX kilobar gold contract saw 152 lots traded. Following this, the entire 2015 volume only reached 158 contracts, with only 4 contracts traded in the fourth quarter of 2015 (2 lots in December 2015, zero lots in November 2015, and 2 lots in October 2015). This means that throughout Q4 2015, only 100 gold kilobars were delivered/received.

In December 2015, in response to these embarrassingly low trading volumes, SGX introduced three changes. These changes:

a) extended trading hours from the a 3-hour window spanning 8:30am – 11:30am Singapore time to a 6.5 hour period spanning 9:00am – 3:30pm

b) introduced a ‘short position’ transfer process under which sellers who don’t have the gold to deliver can transfer their positions to local bullion banks, so as to address seller default sceanarios

c) erased the previous procedure whereby a seller had to direct a participating bullion bank (a Gold Delivery Agent) to ‘attest’ that the gold being sold conformed to the contract’s specifications (specifications such as fineness and approved refinery)

 SGX also waived clearing fees on the contract until 31 March so as to “promote market activity”.

Judging by the contract’s trading volumes, these December 2015 tweaks to the contract have had absolutely no effect on trading volume. In fact, trading volumes have actually fallen to practically zero since the beginning of 2016. In its ‘Market Statistics Report’ for March 2016, SGX reveals that the SGX Kilobar Gold contract recorded zero trading volume in March 2016, zero trading volume in February 2016, and volume of only 1 contract in January 2016. Therefore, for the first 3 months of 2016, only a single gold kilobar contract lot has traded, and the first quarter 2016 volume did not even match the tumbleweed fourth quarter of 2015.



Why has the SGX Gold Kilobar contract failed?

Perceived Liquidity issues

Lack of trading volume will always deter potential participants on any exchange, since if there’s is a perception of low liquidity, participants will stay away. In the case of the SGX Gold Kilobar, market participants appear to find it more efficient to continue to trade in the OTC market, a market which offers greater flexibility, and where premiums on kilobars are derived from actual supply and demand and from arbitraging locational differences between Singapore, London and elsewhere.

Inflexible Quantity

The SGX Gold Kilobar contract is inflexible in that delivery is in the form of a sealed box of 25 x 1 kilo bars of gold. All bars in the box have to be from the same producer, and the buyer has no control over brand of bar purchased, having to accept one of seventeen approved brands. The high quantity threshold also excludes a gold buyer, who, for example, may want to purchase 10-15 kilobars, but not 25 kilobars.

Delivery to the SGX Approved Vault

Gold kilo bars can only be sold through the contract if they reside in the Approved Vault (Brinks vault in Singapore Freeport). This requires the bars to have either a) remained in the Approved Vault with the box unopened, or b) been received in directly from an approved refinery, or c) been sent in from the vault of one of the ‘Recognised Forwarders’ in Singapore (Certis CISCO, G4S, Loomis, Malca-Amit, or Brinks second Singapore vault). The approved vault operator (Brinks) ensures that bars received into its vault fulfill these criteria.

Delivery from the SGX Approved Vault

Gold traded under the SGX Gold Kilobar contract is delivered at the Approved Vault in Singapore. So a buyer of gold through the contract has to then decide how to collect this gold from the Approved Vault. SGX has recently added two other delivery locations,  Bangkok and Hong Kong, using three banks, Bank of Nova Scotia, JP Morgan and ICBC Standard, but delivery in these cities involves extra delivery fees, and is “subject to each bank’s availability of physical gold.”

Convoluted account setups

The account setup requirements for trading and taking/making delivery of gold in the SGX Kilobar Gold contract are quite involved. Trading the contract requires opening a futures trading and clearing account with an SGX Clearing member, which itself involves associated account opening procedures, trading access set-up steps and declarations. There are also trading fees and clearing fees, and reporting requirements. The account then needs to be funded and have a margin facility set up.

Delivery of gold under the contract makes use of a complex account convention called a Kilobar Gold Accounts (KGA). KGAs represent allocated gold holdings held under the contract with Brinks Singapore, the approved vault operator, at the approved vault, Brinks vault at the Singapore Freeport. Anyone trading the SGX contract who wishes to take or make delivery of gold must open a KGA, in one of 3 ways.

A KGA can be opened with a Gold Delivery Agent (GDA) (one of the contract’s market makers) who can either create a customer specific KDA or specify the KGA within an omnibus account structure. Another option is to set up a KGA through an SGX clearing member who in turn will account for the gold via an omnibus KGA account with one of the GDAs, or with Brinks Singapore. A third option is to open a KGA directly with Brinks Singapore Pte Ltd in the form of a Brinks customer KGA. This option involves entering a standard account opening process with Brinks and also signing a ‘Rider’ with Brinks that addresses the SGX custody contract under which Brinks provides services to Singapore Exchange Derivatives Clearing (SGX-DC). Since the gold is ultimately held at Brinks vault, there are storage charges, gold bar transaction charges, as well as transport charges for moving gold from the Freeport vault to somewhere else in Singapore, such as Brinks main Singapore vault.

Only banks can directly trade the contract

Natural participants in the gold market such as refineries and jewellery companies cannot trade the SGX gold kilobar contract directly. They have to trade via banks. When the contract was launched in October 2014, only 4 market makers were appointed, and these market makers were required to be category 1 members of the Singapore Bullion Market Association. The four original 4 market makers for the contract were JP Morgan, Bank of Nova Scotia, Standard Bank and Standard Chartered Bank. These category 1 SMBA members also played a role in the contract as Gold Delivery Agents (GDAs) until December 2015.

SGX Counterparty and Default Risk

It’s still possible for an SGX Gold Kilobar contract to end with cash-settlement, in which case SGX imposes a 10% penalty on one of the parties. There is still also potential default risk, which can arise after the transfer of a short position in the scenario in which the new short also fails to deliver the contracted gold.

BullionStar Flexibility

Compare, for example, the above complexity and rigidity of the SGX Kilobar Gold contract to the ease and simplicity of buying or selling physical gold kilobars through BullionStar in Singapore, with which I’m familiar.


Account Opening

The BullionStar account opening process is very simple and only takes a couple of minutes to complete (either online or in store).

Product Flexibility

When buying gold from BullionStar, the customer can place an order to buy or sell gold bars in any quantity with complete flexibility on brand choice. A customer can choose to purchase 25 x 1 kilo gold bars if they so wish, or can choose any quantity of kilobars, in a mixture of available gold bar brands from some of the world’s most prestigious precious metals refineries and mints. Indeed, with BullionStar, a customer can choose to purchase or sell any available gold bar size, such as 100 gram gold bars, or any available gold coin products, or any other precious metals.

Payment Flexibility

Unlike the SGX Kilobar Gold contract which trades in US Dollars per gram, with BullionStar prices are quoted in Singapore Dollars, US Dollars, Euros and Bitcoin, and purchases can be paid for using any of these currencies. Payment mechanisms are also flexible, including bank transfer, cash, NETS (in Singapore Dollars), and cheque, and again using Bitcoin.

Pricing and Transparency

BullionStar’s gold and other precious metal range is sourced from some of the most highly regarded precious metals refineries and mints in the world such as Germany’s Heraeus, Switzerland’s PAMP, the Royal Canadian Mint, and the Perth Mint of Australia. BullionStar’s website clearly displays the price premium of every product carried compared to the world gold price, as well as the product’s spread between buy and sell price. This ensures the entire transaction process is fully transparent.

Transaction Flexibility

With BullionStar, customers can buy gold and other precious metals online, and request home delivery, or else buy and arrange to pick up their metal at the store, or else purchase metal online and put it into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, customers can walk in and buy gold and other precious metals over the counter at BullionStar shop and showroom premises in Singapore. This physical accessibility also applies to customers being able to walk in to the BullionStar store to deposit gold for storage, walk in to audit their stored gold without appointment, and also walk in to withdraw bullion holdings held in the vault.

Besides allocated bullion products, with BullionStar clients also have access to the Bullion Savings Program (BSP). This is an ultra-flexible and very low entry cost option to buy gold in units of 1 gram and upwards. BSP customers can buy and sell any time, 24 hours a day, 7 days a week. Once 100 grams, or multiples of 100 grams, have been accumulated in the program, a BSP customer can convert these 100 gram holdings into physical bullion in the form of 100g PAMP cast bars. The BSP is fully-backed by precious metals holdings, in fact it has a backing greater than 100%.

No reporting requirements

With BullionStar precious metals transactions, there are no external client reporting requirements. This ensures the highest degree of anonymity possible when trading precious metals.


Some radical changes appear to be needed to the SGX Gold Kilobar contract if it’s to attract critical mass and appeal to a wider variety of trading participants. This may include the need for greater flexibility in lot size. However, competing Singapore-based exchange,  ‘ICE Futures Singapore’, launched a physically-deliverable 1 kilo lot gold futures contract in November 2015, but this too has seen tiny trading volumes, negligible open interest, and zero deliveries (zero issues and stops) since launch date.

Singapore supports a large and vibrant gold market. For example, in 2015, 113 tonnes of gold were exported just from Switzerland to Singapore. But merely looking at exchange volume of the SGX Kilobar Gold contract and the ICE Singapore kilobar gold contract will fail to capture the big picture. It appears that in Singapore and surrounding regions, buyers and sellers of gold kilobars continue to prefer the flexibility of OTC trading, the very flexibility that BullionStar provides on a number of fronts as highlighted above.