Tag Archives: gold flows

Annual Mine Supply of Gold: Does it Matter?

The topic of how much extractable gold is left in the world has become increasingly discussed within the last few years. This is because of increased focus on ‘peak gold’ and also a concern about remaining levels of unextracted gold reserves. Peak gold is a term referring to the phenomenon of annual gold mining supply peaking (i.e. the rate of gold extraction increases until it peaks at maximum gold output and subsequently diminishes).

The concern about remaining extractable gold is based on the fact that annual gold mining production is running at over 3200 tonnes per annum (e.g. 3247 tonnes in 2017 according to GFMS), while various metal and geological consultancy estimates put the amount of remaining extractable gold reserves worldwide in the region of 55,000 tonnes. In other words, at current rates of extraction, according to these estimates, known gold reserves worldwide would be depleted in about 17 years.

For example, the USGS estimates that there are approximately 54,000 tonnes of economically extractable gold reserves in the world, while consultancy Metals Focus in its annual ‘Gold Focus‘ report estimated recently that there are about 57,000 tonnes of in-ground gold mineral reserves remaining worldwide.

Given that about 192,000 tonnes of gold have been mined throughout history (according to the World Gold Council), with about half of that mined gold extracted in the last 50 years, the figures of remaining gold reserves could look quite low and potentially worrying. But should we be worried, and more fundamentally does annual gold supply really matter all that much?

Cumulative Global Gold Production: 1835 to present day. Source: www.goldchartsrus.com 

Estimated Reserves are Not the Full Picture

While published estimates of remaining gold reserves are in the ballpark of 55,000 tonnes, reserves are not the full picture, and other factors indicate that there is a lot more mineable gold left in the world than reserves estimates would suggest. Firstly, the definitions of reserves and resources have to be taken into account.

As the USGS explains in its Reserves and Resources definitions:

“Reserves data are dynamic. They may be reduced as ore is mined and/or the feasibility of extraction diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored, and (or) new technology or economic variables improve their economic feasibility.”

Reserves, according to USGS, are the “working inventory of mining companies’ supplies of an economically extractable mineral commodity“. This inventory is limited by many factors including extraction and operating costs, as well as “the price of the mineral commodity being mined, and the demand for it.

Future supplies, say USGS, “will come from reserves and other identified resources as well as from “currently undiscovered resources in deposits that will be discovered in the future“. This latter category, the undiscovered mineral deposits, “constitute an important consideration in assessing future supplies” says USGS. Therefore, the USGS reserves figure (economically extractable gold) can be augmented by identifiable resources (resources potentially feasible to extract) as well as undiscovered resources (postulated to be in mineral deposits).

The Metals Focus “Gold Focus 2017” report puts some numbers on these differences. While Metals Focus estimate that at the end of 2016 global gold mineral reserves totalled 57,300 tonnes, they think that there is “an additional 110,000 tonnes of gold in the resource category“.

And for example, while the largest 50 gold mines in the Metals Focus tracking database (responsible for over 25% of global mine supply) have on average just over 11 years of reserve mine life remaining, “these mines also have an additional 11 years of mineral resources (exclusive of reserves), which have the potential to be recategorised into reserves.

But even in the published reserves data from USGS, reserve estimates appear to be underestimated and USGS gold reserves data at times looks more static than ‘dynamic’. Drilling down into the USGS estimate of 54,000 tonnes of gold reserves globally, only 2000 tonnes of this total is attributed to the world’s top gold producer China. However, China stated at the end of 2016 that it had a much larger 12,100 tonnes of identified in-ground gold reserves.

Likewise, the USGS estimates only attribute 5,500 tonnes of unmined gold reserves to the third largest  gold producer Russia, whereas the Russian Federation says that it has 12,500 tonnes of identified gold reserves. So even within these two major gold producing countries, China and Russia, that’s another 17,000 tonnes of identified gold reserves that the USGS does not reflect in its gold reserves total.  Different data methodologies perhaps for defining gold reserves and gold resources, but these deltas highlight an important point that when it comes to mineable gold, there is no one consensus figure.

Technological advances in gold mining and processing can also over time change identifiable resources (resources potentially feasible to extract) into reserves, and turn undiscovered resources (theroized to be in mineral deposits) into identifiable resources. These advances and discoveries therefore increase the pool of gold reserves over time. Likewise, some gold deposits which are uneconomic to mine at gold price X will become economically viable to mine at a higher gold price of Y.

Stock vs Flow: The Key to Above-Ground Stocks

But on a more fundamental level, do the short-term gyrations in annual gold supply really matter that much? Specialist gold consultancies such as GFMS and Metals Focus which regularly crunch annual gold mining figures would argue yes, but their fixation on annual gold supply downplays the fact that there are huge above-ground stocks of gold which have an influence on everything from gold’s investment characteristics (e.g. store of value, portfolio diversifier and safe haven) to movements in the gold price, and to the shifting direction of gold flows between east and west.

Almost all of the gold ever mined throughout history still exists in these above-ground gold stocks, be it in the form of gold jewelry, central bank gold holdings, gold held in private gold hoards within investment gold bars and coins, and gold that has been used within industrial medical and technological applications. This amounts to about 192,000 tonnes according to the World Gold Council (WGC), or significantly more according to those who dispute the WGC’s figures as being underestimated.

Using WGC figures, this would mean that the annual flow of new gold from mining (about 3100 tonnes), represents only about 1.6% of the total above-ground stocks of gold. Or in other words, the above-ground stocks of gold are about 62 times larger than the annual flow of new gold from gold mining. i.e. the stock-to-flow ratio is very high.

The majority of this above ground gold is held for saving purposes and as a store of wealth (including in the form of gold jewelry), and while much of the gold in above-ground stocks is not traded, it has the potential to be traded, and it can move into the highly liquid worldwide gold market depending on the gold price. Therefore, this far larger pool of gold held in above-ground gold stocks widens the definition of gold supply considerably.

Above-Ground Stocks – A Store of Value

Holding physical gold as a store of value works precisely because there are very large above ground stocks of gold in existence. Unlike other metals which are produced to be consumed (even including silver to some extent), physical gold is a monetary metal because it is rare, tangible, cannot be debased and has no counterparty or default risk. See here for details. Physical gold is also generally produced to be accumulated and to be used as a store of wealth and as an inflation hedge.

This accumulation of gold from the dawn of civilisations to the present day gives us the current very large above ground stocks of gold, a stock which constantly increases but increases at a slow and stable rate relative to the size of the overall stock. Therefore the value of this total above ground stock of gold is relatively stable, and over long periods of time, the purchasing power of this total stock of gold (which cannot be debased) is stable relative to the prices of other goods.

Gold’s purchasing power has also been found to be nearly constant over long periods. See for example the well-known study by Roy Jastram known as ‘The Golden Constant‘, in which he constructed gold price indexes and general price indexes and found that the purchasing power of gold, although it fluctuated, was broadly constant over long periods of time. Jastram’s study was then updated in 2009 by Jill Leyland. As Leyland wrote in an explanation of gold’s constant purchasing power which makes it an ideal store of value:

“the broad supply and demand fundamentals of gold help this stability. Gold is a scarce metal and the annual increase in supply is a small fraction of above-ground stocks. Most gold is held in a form that makes it easy to return to the market if economic circumstances dictate, thus helping to stabilise price fluctuations.”

Therefore, gold’s ability to act as store of value and as a form of wealth preservation is directly related to gold’s very large and stable above ground stocks. The presence of very large above-ground gold stocks also partially explains gold’s safe haven appeal. One aspect of why gold acts is a safe haven is that it does not have any counterparty or default risk. But there is also an understanding that in times of crisis the physical gold market will remain highly liquid, a liquidity which again is due to the ability of the extensive above ground stock of gold to be mobilised.

Gold is Less Affected by Economic Activity

The existence of very large above-ground gold stocks also drives gold’s ability to provide diversification benefits, for example, holding gold in a wider investment portfolio of other assets such as stocks and bonds is a proven way to reduce portfolio risk. This is so because of the low correlation of the gold price with the prices of these other assets which in turn is because the gold price is far less influenced by business and macro economic cycles than other assets. But why is the gold price less influenced by business and macro economic cycles than other assets?

The answer again lies in gold’s huge above ground stocks, and the highly liquid worldwide gold market that allows these gold stocks to move into the market should conditions merit it. Gold demand can therefore be met, not just from new mine supply which is correlated to business cycles, but from any of the gold that exists in gold’s extensive above-ground stocks.

As a World Gold Council paper from 2003 titled “Why is gold different from other assets?” states:

The lack of correlation between returns on gold and those on financial assets such as equities has become widely established….the fundamental reason for this lack of correlation is that returns on gold are not correlated to economic activity whereas returns on mainstream financial assets are.

It is thought that the reasons which set gold apart from other commodities stem from three crucial attributes of gold: it is fungible, indestructible and, most importantly, the inventory of above-ground stocks of gold is enormous relative to the supply flow….The potential for gold to be highly liquid and responsive to price changes is seen as its critical difference from other commodities.”

A Wider Definition of Gold Supply

In practice, what do these above ground gold stocks constitute and can they be mobilised? According to the WGC, about 90,000 tonnes of above ground gold is held in the form of gold jewellery, another 33,000 tonnes of gold are (reportedly) held by central banks, about 40,000 tonnes are attributed to private gold holders, and the remainder sits within end uses where it has been applied in industrial / technological and other fabrication uses.

In theory, all above-gound gold can be mobilised into the gold market as forms of potential supply if the price is right. In practice, all the major categories of gold holdings are served by functioning markets which allows their mobilisation. For example in India, where between 20,000 and 25,000 tonnes of gold are held by private citizens, the gold market provides a mechanism for the accumulation or sale of investment gold jewelry depending on fluctuating incomes and economic conditions. In China, where at least 17,000 tonnes of gold is held by private citizens, the gold market is served by a central physical gold exchange (the Shanghai Gold Exchange) and large networks of gold jewelery and investment gold retail outlets.

The ability to mobilise gold from the central bank and official sector is served by a functioning gold lending and gold swapping market centred in London. Admittedly, that gold lending market is so opaque due to secrecy and lack of reporting that its impossible to know how much or how little gold is actually in the possession of central banks and how much has been lent out and not returned. But overall, there is gold lent out from central bank holdings that flows into the market and is very distinct from any supply categories tracked by the major precious metals consultancies.

Many national gold markets exist around the world also exist which provide their citizens with the ability to buy and sell physical gold and which provide the necessary liquidity with which private gold holdings can be mobilised into the market. For example, see BullionStar’s Gold University for profiles of over 20 of these gold markets. Due to gold’s high value, a well-functioning scrap gold and gold recycling sector also exists around the world, with numerous refineries and processors adept at extracting valuable gold content from every end use product which contains gold bearing material.

Gold from countries that would normally be net buyers on the international market can also be turn into net gold suppliers when the need arises, in other words flows of gold from West to East can and do sometimes switch to flows going the other way from East to West. This, for example happened in 2016 when non-monetary gold flowed westwards to Switzerland from countries such as UAE, Hong Kong and Thailand (markets that are normally considered large destinations for Swiss gold) and this gold was then exported from Switzerland to mainly the UK but also the US.

There is a relative fixation in the gold industry on new gold mining supply and the impact that this has on the gold market. But beyond annual gold mining output, its important to remember that the world’s above-ground gold stocks, some 190,000 tonnes based on official figures, can and do come into play as supply sources if and when conditions merit this.

Most importantly, these vast above-ground stocks underpin some of physical gold’s most important investment characteristics, such as gold’s ability to act as a stable store of value  and gold’s ability to reduce risk in investment portfolios.

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.