Tag Archives: JP Morgan

A Chink of Light into London’s Gold Vaults?

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

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

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

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

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

“Enhanced transparency from the Bank of England

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

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

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

The Proposed Data

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

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

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

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

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

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

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

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

Bank of England

The Current Data

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

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

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

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

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


The Vaults of London

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

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

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

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

JP Morgan: https://www.bullionstar.com/gold-university/jp-morgan-gold-vault-london

Malca-Amit https://www.bullionstar.com/gold-university/malca-amit-london-gold-vault

G4S: https://www.bullionstar.com/gold-university/g4s-london-gold-vault

And perhaps HSBC: https://www.bullionstar.com/gold-university/hsbc-gold-vault-london

G4S location https://www.bullionstar.com/blogs/ronan-manly/g4s-london-gold-vault-2-0-icbc-standard-bank-in-deutsche-bank-out

Malca-Amit location https://www.bullionstar.com/blogs/ronan-manly/gold-vaults-london-malca-amit

HSBC possible location https://www.bullionstar.com/blogs/ronan-manly/hsbcs-london-gold-vault

And obviously, the Bank of England vaults are where they always have been, under the Bank’s headquarters in the City of London: https://www.bullionstar.com/gold-university/bank-england-gold-vaults

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

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

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


Brink’s letter to SEC, February 2014

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

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



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

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


COMEX and ICE Gold Vault Reports both Overstate Eligible Gold Inventory


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

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

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

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

The Background

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

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

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

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

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

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

The Vault Providers

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

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

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

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

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

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

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

The Inventory Reports

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

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

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

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

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

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




COMEX Warehouse Inventory Report – Gold. Click to Enlarge

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

The ICE licensed vault reports are saved as individually dated reports. The ICE report dated 19 December 2016 for activity on 16 December 2016, can be seen at https://www.theice.com/publicdocs/futures_us_reports/precious_metals/Precious_Metals_Vault_Stocks_Dec_19_2016.xls.

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




ICE Warehouse Inventory Report – Gold. Click to Enlarge

The Rules

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

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

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

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

The Comparisons

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

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

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

Brink’s Example

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


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

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

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

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

MTB Example

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

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

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

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

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

IDS Delaware Example

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

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


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

Delaware Depository Example

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

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


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

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

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

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


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

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

CME states:

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

ICE states:

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

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

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

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

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

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

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


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

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

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

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

THE COURT: “I think that is correct.”

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

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

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

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

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

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

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

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

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

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

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

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

Deutsche Bank Trader B: “10cu>?”

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

UBS Trader A: 10 cents”).

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

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

UBS Trader A: “we smashed it good.”

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

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

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

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

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


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

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

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

Deutsche Bank Trader B: “yeah,

UBS Trader A: “gona blade silver now.

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

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


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

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

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

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

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

Merrill Lynch

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

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

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

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

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


BNP Paribas Fortis

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

Standard Chartered

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

 “Yeh” “small long out of the fix…” “ok where to sell sivler then?

23.40 thru that use it as a stop profit and let it runnnnnnnnnnnnn

were on the same wavelength

im long silver”…”ilke both [silver and gold] to get the absolute sht squeezed out of them” “im longer silver than i am gold


Assuming the transcripts submitted are accepted and plaintiffs are permitted to file their Third Amended Complaint, the possible pending “avalanche” of settlements in silver lawsuits will speak volumes for the investigative prowess of the CFTC and the DOJ, both of which were commissioned to investigate long running allegations of silver and precious metals market manipulation over recent years, and came up completely empty.

It appears Judge Caproni, former FBI General Counsel, was on the money when considering the potential of ineptitude in government investigations of precious metals markets at April’s gold hearing: “I don’t put a lot of stock in the fact that there are investigations because I was a government lawyer for a long time and I know what you need to open an investigation. By the same token, the fact that they closed it without charging anybody doesn’t mean that everybody is innocent. So I don’t put a lot of stock in it one way or the other.”

The CFTC proudly announced in September 2013 they had spent five years and seven thousand enforcement hours investigating complaints of manipulation in the silver market, including with assistance by the Commission’s Division of Market Oversight, the Commission’s Office of Chief Economist, and outside experts, but yet found nothing.

The Department of Justice Antitrust Division which were so confident of their investigation of collusion in precious metals they went to the extraordinary lengths in January of this year of providing a letter to silver and gold lawsuit defendants advising they had closed their investigation without findings of wrongdoing.

The Swiss Financial Services watchdog FINMA investigated, published and prosecuted UBS for forex and precious metals trading misconduct but yet said so little about precious metals findings in their November 2014 investigation report, it was impossible for the court to withstand UBS motion to dismiss in both metals.

And finally of the ability of authorities to reign in rogue banks in the precious metals or any other markets, the memorandum flags a fact that should draw the attention of those trying to figure out if they can indeed trust that their bullion bank has their best interests at heart simply by banning participation in trader chat rooms.

“The chats contained in the DB material are just the tip of the iceberg, as evidence suggests that Defendants intentionally communicated in undocumented ways to keep their manipulation hidden.”

For example the memo includes the salient reminder that banks will always find a way “to evade detection,” in this case where two traders are described as also communicating “via email and personal cell phone.”

The above article was first published at Allan Flynn’s website here.

Allan Flynn is a specialist researcher in aspects of gold and silver. He is currently investigating for future publication on the same topic and works in property and commercial architecture when he needs to eat. He holds shares in precious metals producers and banks.


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.

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:

Spotlight on LPMCL: London Precious Metals Clearing Limited

Within the last 2 months, there have been a series of developments in the London Gold Market, each of which has involved Chinese-controlled banking group ICBC Standard Bank Plc.

  • On 4 April, the London Bullion Market Association (LBMA) announced that ICBC Standard Bank had been reclassified as a LBMA Market Making member for the OTC spot trading markets in gold and silver.
  • On 11 April, ICE Benchmark Administration announced that ICBC Standard Bank had been approved for direct participation in the daily benchmark LBMA Gold Price auctions beginning on 16 May.
  • On 3 May, the LBMA announced in its Alchemist magazine that ICBC Standard Bank had joined the LBMA’s Physical Committee. This committee is responsible for aspects of the physical bullion market such as the LBMA’s Good Delivery List and it also liaises with the LBMA’s Vault Managers Working Party.
  • On 11 May, the relatively obscure but powerful London Precious Metals Clearing Limited (LPMCL) announced that ICBC Standard Bank had joined LPMCL, the first membership addition to London’s monopoly bullion clearing group since 2005.
  • On 16 May, ICBC Standard Bank announced that it had agreed to acquire a London-based precious metals vault currently owned by Barclays. This precious metals vault was built by, and is operated by Brinks, on behalf of Barclays. ICBC Standard says that the vault acquisition will be completed by July 2016.

Therefore, within a period of approximately 6 weeks, ICBC Standard has positioned itself front and centre of the closely protected London bullion trading, clearing and vaulting infrastructure.

[Note: On 1 February 2015, Chinese bank Industrial and Commercial Bank of China (ICBC) acquired a controlling interest in London headquartered Standard Bank Plc, hence the name change to ICBC Standard Bank PLC].

On Monday 16 May 2016, the LBMA also issued its own press release, announcing that ICBC Standard bank had joined LPMCL, and that it would become an ‘active member‘ of LPMCL in early June 2016.

The LBMA press release about LPMCL also quoted LBMA CEO Ruth Crowell as saying:

“I’m delighted to see ICBC Standard Bank join this vital organisation. The LPMCL clearing system is one of the great strengths of the London bullion market. The LBMA welcomes this addition and looks forward to continuing to assist LPMCL in its growth and development.”

Although the same bullion bank representatives, wearing different hats, run, and have always run, all of the precious metals entities that operate in the London market (via a series of different ‘puppet shows’), the ‘assistance’ that the LBMA is now providing to LPMCL is based on the following development that was highlighted by the LBMA CEO at the LBMA conference in Vienna in 2015, when she said:

“I’m delighted to inform you 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.”

Examination of the Barclays / Brinks vault (most likely near Heathrow in the Brinks complex) which ICBC is now acquiring, is left to a future analysis. This article concentrates solely on the LPMCL clearing system, the protected crux of the London precious metals markets, but an entity which is rarely given anything but a passing glance by the financial media in London or elsewhere.

One important point to mention here though is that it had been widely reported in January (initially by Reuters) that ICBC was acquiring another London-based precious metals vault, a vault that had been built by G4S in Park Royal on behalf of Deutsche Bank, and that had then been leased from G4S by Deutsche Bank. See “G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out” for details.

It turns out that the deal for the G4S / Deutsche Bank vault “did not go through“, according to ICBC. It appears that ICBC considered the Barclays / Brinks vault to be the preferred transaction over the Deutsche / G4S vault, and that when the Barclays / Brinks vault came on to the market, ICBC backed out of the transaction with Deutsche, in much the same as house-hunters change their mind when a better house comes on the market.

The future of the G4S / Deutsche vault is therefore still unknown. Possibly Standard Chartered, which was also mentioned as a name wanting to join LPMCL, could be a potential buyer of the Deutsche / G4S vault?

It’s also interesting to note that “London Precious Metal Clearing Limited (LPMCL) provides formal recognition of companies to provide vaulting services“, not the LBMA.


LPMCL  – The Company

London Precious Metals Clearing Limited (LPMCL) is a UK private company limited by guarantee without share capital, that was incorporated on 5 April 2001, with a company number of 04195299. LPMCL is classified in Companies House with a Standard Industrial Classification (SIC) code of ‘Administration of financial markets‘. LPMCL has a registered address of C/O Hackwood Secretaries Limited, One Silk Street, London EC2Y 8HQ. Interestingly, this is the same registered address as the London Gold Market Fixing Limited and the London Silver Market Fixing Company Limited, both of which are still active companies and both of which are currently defendants in ongoing New York court class action suits where they and their member banks stand accused of price manipulation in the gold and silver markets, respectively. Hackwood Secretaries Limited is Company Secretary for LPMCL. Hackwood Secretaries is a Linklaters company used for company secretariat services. Linklaters is one of the better known global law firms that is headquartered in London.

LPMCL uses an electronic clearing platform called ‘AURUM’ to clear London-settled precious metals trades. This is done via book entry netting and clearing, entirely using unallocated accounts. The vast majority of the LPMCL clearing trades are processed by HSBC and JP Morgan.

As to the raison d’etre for LPMCL, perhaps the recent LBMA press release sums it up best:

“[the] London clearing system for gold, silver, platinum and palladium [is] managed by London Precious Metals Clearing Limited (LPMCL).

LPMCL operates a central electronic metal clearing hub, with deals between parties throughout the world, settled and cleared in London

Most global ‘over-the-counter’ gold and silver trading is cleared through the London clearing system. The London bullion market clearing banks provide a service to their clients in providing the settlement of gold and silver transfers. Ultimately each clearer has to have access to reserves of physical metal and provides an array of services tailored to each client’s specific needs; the most important of which is intermediating credit and providing credit facilities.

This last paragraph in the press release was cut and pasted by the LBMA from the LPMCL website FAQ under the question: “Can you explain the benefits of the London bullion clearing system as compared with a clearing house?” so it can also be viewed there.

You will notice from the above press release that:

a) LPMCL is critically important due to its role as global clearer for all 4 precious metals, and

b) Access to physical precious metals plays a secondary role in the LPMCL system compared to ‘credit facilities and intermediating credit (i.e. The LPMCL system is a credit-based fractional-reserve system of unallocated metal holdings and transfers).

LPMCL was founded in 2001 by 7 bullion bank founding members, namely, NM Rothschilds, JP Morgan Chase, HSBC Bank USA, ScotiaMocatta, UBS AG, Deutsche Bank , and CSFB (Credit Suisse). Credit Suisse resigned in October 2001, Rothschilds resigned in June 2004, and then Barclays joined in September 2005. Deutsche bank resigned in August 2015. HSBC Bank USA NA resigned on 11 February 2015, and was replaced by HSBC Bank Plc. Gold and silver were the two metals originally cleared loco London by LPMCL’s system. Platinum and palladium clearing loco London was added to LPMCL’s clearing offering in September 2009. UBS (a LPMCL member) and Credit Suisse (a previous LPMCL member) also offer loco Zurich clearing of platinum and palladium.

Including ICBC Standard Bank, the current membership of LPMCL as of May/June 2016 now consists of JP Morgan, HSBC, Scotia Mocatta, UBS, Barclays, and ICBC Standard. Since Barclays is withdrawing from much of its precious metals business in London, and is selling its London vault , its possible that Barclays will resign from LPMCL in the near future.

All LPMCL members either have their own precious metals vault in London, or access to vaulting facilities at London vaults. Many of the LPMCL members also have vaulting facilities in other financial capitals around the world. Here are some of the vault operations for each of the LPMCL members:

  • HSBC – vaults in London, New York (Manhattan) and Hong Kong
  • JP Morgan – vaults in London, New York (Manhattan) and Singapore (Freeport)
  • Scotia – vaults in Toronto and New York (JFK)
  • Barclays – vault in London (being sold), vault in Singapore
  • UBS – vault in Zurich (Kloten) and Singapore (Freeport)
  • Deutsche Bank (ex LPMCL) – trying to sell a lease on a G4S vault in London; has / had a vault in Singapore (Freeport)
  • ICBC Standard – buying vault in London from Barclays. Standard Bank had vaulting facilities at JP Morgan’s vault in London. ICBC has many vaults in China.

ICBC London

Notice also that 4 of the LPMCL member banks, HSBC, JP Morgan, Scotia and UBS are also 4 of the 6 banks represented on the LBMA Management Committee, therefore LPMCL members have a disproportionately large influence on the strategic direction and decision-making of the LBMA.

LPMCL’s original Memorandum and Articles of Association, signed by representatives of the 7 founding bullion banks can be seen here -> LPMCL Memorandum and Articles of Association October 2001.  One of LPMCL’s main objectives in its Memorandum of Association is:

“to take on and continue the promotion, administration and conduct of precious metals clearing in the London precious metals markets” 

According to the original Articles of Association, the registered ‘Office’ of LPMCL was “New Court, St Swithin’s Lane, London EC4P 4DU“, which is the headquarters of N.M. Rothschild & Sons in London. Rothschilds was also the company Secretary at that time. Interestingly, the respective addresses listed for JP Morgan and HSBC in the Memorandum and Articles of Association document are “60 Victoria Embankment”, and “Thames Exchange, 10 Queen Street Place”, which is the location of JP Morgan’s London precious metals vault, and a supposed location of HSBC’s London precious metals vault, respectively.

Why LPMCL was Established

According to the history section of the LPMCL’s website, the London bullion market first felt the need to develop an electronic clearing  / matching system in the mid-1990s due to a combination of growing trade volumes, technological change, and also the need for better audit trails. This view is backed up by comments from Peter Smith of JP Morgan in a 2009 article for the LBMA’s Alchemist when he said that:

“Thirteen years ago [1996], the bullion clearers were exchanging transfers between themselves by telephone instructions – a situation that was causing considerable problems in the control and audit departments within those banks. Because of those concerns, the clearers realised that the only sensible and secure solution was to develop a central clearing hub, where transfer instructions could be up loaded and matched. This resulted in the establishment of LPMCL in April 2001″

The LPMCL website’s history section also reveals that the initial legwork on automating London precious metals clearing was done by the LBMA’s physical committee, since this committee “comprised the clearing members”.

Until very recently, the LBMA physical committee was exclusively made up of LPMCL members, indeed, the LBMA physical committee literally looks like an alternate venue for LPMCL members to meet up in. For example, in September 2015, the only members of the LBMA physical committee were representatives from the then 5 members of LPMCL, i.e. JP Morgan, HSBC, Scotia, UBS and Barclays.

The addition of ICBC Standard and Standard Chartered to the LBMA Physical Committee was announced in the LBMA’s Alchemist on 3 May 2016. Currently, all 6 LPMCL members – JP Morgan (chair of physical committee), HSBC, ScotiaMocatta, Barclays, UBS, and ICBC Standard Bank are members of the LBMA physical committee, as is Standard Chartered (a potential member of LPMCL), and TD Bank (Toronto Dominion). Note that Standard Chartered and TD Bank are the 5th and 6th member banks of the LBMA Management Committee. Therefore all 6 bullion banks that are on the LBMA Management Committee are also on the LBMA Physical Committee.

The LBMA physical committee membership is rounded off by Brinks (notably, the vault transaction facilitator between Barclays and ICBC Standard Bank) . Note also, that there is a Bank of England ‘observer’ on the LBMA physical committee, an indication of the Bank of England’s keen interest in monitoring the London Gold Market and the gold market’s physical operations and transactions.

The LPMCL history goes on to say that:

“It was subsequently decided that the most effective way of carrying the electronic matching system project forward would be for the clearing members to form a separate company specifically for the purpose of developing and administering such a system. As a result LPMCL was formed in April, 2001.

Obscurely, LPMCL was first incorporated on 5 April 2001 with a name of Itemelement Limited (basically a shell company). It changed name to London Precious Metal Clearing Limited on 2 October 2001 (‘Metal’ singular). It then changed name again on 2 November 2001 to London Precious Metals Clearing Limited (‘metals’ plural). The first tranche of LPMCL directors were then installed in November 2001 from the six remaining founder members companies (excluding Credit Suisse First Boston International since CSFB resigned in October 2001).

OM and LBT Computer Services

Its unclear what, if anything, LPMCL did as a company in 2002, however in April 2003 a press release was issued by Swedish technology company OM revealing that:

“London Precious Metals Clearing Limited (”LPMCL”) has chosen OM as an outsourcing partner for Facility Management of their proposed web-based automated bullion matching system to be provided by LBT Computer Services, an Information Technology service provider and partner to OM.”

We are happy to welcome LPMCL, the leading organization for precious metal clearing, as a Facility Management customer to OM.”

This ‘web-based automated bullion matching system’ is “AURUM”.

The same press release described LPMCL as:

“LPMCL is the administrative company set up by the six clearing members of the LBMA to facilitate the development of an electronic matching system to replace the existing clearing system which is conducted by telephone and / or facsimile.”

In 2003, OM also merged with Finland’s NEX to form OMHEX. Following the merger OM continued to exist as the OM Technology division of OMHEX, providing transaction technology services to the financial and energy industries. OMHEX became OMX in 2004, and was then acquired by NASDAQ in 2007 to form the current group NASDAQ OMX.

However, the relevant entity here is LBT Computer Services, which is still around today as it’s website shows. The LBT web site also still has a short profile of its LPMCL project in the ‘case study’ section of its website, where is states, in a slightly childish way that:

“The LPMCL are the ‘clearing’ organisation for precious metal dealing and are based in London, the centre for such trading. They needed a way of linking together the precious metal bankers to match transactions/deals. They needed to do it in such a fashion that no bank could see anything other than their counterparty bank, and to do it with absolute security. 

LBT built an application that is hosted on the Internet and which connects to each bank via a secure link to collect transactions which it then matches to the counterparty bank’s transactions and send the results back to both banks. It runs 24 x 7, unattended, other than via an on-line link. Unfortunately we cannot say more about this innovative solution.

Why can’t LBT Services say anything more about the LPMCL automated platform? This statement from LBT is perhaps the first clue as to the secrecy, paranoia, and obsessive protectionism that surrounds LPMCL, a company that is the global clearer for all 4 precious metals, yet lies at the heart of the opaque system that is the global precious metals trading system run out of London where real trade-level data that runs through AURUM is never publicly reported.

Between 2003 and the present day, the AURUM platform would obviously have gone through a number of changes, and it may not even be hosted on the LBT platform any longer. Given that lack of publicly available information on the design and functionality of AURUM, its hard to say. There is however a current ‘LPMCL Technical Committee‘ comprising IT and Business Analyst representatives of the member banks (see various Linkedin profiles for details), so perhaps AURUM was brought in-house between the bank members. Many of the in-house systems that AURUM interfaces to would also have changed over the years, requiring various upgrades of the AURUM platform too, and therefore a rationale for the existence of a ‘LPMCL Technical Committee’.

ICBC Standard’s Membership Application to LPMCL

When Reuters reported back in January of this year that ICBC Standard was looking to take on the vault lease for the Deutsche Bank / G4S vault, Reuters also reported in the same article that ICBC Standard had:

“also applied to become a clearing member of the London gold and silver over-the-counter business [LPMCL]”

“These banks are shareholders of the London Precious Metals Clearing (LPMCL) company. They will decide whether to accept or reject ICBC Standard Bank’s application within the next few months.”

“They [ICBC] are applying for clearing membership at the moment, but that’s still subject to a vote, which has not taken place yet”

Therefore, LPMCL’s announcement that it had allowed ICBC Standard to join wasn’t really a surprise. But the application and voting procedure referred to by Reuters gels with the new membership procedure laid out in the Articles of Association of LPMCL, which states that membership of LPMCL is open to “other eligible persons as the directors in their discretion may admit to membership“. (person here means company entities that wish to become members).

In the LPMCL company each ‘member’ (bank) appoints a director. Each director can also appoint an alternate director. During the ICBC membership application, there were 9 directors listed as current directors of LPMCL, comprising 5 directors from each of the 5 members banks of JP Morgan, HSBC, ScotiaMocatta, UBS and Barclays, and 4 alternate directors from all the member banks except Barclays. A list of the current directors names can be seen here.

According to the 2015 annual accounts of LPMCL, the 5 LPMCL directors are Tony Dean (HSBC), Jane Lloyd (Scotia), Andrew Lovell (JP Morgan), Marco Heil (UBS), and Vikas Chamaria (Barclays). The 4 alternate directors are Peter Smith (JP Morgan), William Wolfe (HSBC), Conway Rudd (Scotia) and Daniel Picard (UBS).

Former Deutsche bank LPMCL director , Raj Kumar, has now moved to ICBC Standard Bank and should be in the front running to be appointed a LPMCL director representing ICBC Standard. If Standard Chartered also joins LPMCL, then former Barclays LPMCL director, Martyn Whithead, who moved to Standard Chartered, may also be expected to re-appear as a LPMCL director representing Standard Chartered.

LPMCL’s latest annual Accounts

The most recent set of annual accounts filed by LPMCL at UK Companies House are the accounts for the full year to 31 March 2015. These accounts were, audited by Kingston Smith LLP, signed off on 8 September 2015, and filed with Companies Office on 8 October 2015. The most interesting items in the accounts are as follows:

- 2015 Turnover (Revenue) totalled £223, 599 and is entirely derived from subscription income. This revenue is accounted for on an accruals basis, meaning that it refers to subscription income for the year to 31 March 2014. With 6 bank members of LPMCL for the period under consideration, thats £38,933 per member, which is very small change for investment banks.

- For the year to March 2015, LPMCL actually made an operating loss of £64,944 because Administrative Expenses were £288,543. The bottom line loss was a similar figure.

- The biggest components of Administrative Expenses were Computer Service Fees: £151,978, and Legal and Professional Fees: £118,384, which together totalled £270,362.

Computer Service Fees obviously refers to costs in running AURUM, running the LPMCL web site, and possibly other technology costs that can be billable by the member banks to LPMCL such as, for example, electronic communications and interfacing software for sending trades to and receive data from AURUM.  ‘Fees’ suggests a payment to an external provider.

The ‘Legal and Professional Fees’ line item is more unusual. Why would LPMCL need to spend £118,384 on legal and profession fees in one year, which is 41% of total admin expenses, and 78% as large as the ‘computer service fees’? This legal and professional fees line item is also eye-opening since it increased  from £69,194 in 2014 to £118,384, a 71% increase. Auditing fees would be fairly constant from year to year, so there is a relatively new and quite large expense under this category. Could it be a legal expense, and if so why?


What does LPMCL’s AURUM actually do?

The London bullion market’s clearing system is a monopoly bullion clearing system run by LPMCL for bullion settled loco London, with “all bullion transactions between the clearing members of the LBMA settled and cleared by The London Precious Metals Clearing Limited.” “Loco London” traditionally meant gold and silver bullion physically held in London. With the rise of the unallocated account transfer system, to what extent unallocated bullion accounts are backed by physical bullion is debatable. The system is now a fractional-reserve credit system. LPMCL’s electronic clearing platform, AURUM, clears all bullion trades via book-entry netting and clearing using unallocated accounts.

Entities trading in the London bullion market maintain a series of unallocated accounts with one or more of the LPMCL clearers. The LMPCL members maintain unallocated accounts between each other used for clearing. The LPMCL also maintain bullion clearing accounts at the Bank of England. Each day, each client of each bullion clearer sends its LPMCL member clearing bank details of bullion trades between that client and its counter-parties. At the end of each trading day, each LPMCL member then processes position settlements by first netting out, in-house, to whatever extent possible, the bullion trades done by its own clients and clients of those clients.

Following this, the LPMCL members send their netted trade data to AURUM which then clears the clearers’ positions. The majority of LPMCL trades cleared are processed by LPMCL members  HSBC and JP Morgan. The clearers also ‘settle’ their own positions with each other between 4pm and 4:30pm each day via broker transfers usually involving  3 brokers. This is done to prevent excessive overnight credit exposure between the clearers. The clearing process also involves “close liaison with the Bank of England and the many overseas bullion depositories“.

According to the LBMA, the LPMCL members:

“utilise the unallocated gold and silver, in accounts they maintain between each other, to make ‘paper transfers’ to settle mutual trades. They also settle third-party loco London bullion transfers, conducted on behalf of clients and other members of the London Bullion Market. This system of ‘paper transfers’ avoids the security risks, costs and impracticality of physically moving metal bars”

An overview of the London clearing process can be read on BullionStar’s Gold University profile of the London gold market here. The LBMA web site also provides a summary here.  A similar summary is also in an article titled “Gold and Silver Clearing “Loco London” Through the Central Hub Developed by London Precious Metal Clearing Ltd” in Issue 55 of the Alchemist , dated July 2009. The most visible part of LPMCL and AURUM is the generally useless high level monthly clearing statistics that the LPMCL has produced each month since early 1997, and that are published on the LBMA website. These clearing statistics report the “net volume of loco London gold and silver transfers settled between clearing members of the LBMA.

For each of gold and silver, the statistics are calculated as daily averages and reported each month as three sets of figures, namely, a figure of millions of ounces transferred per day, the USD value of those ounces transferred per day, and also the number of transfers per day. Note that these clearing figures are just a fraction of what the real underlying trading figures are. Overall  trading figures of the London gold market are anywhere up to 10 times or more larger than the clearing figures would suggest, since the clearing figures are ‘netted’ trading figures.

London-settled gold and silver clearing statistics were first published in January 1997, with the first clearing data reported for the Q4 period 1996. This was prior to the automation of the daily clearing operations through AURUM.

Even back then in 1997, the daily clearing figures for gold and silver through London were baffling and opaque since the daily clearing volumes were huge compared to the quantities of physical gold and silver that exists in the entire world, and there was no granular explanation or categorisation as to the trade types and client types that these clearing figures represented. In this regards, nothing has changed. Then as of now, the LPMCL only reveal that the monthly figures include 3 types of data:

- Loco London book transfers from one party in a clearing member’s books to another member in the same member’s books or in the books of another clearing member.

- Physical transfers and shipments by clearing members

- Transfers over clearing members accounts at the Bank of England

For example, the LBMA clearing statistics for April 2016 state that 16.5 million ounces (513 tonnes) of gold were cleared each day during the month. With 21 trading days in April 2016, that would be 346 million ounces (10,777 tonnes) of gold cleared during April. Since there is said to be a 10 :1 ratio between the amount of gold traded in London and the amount of gold cleared through AURUM, these clearing figures can be rolled up by a multiple of 10.

The trouble with this type of high level reporting is that it doesn’t even reveal the percentage of transfers in each of the above three groups, but physical transfers would be very very small percentage of the total, because, by definition, physical transfers couldn’t be any larger given that there is only a fraction of physical gold being transacted in the world on any given day relative to these gigantic clearing & trading figures.

An article called “Clearing Volume on the London Bullion Market” in Issue 6 of the Alchemist, by Peter Smith of JP Morgan, dated January 1997,  first introduced these predominantly useless clearing statistics and revealed the 3 categories above. Nothing has changed in the reporting since 1997 and this LBMA lack of transparency remains right up to today. Ironically, Issue 6 of the LBMA’s Alchemist was titled ‘Towards Transparency‘ but there was little transparency divulged at that time, and the same opacity of the London bullion market still remains 20 years later.

Issue 6 of the Alchemist also had an introductory editorial from the then chairman of the LBMA, Alan Baker, whose opening line in the editorial was:

The bullion market in London is often criticised by observers for being secretive and lacking in information and data. Unfortunately to an extent this is inevitable given the need for a duty of care to clients which dictates that a high level of discretion is an essential element in so much of the business that takes place in the market, particularly for gold.”

Notice the secrecy is inevitable spin. The LBMA has been making excuses for the lack of transparency for at least 20 years now. Frankly, I don’t agree with any of the above explanations on the need for opacity. It’s a fiction. Reporting of trade volumes in all other markets globally such as equities, bonds, FX, money market and exchange-based commodities, is detailed, publicly available, and usually granular by transaction types and client types, and this does not, and has never, compromised client confidentiality in any of these asset classes. Why then do the precious metals markets, and the gold market in particular need to be the exception? They do not.

The excuses by people such as the ex LBMA chairman are merely helping to protect an entrenched system of opacity in which central banks, sovereign institutions, monetary authorities, the Bank for International Settlements, large bullion banks, and other large operators can move within the gold market without being concerned that any of their transactions and interventions will ever be noticed and reflected in gold price discovery. This is not an efficient market. Far from it. This is a protected and hidden physical trading system upon which is overlaid a massive pyramid of fractional-reserve paper gold trading.

The trade types of the trades from which the massive MPMCL clearing figures are generated could easily be reported by LPMCL and the LBMA, but they choose not to report this information. All positional, transactional, account, account type, and physical allocation data in every database table in AURUM and in every bullion trade database table of each LPMCL member bank could be published publicly while stripping out clients’ account-sensitive data and would still not jeopardize client confidentiality.

Trade Types behind the LPMCL Clearing figures

LPMCL provided one glimpse into London bullion market trade types in October 2003, in an article in Alchemist 32, titled “Clearing the Air Discussing Trends and Influences on London Clearing Statistics“, when the then LMPCL chairman,  Peter Fava, and JP Morgan’s Peter Smith, both involved in the compilation of the original clearing statistics in 1997, were interviewed about “some changes in the nature of the market and over the intervening years that might have had an impact on the reported numbers.” This is the only insight that I am aware of that provided a small window into some of trade types of bullion transactions that are processed through AURUM.

Fava was asked about the “changes in the overall pattern of trading activity from certain counterparts”. He then gave a rundown of various bullion trading activities that were showing up in the clearing data. The activities mentioned were:

  • central bank gold deposits, rolling over monthly, and the hedging transactions connected to that borrowing
  • interest rate swaps and longer-term collateralised agreements
  • speculative trading activity on a leveraged, forward basis that is closed out before maturity
  • investment fund participation via spot transactions* (generally netted by the counterparty banks against EFPs – exchange for physicals) but if not netted would show up in clearing
  • interbank market trading (multiple times per day)
  • consignment accounts in physical markets, notably Istanbul, Dubai and India” with purchases out of the consignment account hedged loco London

Since that 2003 article was written, there has been a huge growth in Exchange Traded Fund (ETF) trading, a trading activity that can be added to the above list. In 2014, in the LBMA Silver Price competition proposals, ETF Securities’ bid stated that “our physical precious metal ETCs are created and redeemed for physical metal, with the metal being cleared through the LBMA clearing system and the securities being cleared through the CREST clearing system which is used for LSE trading“.

I have analysed the above London bullion market trade types in more depth, but due to space constraints, I’ll cover this is a future posting, but for now, the point to note is that a lot of London bullion trading activity has very little to do with physical metal movements.

Recall also that Stewart Murray (ex LBMA CEO) had said in a 2011 presentation that investment funds had ‘very large’ unallocated positions in the market.

 “Various investors hold very substantial amounts unallocated gold and silver in the London vaults”

I wonder if investment funds which presume they own unallocated gold or silver (which is just a long unallocated spot position put on by a bank), are aware that their positions are then offset against futures. Some unsophisticated funds might think they are actually hold pooled gold or silver holdings within a London bank vault.

Circling the Wagons: Protection of LPMCL’s clearing monopoly

In 2014, the daily fixing auctions for all 4 precious metals in the London market were moved to new electronic platforms. In the case of gold and silver, competitions were held (organised by the LBMA) to decide on which companies would become the new administrators and calculation agents for the auctions. Ultimately, Thomson Reuters / CME Group secured the contract to run the new Silver auctions (LBMA Silver Price), and ICE Benchmark Administration secured the contract to run the new Gold auctions (LBMA Gold Price). In the case of the platinum and palladium auctions, as to whether a competition was held is debatable, since neither LPPM nor the London Platinum and Palladium Fixing Company (LPPFC) would confirm this when asked. However, the London Metal Exchange was ultimately awarded the mandate to run the new platinum and palladium auctions (LBMA Platinum Price and LBMA Palladium Price).

After Thomson Reuters and CME Group had secured the contract for the silver auctions, CME Group maintained (in a public presentation) on 29 July 2014 that it would soon introduce a centrally cleared platform for these auctions trades so as to widen participation in the auctions and eliminate credit risk between participants.

“[for] Extended Participation, we envisage central clearing via CME Clearing Europe under the auspices of the UK and European regulated authorities which should effectively open the door for most participants.

We’re basically starting the process as soon as possible. Let’s get this up and running by 15thAugust [2014] and then it’s all hands to the pumps on the clearing side so hopefully it will happen soon.

“The work we’ve got to do is to set this up so that’s it’s part of the platform so it’s a level playing field for participants…”

Anindya Boral will be starting to do a big drive to enable cleared transactions through our clearing house and wider participation in August”

In its presentation, CME Group featured a slide which stated that:

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

We anticipate using CME Group’s London Clearing House – CME Clearing Europe – for the London Silver Price

 By serving as the counterparty to every transaction, CME Clearing Europe will become the buyer to every seller and the seller to every buyer, virtually eliminating credit risk between market participants

However, the CME’s promise of central clearing never happened and its plans to introduce central clearing were mysteriously dropped. See BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing” for full details.

Likewise, when the LME announced that it had been awarded the contract by LPPFC to run the platinum and palladium price auctions, the LME issued a press release on 16 October 2014 stating that it planned to introduce clearing of platinum and palladium auction trades using its clearing platform LME Clear, so as to maximise participation and overcome the credit risk obstacle:

To maximise participation in the London pricing mechanism, the LME also plans to introduce a cleared platinum and palladium servicewhich will mitigate the difficulty associated with participants taking bilateral credit risk in positions.

LME Clear, launched on 22 September 2014, was built specifically to enable efficient clearing of metals exposures and will extend its existing precious metals clearing functionality to clear platinum and palladium.

However, the LME mysteriously pulled its press release a few hours after it had been published, and replaced it with an amended version where the above two paragraphs had been deleted. See BullionStar blog “LPPM – The London Platinum and Palladium Market” for full details.

And so, LME Clear was never introduced for clearing platinum and palladium auction trades.

Similarly, in its Executive Summary proposal submitted to the LBMA in October 2014 to run the new gold price auctions, a contract which it ended up winning, ICE Benchmark Administration (IBA) stated that its solution could employ pre-collateralisation to eliminate bi-lateral credit risk between participants, and therefore widen auction participation. ICE also made reference to the logic of using a centrally cleared model, but was shrewd enough at that point in time to defer to the powerful interests of the clearing members who essentially run the LBMA, knowing that the CME Group and LME clearing solutions for Silver and Platinum/Palladium had been shot down:

“It is through the Oversight Committee that the LBMA will continue to have significant involvement in the auction process, including… the decision on whether to move to a centrally cleared model (until that time, weaker credit names can be accommodated via pre-collateralisation).”

“One of the key benefits of WebICE is its ability to allow clients to participate in the auction process with the same information and order management capabilities as the direct participants. This reduces both operational and regulatory risk for direct participants, even before increasing the number of direct participants or moving to a centrally cleared model.

In its presentation submission to the LBMA in October 2014 during the competition to run the London gold auctions, the LME also seemed to have gotten the message that the LPMCL’s clearing monopoly and its AURUM clearing system were not to be tampered in any proposed LME platform. In a slide titled “Potential credit models” the LME 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

Likewise, in the slide that followed the above one, the LME again made it abundantly clear that it had got the message that LMPCL was not to be touched – “LME Clear fully respects existing loco London delivery mechanism and participants“:

LME Pathway to cleared solution

The only reference by the LBMA to central clearing counterparties is a short comment on its website about centrally clearing OTC forward trades where it states:

“..members of a common ‘Central Counterparty’(CCP), that has a facility to clear forwards, may novate their trades and thus avoid bilateral credit risk. In the absence of an exchange, the trade remains one of an OTC nature but has the ability to be cleared. This method of credit mitigation is known as OTC Cleared.”

CME Group already offers a very sparsely used (or not even used) centralised clearing service for OTC unallocated gold forwards using collateral or cash margin. “Delivery occurs at LPMCL member banks via book entry transfer of ‘London Good Delivery’ gold, which means unallocated loco London book entry gold claims on an LPMCL bank”.

Not surprisingly, the LBMA web site, says nothing about the pros and cons of centrally clearing OTC spot trades nor is there any discussion about exchange-based trading and clearing of any London bullion trades.

The LPMCL web site mentions an alternative clearing system (a clearing house), but not surprisingly, this approach is only mentioned as a foil for undermining it, as follows:

Q: Can you explain the benefits of the London bullion clearing system as compared with a clearing house?

 A: “…a clearing house usually has a rigid settlement structure, does not provide credit, or assume intra-day or term credit risks, and not being in the banking business, has no ability to use any underlying liquidity. It will thus most likely be less flexible, less efficient and more expensive – particularly as clearing houses by their nature are non-competitive, whereas the London bullion clearing banks compete for clients by providing competitive services and pricing.”

Q: Could a clearing house replace the London bullion clearing system?

“Yes, but it would prove to be less efficient and more expensive than the current arrangement. It would also most likely need strong financial backing and insurance cover – which then directs us back to the London bullion clearing banks, as above, all of whom are first tier global institutions.”

Why is LPMCL being Protected?

In conclusion, why does the LBMA think that LPMCL is a ‘vital organisation’? as the LBMA CEO phrases it.

  • Firstly, LPMCL keeps the entire pyramid of London’s unallocated precious metals trades spinning. By not reporting any trade information, the LBMA and LPMCL keep the entire gold world in the dark about the extent of the London paper gold trading scheme
  • Secondly, LPMCL preserves opacity and prevents public reporting of precious metals trades, including central bank gold lending and gold swaps, and therefore keeps this major gold market trading activity out of focus, with the spotlight off the role of the Bank of England in the London Gold Market.
  • Thirdly, the most powerful banks in the LBMA are the LPMCL members which are also the vaulters in London and the member banks of the LBMA Management Committee. These banks want to maintain the monopoly status quo of LPMCL and to maintain the status quo of the London precious metals vaulting system and their vaulting fees. The same banks run the trading, clearing and vaulting of the entire London bullion system. Perhaps the FCA should be looking at anti-competitive behaviour here, for example vaulting fees, and clearing fees.
  • Fourthly, the current LPMCL system masks huge amounts of trading for the LBMA members banks and brokers. Huge trading makes large trading commissions. The same system generates the need for the banks to provide credit to bullion market participants, which generates interest income.
  • Fifthly, by propping up LPMCL, its member banks can push back on any competing initiatives that are proposing a ‘gold exchange’ in London, such as the exchange initiative that’s backed by the World Gold Council and a number of other (non LPMCL) bullion banks.

As the Financial Times said in October 2015 when reporting about the LBMA’s so-called moves to provide trade reporting in light of other initiatives by the LME / World Gold Council and banks such as Goldman, SocGen, Citibank and Morgan Stanley (and previously including ICBC Standard) to move gold trading on to an exchange platform using exchange defined gold contracts:

“In the other camp is the LBMA, the official body set up by the Bank of England in 1987 to regulate the bullion market, which has close ties to the vaulting banks. Many of its biggest members want physical gold trading in London to remain off-exchange, but have conceded that a move towards all trades being cleared in one place could add transparency.”

Look at what the incumbent LBMA banks do, not what they say to newspapers. What the LBMA – LPMCL co-op (same people, different hats) has just done is welcomed another bank (ICBC Standard) into ‘this vital organisation” (the LPMCL), and the LBMA is now looking forward to “continuing to assist LPMCL in its growth and development.”

ICBC Standard had been in the LME / World Gold Council / Goldman / SocGen/ Citi / Morgan Stanley camp, buton the face of it, ICBC now appears to have deserted that faction and fully aligned with the LPMCL cartel of HSBC / JP Morgan / Scotia / UBS and Barclays. ICBC Standard may have been using the LME / Goldman camp as a bargaining tool with which to exert access pressure to join the LPMCL gang, and now that it has done so, it would be surprising if ICBC continues to align itself with the LME’s upcoming gold exchange proposal. However, as a Chinese controlled bank with long-term planning horizons, ICBC may wish to play a strategic game with a seat at both tables.

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.


Central bank gold at the Bank of England

In a recent article, “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“, I considered how much gold is actually in the London Gold Market, and highlighted how the amount of gold stored in the London wholesale market has fallen noticeably in recent years.

That article highlighted that the amount of gold stored in custody at the Bank of England (BoE) fell by 350 tonnes during the year to 28 February 2015, after also falling by 755 tonnes during the year to end of February 2014. Therefore, by 28 February 2015, there was, according to the BoE’s own statement, £140 billion or 5134.37 tonnes of gold in custody of the BoE, or in other words ~ 410,720 Good Delivery gold bars.

The article also reviewed snapshots of the total amount of gold stored in the London vaults at various recent points in time.

Firstly, a reference on the London Bullion Market Association (LBMA) web site for a date sometime before 2013 stated that there had been 9,000 tonnes of gold (i.e. 720,000 Good Delivery bars) stored in London with two-thirds of this amount, or 6,000 tonnes, stored in the Bank of England (about 482,000 bars), and 3,000 tonnes stored in London ex Bank of England vaults (238,000 bars). (Nick Laird of Sharelynx subsequently pointed out to me that the earliest reference to this 9,000 tonne figure was from a LBMA presentation from November 2011.)

Secondly, by early 2014, the LBMA web site stated that there were only 7,500 tonnes of gold in all London vaults, i.e. ~600,000 bars, and of this total, three-quarters or 5,625 tonnes were at in Bank of England, ~ 450,000 bars, and only one-quarter or 1,875 tonnes was stored at LBMA London gold vaults excluding the Bank of England’s gold vaults.

So, the entire London market including the Bank of England had lost 1,500 tonnes (120,000 bars) between 2011 and early 2014, with 375 tonnes less in the BoE and 1,125 tonnes less in the London market outside the BoE.

Finally, on 15 June 2015, the LBMA stated that “There are ~500,000 bars in the London vaults, worth a total of ~US$237 billion”. This ~ 500,000 bars equates to 6,256 tonnes. (On 15th June 2015, the morning LBMA Gold Price was set at $1178.25, which would make $237 billion worth of gold equal to 201.145 million ounces, which is 6,256 tonnes).

Therefore, another ~1,250 tonnes of gold (approximately 100,000 Good Delivery bars) departed from the London gold vaults compared to the early 2014 quotation of  7,500 tonnes of gold in the London vaults.

So overall, between the 9,000 tonnes quotation in 2011, and the 6,256 tonnes 2015 quotation, some 2,750 tonnes (~ 220,000 Good Delivery bars) disappeared from the London gold vaults. With 6,256 tonnes of gold stored in the entire London vault network in 2015, and with 5,134 tonnes of this at the Bank of England, that would leave 1,122 tonnes of gold in London outside the Bank of England vaults.

To reiterate, “the London gold vaults“, in addition to the Bank of England gold vaults, refer to the storage vaults of JP Morgan and HSBC Bank in the City of London, the vaults of Brinks, Malca Amit and Via Mat (Loomis) located near London Heathrow Airport, the vault of G4S in Park Royal, and the Barclays vault managed by Brinks.

Because the Bank of England reveals in its annual report each year the value of gold it has stored in custody for its customers (central banks, international official sector institutions, and LBMA member banks), then it is possible to compare 3 years of gold tonnage figures, namely the years 2011, 2014 and 2015, and then show within each year how much of this gold is stored at the Bank of England, and how much is stored in London but outside the Bank of England vaults.

Nick Laird of www.sharelynx.com / www.goldchartsrus.com has done exactly this in the following sets of fantastic charts which he has created to graphically capture the above London gold trends, and a lot more besides. These charts are just a subset of a suite of inter-related gold charts that Nick has created to address this critical subject in the London Gold Market.

LBMA and BoE Holdings AU 01

Although the Bank of England is not a LBMA member, the Bank of England gold vaults are a critical part of the LBMA gold vaulting and gold clearing system, and LBMA bullion banks maintain gold accounts with the Bank of England which facilitate, among other things, gold lending and gold swaps transactions with central banks. Hence the above and below charts are titled “LBMA Vaulted Gold in London”.

LBMA and BoE Holdings AU 02

My “How many Good Delivery gold bars are in all the London Vaults” article had also quantified that nearly all of this ~1,122 tonnes consists of gold from physical gold-backed ETFs which store their gold in the London vaults. (previously rounded up to 1,125 tonnes for ease of calculation).

I had included 5 gold ETFs in my previous analysis namely, SPDR Gold Trust (GLD), Shares Gold Trust (IAU), ETF Securities – ETFS Physical Gold ETF (PHAU & PHGP), ETF Securities – Gold Bullion Securities (GBS & GBSS), and Source Physical Gold ETC (P-ETC), and also some smaller holdings at BullionVault and GoldMoney. In total these ETFs and other holdings accounted for just over 1,000 tonnes of gold in the London market.

However, I had missed a few other gold ETFs which also store their gold in the London vaults. Nick Laird, whose Sharelynx website maintains up-to-date gold ETF data and gold holdings, took the initiative to fill in the missing ETF blanks and Nick re-calculated the more comprehensive ETF holdings figures for London, which worked out at an exact 1,116 tonnes of gold, astonishingly close to the implied figure represented by the 1,122 tonnes outside the Bank of England vaults.

The additional gold backed ETFs also included in Nick Laird’s wider catchment were Deutsche Bank db Physical Gold ETC and associated Deutsche ETFs, ABSA gold ETF (of South Africa), Merk Gold ETF, and some smaller holdings from Betashares and Standard Bank. The following chart from Sharelynx shows the full data for physically backed gold ETFs storing their gold in London:

LBMA vaults ETF gold in London AU 06


We then discussed an approach, in conjunction with Koos Jansen and Bron Suchecki, to identify known central bank gold stored in the Bank of England vaults by tallying up this storage data on a country level basis. So, for example, assuming 5,134 tonnes of gold stored at the Bank of England in early 2015, the aim would be to try to account for as much of this gold as possible using central bank sources.

As mentioned in the ‘How many gold bars‘ article, the Bank of England stated in 2014 that 72 central banks (including a few official sector financial organisations) held gold accounts with the Bank. It is not known if any of these gold accounts are inactive or whether any of these accounts have zero gold holdings. The LBMA stated in 2011 that “The Bank of England acts as gold custodian for about 100 customers, including central banks and international financial institutions, LBMA members and the UK government”. Therefore there could also be more than 25 LBMA member commercial banks with gold accounts at the Bank of England.

Some of the Bank of England 5,134 tonne total would therefore be gold held in LBMA member bank gold accounts at the Bank of England, for which data is not public. Likewise, a lot of central banks do not reveal where their gold is stored, let alone how much is stored in specific vaults such as at the Bank of England and Federal Reserve Bank of New York.

However, many central banks have more recently begun to provide some information on where they say their official reserve gold is stored. Other central banks have always been to some extent transparent. Overall, a variety of sources, where possible, can be used to source locational data regarding central bank gold storage locations. There will continue to be gaps however, since some central banks remain non-cooperative, even when asked directly about where they stored their gold.

Tallying this type of central bank gold storage data will probably be a work in progress. However, there has to be a cut-off point for doing a first pass through the data, and this is a first pass. As a group, the European central banks have been especially forthcoming with gold storage data, compared to even 3-4 years ago (except for Spain). For other central banks, I looked in various places such as their financial accounts, and I contacted some of them by email with varying degrees of success.  About half of the 72 central banks on the Bank of England’s list were identified, again, with varying degrees of accuracy.

The following fantastic chart by Nick Laird captures an overview of this Bank of England gold storage data. Essentially the chart shows that the banks listed hold, or have stated that they hold, the respective quantity listed, and in total the named banks could account for x tonnes gold stored at the bank of England. This is labelled ‘Known Gold‘. Given ‘Known Gold’, this leaves the residual as ‘Unknown Gold‘.

Bank of England vaulted gold AU 03

The remainder of this article explains the logic and the sources behind each country, and why that country appears on the list. When a central bank claims to have stored gold at the Bank of England, or the evidence suggests that, it does not necessarily mean that the gold in question is held in custody in a gold set aside account or that it is allocated in identifiable bars, or even that it is actually there. Many central banks engage in gold lending, or have done so in the last 15-20 years, and have at times, or permanently, transferred control of that gold to LBMA bullion banks.

Until all central banks come clean about what form their gold holdings are in, which will never happen, then the amount of central bank gold that’s encumbered by bullion banks or under claims, liens, loan agreements etc will not be apparent.


Sweden holds 125.7 tonnes of gold, and 48.8%, or 61.4 tonnes are stored at the Bank of England.

Swedish Riksbank - distribution of gold reserves
Swedish Riksbank – distribution of gold reserves



Finland holds 49.035 tonnes of gold, and 51%, or 25 tonnes are stored at the Bank of England.

Bank of Finland - Distribution of gold reserves
Bank of Finland – distribution of gold reserves



Germany holds 3,384 tonnes of gold, and 12.9%, or 438 tonnes are stored at the Bank of England. The Bundesbank’s ongoing repatriation of gold from New York and Paris does not alter the amount of Bundesbank gold held at the Bank of England.

Deutsche Bundesbank - distribution of gold reserves
Deutsche Bundesbank – distribution of gold reserves



Austria hold 280 tonnes of gold, and 80%, or 224 tonnes are stored at the Bank of England.

Oesterreichische Nationalbank (OeNB) - distribution of gold reserves
Oesterreichische Nationalbank (OeNB) – distribution of gold reserves



Switzerland holds 1,040 tonnes of gold, and approximately 20%, or 208 tonnes are stored at the Bank of England.

Swiss National Bank - distribution of gold reserves
Swiss National Bank – distribution of gold reserves



Portugal holds 382.5 tonnes of gold (annual report 2014), and 48.7%, or 186.3 tonnes are stored at the Bank of England.

Banco de Portugal - distribution of gold reserves
Banco de Portugal – distribution of gold reserves



The following commentary about Denmark’s gold contains some key points on understanding how to identify which countries store gold at the Bank of England.

As of August 2015, Danmarks Nationalbank (the Danish central bank) holds 65.5 tonnes of gold.

In August 2015, the Nationalbank said that:

“Most of Danmarks Nationalbank’s gold is stored at the Bank of England, where it has been since it was moved for safety reasons during the Cold War. In March 2014, Danmarks Nationalbank inspected its stock of gold in the Bank of England.”

However, an earlier Nationalbank publication in 1999 said that 94%, or 62.7 tonnes was stored at the Bank of England.

Danmarks Nationalbank - location of gold reserves
Danmarks Nationalbank – location of gold reserves

Therefore, the assumption here is that 62.7 tonnes of Danish gold is stored at the Bank of England.

Note the Danmarks Nationalbank’s assertion that in order for gold to be lent it has to be moved to the London, since London is the centre of the gold lending market.

In 1999 “Almost 99 per cent, or 93 per cent of the Nationalbank’s total gold stock, had been lent.” The same 1999 Danish central bank article also said that:

Denmark gold lending BoE

I have underlined the above sentence since it’s of critical importance to understanding that in gold lending, central bank gold lent to LBMA bullion banks at the Bank of England does not necessarily move out of the Bank of England vaults. Lent gold may or may not move out the door, depending on what the borrower plans to do with the borrowed gold.

It also means that the total gold in custody figure that the Bank of England reveals each year (for example £140 billion in February 2015), consists of:

a) central bank gold stored at the Bank of England

b) bullion bank gold stored at the Bank of England

c) central bank gold that has been lent or swapped with bullion banks (gold deposits and gold swaps) and that has not been moved out of the Bank of England vaults. This category of gold is still in custody at the Bank of England. The central bank claims to still own it, the bullion bank has control over it, and the Bank of England still counts it as being in its custody.


The Netherlands holds 612.5 tonnes of gold, and 18%, or 110 tonnes are stored at the Bank of England.

De Nederlandsche Bank (DNB) - distribution of gold reserves
De Nederlandsche Bank (DNB) – distribution of gold reserves


United Kingdom

The UK gold reserves are held by HM Treasury within the Exchange Equalisation Account (EEA). EEA gold reserves totals 310.3 tonnes, and all 310.3 tonnes are stored at the Bank of England.


Notice that the UK gold reserves includes holdings of gold coin, as well as gold bars.



Ireland hold 6 tonnes of gold in its official reserves, a small amount of which is in the form of gold coins, but nearly all of which is in the form of gold bars stored at the Bank of England.

CB 1 Ireland

Recently, I submitted a Freedom of information (FOI) request to the Central Bank of Ireland requesting information such as a weight list of Ireland’s gold stored at the Bank of England. After the FOI request was refused and the Central Bank of Ireland claimed there was no weight list, I appealed the refusal and was provided with a SWIFT ‘account statement’ from 2010 that the Bank of England had provided to the Central Bank of Ireland. See below:

Central Bank of Ireland - gold bars at the Bank of England
Central Bank of Ireland – gold bars at the Bank of England

This statement shows that as of 31 December 2010, the Central Bank of Ireland held 453 gold bars at the Bank of England with a total fine ounce content of 182,555.914 ounces, which equates to an average gold content of 402.993 fine ounces per bar. It also equates to 5.678 tonnes, which rounded up is 5.7 tonnes of gold stored at the Bank of England.

The fact that no weight list could be tracked down is highly suspicious, as is the fact that Ireland had in earlier years engaged in gold lending, so did not, at various times in the 2000s have all of its gold allocated in the Bank of England. How a central bank can claim to hold gold bars but at the same time cannot request a weight list of those same bars is illogical and suggests there is a lot more that the Central Bank of Ireland will not reveal.



Belgium holds 227 tonnes of gold, most of which is stored at the Bank of England with smaller amounts held with the Bank of Canada and with the Bank for International Settlements. Banque Nationale de Belgique (aka Nationale Bank van België (NBB)) does not publish an exact breakdown of the percentage stored at each location, however, in March 2013 in the Belgian Parliament, the deputy Prime Minister and Minister for Finance gave the following response in answer to a question about the Belgian gold reserves:

Most of the gold reserves of the National Bank of Belgium (NBB) is indeed held with the Bank of England. A much smaller amount held with the Bank of Canada and the Bank for International Settlements. A very limited amount stored in the National Bank of Belgium.

Furthermore, there were a series of reports in late 2014 and early 2015 that would suggest that Belgium stores 200 tonnes of its gold at the Bank of England. Firstly, in December 2014, VTM-nieuws in Belgium reported that the NBB governor Luc Coene had said that the NBB was investigating repatriating all of its gold. See Koos Jansen article here.

On 4 February 2015, Belgian newspaper Het Nieuwsblad said that Belgium would repatriate 200 tonnes of gold from the Bank of England, but the next day on 5 February 2015, another Belgian newspaper De Tijd reported that NBB Luc Coene denied the repatriation report, and quoted him as saying:

There are other and more effective ways to verify if the gold in London is really ours. We have an audit committee that inspects the Belgian gold in the UK regularly”.

See another Koos Jansen article on the Belgian gold here.  However, Luc Coene did not deny the figure of 200 tonnes of Belgian gold stored in London.

Therefore, the assumption here, backed up by evidence, is that Belgium stores 200 tonnes of gold at the Bank of England.



Australia holds approximately 80 tonnes of gold in its official reserves, with 1 tonne on loan, and 99.9% of gold holdings stored at the Bank of England. See 2014 annual report, page 33.  According to a weight list of its gold held at the Bank of England, released via an FOIA request in 2014, Australia stores approximately 78.8 tonnes of gold at the Bank of England.

Reserve Bank of Australia


 South Korea

South Korea (Bank of Korea) holds 104.4 tonnes of gold, 100% of which, or 104.4 tonnes is stored at the Bank of England. The Bank confirmed this to me in an email on 11 September 2015. See email here ->

Bank of Korea (BOK) - location of gold reserves
Bank of Korea (BOK) – location of gold reserves


International Monetary Fund

The IMF currently claims to hold 2,814 tonnes of gold after apparently selling 403.3 tonnes over 2009 and 2010 (222 tonnes in ‘off-market transactions and 181.3 tonnes in ‘on-market transactions’). Prior to 2009, IMF gold holdings had been 3,217 tonnes, and had been essentially static at this figure since 1980 [In 1999 IMF undertook some accounting related gold sale transactions which where merely sale and buyback bookkeeping transactions].

Although the IMF no longer provide a breakdown of how much of its gold is stored in each location where it stores gold, the amount of gold held by the IMF at the Bank of England can be calculated by retracing IMF transactions from a time when the IMF did provide such details. In January 1976, the IMF held 898 tonnes of gold at the Bank of England in London, 3,341 tonnes at the Federal Reserve Bank of New York, 389 tonnes at the Banque de France in Paris, and 144 tonnes at the Reserve Bank of India in Nagpur, India. Therefore, of the IMF’s total 4,772 tonnes holdings at that time, 70% was stored in New York, 19% in London, 8% in Paris and 3% in India. See here and here.

In the late 1970s, the IMF sold 50 million ounces of gold via two methods, namely, 25 million ounces by ‘public’ auctions, and 25 million ounces by distributions to member countries.

In the four-year period between mid-1976 and mid-1980, the IMF sold 25 million ounces of gold to the commercial sector via 45 auctions. Thirty five of these auctions delivered gold at the FRBNY, 7 of these auctions delivered gold at the Bank of England, and 3 of the auctions delivered gold at the Banque de France.

Of the 7 auctions that delivered the IMF’s gold at the Bank of England, these auctions in total delivered 3.74 million ounces [Dec-76: 780,000 ozs, Aug-77: 525,000 ozs, Nov-77: 525,000 ozs, May-78: 525,000 ozs, Oct-78: 470,000 ozs, Mar-79: 470,000, and Dec 79:444,000 ozs], which is 116 tonnes. See IMF annual report 1980.

The IMF also sold 25 million ozs of gold to its member countries within four tranches over the 3 year period from January 1977 to early 1980. These sales, which were also called gold ‘distributions’ or ‘restitutions’ and covered between 112 and 127 member countries across the tranches, were initially quite complicated in the way they were structured since they involved IMF rules around quotas which necessitated the gold being transferred to creditor countries of the IMF and then transferred to the purchasing countries. In the later sales in 1979 and 1980 countries could purchase directly from the IMF.

Countries could choose where to receive their purchased gold, i.e. London, New York, Paris or Nagpur, however, the US, UK, France and India, which had the largest IMF quotas and hence the largest gold distributions, all had to receive their gold at the respective IMF depository in their own country. I don’t have the distribution figures to hand at the moment for the 25 million ozs sold to countries, but about 18 countries took delivery from the Banque de France in Paris, with the rest choosing delivery from New York and London.

Therefore an assumption is needed on the amount of gold the IMF ‘distributed’ to member countries from its Bank of England holdings between 1977 and 1980. Of the 25 million ounces distributed, the US received 5.734 million ozs, the UK received 2.396 million ozs (75 tonnes), France received 1.284 million ozs, and India received 805,000 ozs. Subtracting all of these from 25 million ozs leaves 14.78 million ozs which was distributed to the other ~120 countries. Since the IMF held 70% of its holdings at the FRBNY in 1976, 19% at the Bank of England and 8% at the Banque de France, apportioning these three weights to the remaining 14.78 million ozs would result in 10.76 million ozs (332 tonnes) being sold from the FRBNY, 2.867 million ozs (89 tonnes) from the Bank of England and 1.24 million ozs (38.5 tonnes) from the Banque de France.

Adding this 89 tonnes to the 75 tonnes received by the UK would be 164 tonnes distributed from the Bank of England IMF gold holdings. Add to this the 116 tonnes of London stored IMF gold sold in the auctions equals 280 tonnes. Subtracting this 280 tonnes from the IMF’s London holdings of 898 tonnes in January 1976 leaves 618 tonnes.

In 2009 the IMF said that it had sold 200 tonnes of gold to India, 2 tonnes to Mauritius, 10 tonnes to Sri Lanka,and then 10 tonnes to Bangladesh in 2010. The Bangladesh figures reflect its 10 tonne purchase. However, at the moment, there has been no exact confirmation that the 200 tonnes that India bought is in London. It probably is in London, but leaving this amount under the IMF holdings instead of in India’s holdings makes no difference. Subtracting the Bangladesh sale of 10 tonnes, and rounding down slightly, there are 600 tonnes of IMF gold (excluding the 2009 India 200 tonnes sale) stored at the Bank of England.

The IMF sales of gold to Sri Lanka and  Mauritius in 2009 of a combined total of 12 tonnes probably came out of the IMF’s London holdings also. The IMF’s sale of 181.3 tonnes of gold in 2010 via ‘on-market transactions’ may also have come out of the IMF’s London stored gold. These ‘on-market transactions” look to have used the BIS as pricing agent, and the IMF have gone to great lengths to hide the full details of these sales from public view. More about that in a future article.



The Reserve Bank of India holds 557.75 tonnes of gold. Of this total, a combined 265.49 tonnes are stored (outside India) at the Bank of England and with the Bank for International Settlements. In 2009 India purchased 200 tonnes of gold from the IMF via an ‘off-market transaction‘. A slide from this presentation sums up this information.

The questions then are, is the 200 tonne purchase from the IMF stored at the Bank of England, and how much of the earlier 65.49 tonnes is stored at the Bank of England.

Reserve Bank of India - gold held outside India
Reserve Bank of India – gold held outside India
A 2013 article in the Indian Business Standard which was reprinted from “Reserve Bank of India history series. Volume 4, 1981-1997, Part A”, explains that in 1991, the Reserve Bank of India entered 2 separate gold loan deals, one deal with UBS in Switzerland (which required 18.36 tonnes of RBI gold to be sent to Switzerland) and the other deal with the Bank of England and Bank of Japan (where 46.91 tonnes was required to be sent to the Bank of England). Together those 2 transactions equals 65.27 tonnes which is 0.222 tonnes short of the 65.49 total.
After the gold loan deals expired, it looks like 18.36 tonnes of Indian gold were left in Switzerland and transferred to safekeeping or deposit with the BIS, and 46.91 tonnes of Indian gold was left at the Bank of England.
Regarding India’s purchase of 200 tonnes of gold in 2009, the IMF only has gold 4 depositories, namely, the Bank of England, Federal Reserve Bank of New York, Banque de France, and the Reserve Bank of India in Nagpur, India. Given that the Indian gold stored abroad is “with the Bank of England and the Bank for International Settlements“, then for the 200 tonnes of IMF gold to end up being classified as ‘with’ the BIS, it would have to have either been transferred internally at one of the IMF depositories to a BIS account, or transferred via a location swap or a physical shipment to a BIS gold account at the vaults of the Swiss National Bank in Berne.
For now, the 200 tonnes of gold sold by the IMF to India in 2009 is reflected in the IMF holdings and not the India holdings. It does not make a difference to the calculations, since the 200 tonnes is still at the Bank of England.
Bulgaria has 40.1 tonnes of official gold reserves. The latest BNB annual report states that 513,000 ozs are in standard gold form, and 775,000 ozs are in gold deposits.
Bulgaria CB
In 2014, about 60% of Bulgaria’s gold was in gold deposits. These deposits are ‘stored’ in the Bank of England. Therefore approximately 24 tonnes of Bulgaria’s gold is at the Bank of England.

Bulgaria 2


Bank for International Settlements

The Bank for International Settlements (BIS), headquartered in Basle, Switzerland does not have run any gold vaults of its own. However, the BIS is a big player in the global central bank gold market, and it offers its central bank clientele gold safekeeping (and settlement) services using central bank vaults in London, New York and Berne. These services are possible because the BIS maintains gold accounts at the Bank of England, the Federal Reserve Bank of New York, and the Swiss National Bank in Berne. BIS gold accounts can act like omnibus accounts in that many central banks can hold gold in sub-accounts under a BIS gold account at each of these institutions in London, New York and Berne.

Gold can then be transferred around locations using gold swaps where one of the counterparties to the gold swap is the BIS.

BIS gold services to the global central bank market
BIS gold services to the global central bank market

The BIS is involved with gold in 3 main categories.

a) the BIS holds gold in custody for customers, off of the BIS balance sheet

b) the BIS has its own gold holdings which are classified as its gold investment portfolio, and which are on its balance sheet

c) the BIS accepts gold deposits from central banks. These gold deposits appear as a liability on the BIS balance sheet. Then the BIS turns around and places these gold liabilities in the market under its own name. These placing are also in the form of gold deposits and gold loans with other institutions including commercial banks. These ‘assets’ are then classified on the BIS balance sheet as BIS’ “gold banking” assets.

a) In its latest annual report, as of the end of March 2015, the BIS stated that it holds 443 tonnes of gold under earmark for its central bank customers on a custody basis. This gold is not on the BIS balance sheet. i.e. it is ‘off-balance sheet’ gold held by the BIS.

Bank for International Settlements - Off-Balance sheet gold in custody for customers
Bank for International Settlements – Off-Balance sheet gold in custody for customers
b) The BIS also holds 108 tonnes of its own gold (on balance sheet within an investment portfolio). This BIS gold is either kept in custody or transferred to bullion banks as gold deposits. The BIS does not provide granular data in its annual report as to how much of its own gold is ever put into gold deposits.
BIS 108
c) As of 31 March 2015, the BIS had 510 tonnes of gold assets on its balance sheet. Of this total, 108 tonnes was the BIS’ own gold, leaving 403 tonnes as banking assets (i.e. customer gold . Of this same 510 tonnes total, 55 tonnes were classified as gold loans, so 457 tonnes were not gold loans. If all 55 tonnes of gold loans were from customer gold, this would leave 348 tonnes of customer backed gold banking assets. On the same date (31 March 2015), the BIS held 356 tonnes of gold deposits from customers (sight deposits and short-term deposits) on the liability side of its balance sheet which originate entirely from central banks depositing gold with the BIS in sight and term deposits.
The question then is how to reflect BIS gold storage holdings at the Bank of England. While most if not all gold deposit transactions between central banks/BIS and bullion banks take place in London, the data is not readily published.
It was therefore decided, in the spirit of being conservative, to make an assumption on the BIS gold, and only use BIS customer custody gold and BIS own gold as inputs, and because BIS has gold accounts with 3 vaults (London, NY and Berne), to then just divide by 3 and say that one-third of BIS own gold and one-third of BIS ‘central bank custody gold’ is in London This would be 183.66 tonnes, i.e. (108+443)/3.
Therefore, this model states that 183.66 tonnes of BIS gold is stored in the Bank of England. This is probably being very conservative, especially given that no on-balance gold deposited by BIS customers is reflected in this figure.



Venezuela holds 361 tonnes of gold. All the Venezuelan gold is held in Caracas in Venezuela at the Banco Central de Venezuela except 50 tonnes are still stored at the Bank of England for transactions such as the gold swap with Citibank. See my article “Venezuela’s Gold Reserves – Part 2: From Repatriation to Reactivation“.



Bangladesh Bank (Central Bank of Bangladesh) holds 14 tonnes of gold, and 84.2%, or 11.8 tonnes are stored at the Bank of England.

Bangladesh Bank - distribution of gold reserves
Bangladesh Bank – distribution of gold reserves

In September 2010, the IMF sold 10 tonnes of gold to Bangladesh Bank, bringing total gold holdings up from 3.5 tonnes to 13.5 tonnes. The fact that this gold is stored at the Bank of England shows that the IMF sold this gold from its holdings that were stored at the Bank of England. (Note, Bangladesh has recently added some small amounts of domestic confiscated gold to its reserves).



Mexico’s central bank, Banco de Mexico (Banxico) currently hold 122.1 tonnes of gold.  At the end of 2012, Mexican official gold reserves totalled 4,034,802 ounces (125 tonnes), of which only 194,539 ounces (6 tonnes) was in Mexico, and 119 tonnes abroad.

According to a response from Banxico to Mexican economist Guillermo Barba, 99% of Mexico’s gold stored abroad is at Bank of England. So that  is 117.8 tonnes of Mexico’s gold stored at the Bank of England.

With Banxico now holding 122 tonnes according to the World Gold Council, and not 125 tonnes, the assumption is that the 3 tonne reduction came from domestic holdings.

Banxico - location of gold reserves
Banxico – location of gold reserves



Poland holds 102.9 tonnes of gold in its reserves. Poland’s central bank (Narodowi Bank Polski (NBP)) published a guide to Poland’s gold in 2014 in which it confirmed that nearly all of its gold is at the Bank of England. See pages 86-90 of the guide.

“How much gold did Poland possess before 1998? Approximately 746,463 ounces, of which almost 721 thousand was invested in deposits in commercial banks. In turn, the gold kept in the country was mainly coins, gold bars and various types of gold “scrap” bought by NBP.” (page 86)

Before 1998, only 25,463 ozs of NBP gold was kept in Poland, and 721,000 ozs (22.43 tonnes) was deposited with bullion banks. Poland then bought 80 tonnes of gold in 1998, bringing its gold reserves up to nearly 103 tonnes. The purchase was done as follows:

“…we used the services of a bank which constantly carries out similar transactions. Next, we made a location swap and the whole of NBP’s foreign gold reserves were deposited onto our account in the Bank of England.” (page 88)

It is likely that the NBP is referring to the BIS as the bank which purchased the gold on behalf of Poland, and then transferred it from one of the BIS gold accounts at the Bank of England to the NBP gold account at the Bank of England.

So that is 102.9 tonnes stored at the Bank of England.

Note also that, the Polish central bank explains that “It can be assumed that the gold that has been placed on the market at any time is precisely the gold that is held by the central banks in London“. In other words, central banks that have places gold on deposit (lent it) have done so with gold that they have stored in the Bank of England. See the following screenshot:

Narodowi Bank Polski - location of gold reserves
Narodowi Bank Polski – location of gold reserves

Note 6.1 on page 136 of the 2013 NBP annual report states:

“Gold and gold receivables The item comprises gold stored at NBP and deposited in a foreign bank account. As at 31 December 2013, NBP held 3,308.9 thousand ounces of gold (102.9 tonnes).

The annual report is a large file and slow to downlaod so its probably not worth downlaoding it http://www.nbp.pl/en/publikacje/r_roczny/rocznik2013_en.pdf

This statement about the “gold stored at NBP and deposited in a foreign bank account” has been in a few of the recent NBP annual reports. In April 2013, before the NBP had published the guide to its gold, I asked the NBP by email, based on the statement, to  clarify if the gold held abroad is held in custody, for example at the Bank of England or FRBNY or held in time deposits with commercial banks?”

The NBP responded: “Narodowy Bank Polski does not make gold time deposits with commercial banks”.

This may be true if the NBP is using sight deposits, but the 2013 answer, like so many other central banks currently, avoided providing any real information to the question.

Given that nearly all NBP’s 102.9 tonnes of gold was in the Bank of England when the 80 tonnes purchase was made in 1998, the assumption here is that still is the case, and that for simplicity, 100 tonnes of Poland’s gold is at the Bank of England.



Romania has 103.7 tonnes of gold in its official reserves.

National Bank of Romania - distribution of gold reserves
National Bank of Romania – distribution of gold reserves

In percentage terms, as at 31 December 2014, 27% of Romania’s gold was in ‘standard form’ which presumably means Good Delivery Bars (400 oz bars), 14% in gold coins, and 59% in ‘Deposits’ abroad. (59% of 103.7 tonnes is 61.2 tonnes)

Looking at earlier financial accounts, and going back to 2005/2004, the Romanian central bank held gold deposits with bullion banks, and gold deposits at the Bank of England, and the percentage of he gold in each of the 3 categories was very similar to 2014, specifically, in 2005 it was 32% in gold bullion in standard form, 13% in gold coins,and 55% in gold deposits.

Note the gold deposits with Bank of Nova Scotia and Fortis Bank Bruxelles in 2005 and additionally with the same two banks and with Barclays and Morgan Stanley NY in 2004.

National Bank of Romania 2005

Since the percentage breakdown between Romania’s bullion bank deposits (59%), standard bars (27%) and coins (14%) hasn’t varied much since 2005, and was at a similar mix over various years that I checked such as 2011 and 2014, the conclusion is that Romania has had more than  50% of its gold on constant deposit since at least 2004 (i.e. the original allocated gold is long gone).

The 2005 annual report also states that there were 61 tonnes of Romanian gold stored at the Bank of England. Since Romania had just under 105 tonnes of gold in 2005, this 61 tonnes was referring to the gold deposits, which central banks, as illustrated in numerous other examples, continue to count as their gold even though it has been lent to bullion banks.

Romania therefore had or has 61 tonnes of gold stored at the bank of England.

Note also the reference to central vault, which probably refers to a vault in Bucharest.



The Philippines hold 225 tonnes of gold in its official reserves. In November 2000, when the Bangko Sentral ng Pilipinas (BSP) held 225 tonnes of gold, it explained in a press release titled ‘Shipment of Gold Reserves‘ that it ended up storing 95% of its gold at the Bank of England due to the use of location swaps with a counterparty (probably the BIS) that took delivery of BSP gold, and transferred gold to the BSP account at the Bank of England.

Bangko Sentral Philippines - 95% gold at Bank of England
Bangko Sentral Philippines – 95% gold at Bank of England

Since 2000, the BSP gold reserves have risen, fallen, and risen again and now total 195 tonnes. Assuming the ‘95% of its gold’ storage arrangement is still in place, then the Philippines has 95% of 195 tonnes, or 185 tonnes stored at the Bank of England.



Greece claims to hold 112.6 tonnes of gold. In 2013, the Greek finance ministry on behalf of the Greek central bank stated that half of Greece’s gold reserves were ‘under custody’ of the Bank of Greece, and the other half was ‘under custody’ of the Federal Reserve Bank of New York (FRBNY), the Bank of England and (very vaguely) Switzerland. Who actually controls Greece’s gold reserves at this point in time is anybody’s guess.

Bank of Greece, locations of Greece's gold reserves
Bank of Greece, locations of Greece’s gold reserves

See my article from February 2015, titled “Spotlight on Greece’s Gold Reserves and Grexit” which explores Greece’s official gold reserves.

Given that the Federal Reserve Bank of New York was listed by the Greek MinFin as a foreign gold storage location ahead of the Bank of England, the assumption here is that of the 50% of Greece’s gold held abroad, the FRBNY holds more of this portion than the Bank of England. And so the assumption is that the Bank of England holds 40% of the foreign half, i.e. 20% of the total of Greece’s gold, with the FRBNY holding 50% of the foreign half. Taking 112 tonnes of gold as Greece’s total gold holding, 40% of this is 22.4 tonnes stored at the Bank of England. (Note, Greek gold reserves keep increasing incrementally each month by small amounts. As I am not sure what these increases relates to, a recent rounded figure of 112 tonnes has been chosen).



The Banca d’Italia holds 2.451.8 tonnes of gold. Although in 2014, the Banca d’Italia released a document in which it confirmed that some of this gold is held at the Bank of England, there is no evidence to suggest that Italy’s gold in London amounts to more than a few tonnes left over from 1960s transactions.

Bank of England gold set-aside ledgers show that in 1969 there were less than 1000 ‘Good Delivery’ gold bars in the Banca d’Italia gold account at the Bank of England, weighing less than 400,000 ozs in total. This is equal to about 12 tonnes. Most of the Italian gold at the Bank of England was flown back to Rome (and Milan) in the 1960s.

Since there is no public documentation that Banca d’Italia has ever engaged in gold lending (as far as I am aware), then there would be no need for Italy to keep a lot of gold at the Bank of England. Nearly all of Italy’s foreign held gold (over 1,200 tonnes) looks to be in New York (assuming it hasn’t been swapped or used as loan collateral). Italy could have engaged in non-public gold transactions from the Bank of England using gold location swaps from the FRBNY, or from Rome, but there is no evidence of this.

So, this model assumes 12 tonnes of Italian gold is stored at the Bank of England.



Brazil hold 67.2 tonnes of gold reserves. In 2012, Banco Central do Brasil told me by email that all of its gold reserves were in the form of ‘fixed term gold deposits at commercial banks only’. Since the gold would be required to be stored at the Bank of England for these gold deposit transactions to take place, Brazil therefore holds 67.2 tonnes of gold at the Bank of England. See email below:

Banco Central do Brasil - gold deposits
Banco Central do Brasil – gold deposits
Banco Central del Ecuador conducted a 3 year gold swap with Goldman Sachs in June 2014 where it swapped 466,000 ozs for US dollar cash This swapped amount of gold has been factored into the World Gold Council data for Ecuador, and the Ecuadorian reserves dropped by 14.5 tonnes in Q2 2014. from 23.28 tonnes to 11.78 tonnes. This swapped amount of 14.5 tonnes is most probably stored at the Bank of England, since Goldman Sachs proposed a similar deal with Venezuela in 2014 where the gold was required to be at the Bank of England for the swap to be initiated.
Bolivia Central de Bolivia holds 42.5 tonnes of gold, all of which is permanently on deposit with bullion banks. The Bolivian Central Bank is very transparent in explaining where its gold is ‘invested’. Hence, it has (until recently) even provided in its financial accounts, the names of the bullion banks which happened to hold its ‘gold deposits’ and the amounts held by each bank.
Banco Central de Bolivia
Banco Central de Bolivia
A recent Banco Central de Bolivia report for 2014 is less revealing and only shows the country distribution of the gold deposits, with 39% in the UK and the rest in France. While this probably refers to the headquarters of the actual bullion banks in question, i.e. Natixis is French etc, it could mean the gold is being attributed to the Bank of England and the Banque de France, so, a conservative approach here is to attribute 39% of 42.5 tonnes to the Bank of England, i.e. 16.6 tonnes stored at the Bank of England.
Banco Central de Bolivia
Banco Central de Bolivia
Peru holds 34.7 tonnes of gold in its official reserves.
At the end of December 2013, Banco Central de Reserva del Peru held 552,191 ounces (17 tonnes) of gold coins which were stored in the Bank’s own vault, and 562,651 troy ounces of “good delivery” gold bars (17.5 tonnes) which were stored in banks abroad, of which 249,702 ounces were in custody and 312,949 ounces in the form of short-term interest bearing deposits. See 2013 annual report.
Since the gold bars are all ‘good delivery’ bars (which is not the case at the FRBNY), and since Peru has still recently been engaging in gold lending, then the evidence suggests that 17.5 tonnes of Peru’s gold is stored at the Bank of England.
Peru CB

Latvia hold 6.62 tonnes of gold in its official reserves after joining the Euro on 1 January 2014 and after transferring just over 1 tonne of gold to the European Central Bank (ECB). All of Latvia’s gold is stored at the Bank of England, therefore Latvia stores 6.62 tonnes of gold at the Bank of England.

Before this transfer of gold to the ECB, Latvia had 248,706 ozs of gold, and it transferred 35,322 ozs to ECB, leaving 213,384 ozs.

Latvia CB

The latest annual report of the central bank of Latvia explains this transfer to the ECB.

Central Bank of Latvia - gold transfer to the ECB, 2014
Central Bank of Latvia – gold transfer to the ECB, 2014
European Central Bank
The ECB holds 504.8 tonnes of gold. This gold was transferred by the Euro members to the ECB at the launch of the Euro by 1 January 1999. All the ECB gold is de-centrally managed, meaning that it stays where it was when transferred and is still locally ‘managed’ by the bank which transferred that gold to the ECB. Some banks may have transferred gold stored at FRBNY in fulfillment of their requirement, some banks may have transferred gold at the BoE, and countries such as France and Italy may have transferred amounts which are still stored at Banque de France and Banca d’Italia etc. Some of the ECB gold, such as the smaller amount transferred by Latvia, is in the Bank of England. Other amounts of the ECB’s gold are most certainly also at the Bank of England in London.
It would be a separate project to track these transfers. The 1 tonne of Latvian gold transferred to the ECB at the start o 2014 was included in the figures here just as a placeholder, so as to acknowledge that ECB gold is at the Bank of England. Given that the Euro is a competing currency to the US Dollar, the ECB may have more gold than not stored in Europe and not at the Federal Reserve Bank of New York, since ECB gold would logically be safer not stored in the main Reserve Bank of a competing currency bloc.



Iceland holds 2 tonnes of gold reserves (precisely 63,831.46 ozs). Although the Bank of Iceland says that its gold is stored at the Bank of England and in its own vault also, nearly all the gold is stored at the Bank of England.

In its 2014 annual report, the Bank of Iceland said that “The Bank resumed lending gold for investment purposes in June 2014“, and “The Bank loaned gold to foreign financial institutions during the year”.

CB Iceland

The Bank of Iceland lent 99.7% of its gold during 2014 because this is the percentage of the gold reserves which are not payable on demand, but are payable in less than 3 months. See below screenshot.

Central Bank of Iceland - gold deposits
Central Bank of Iceland – gold deposits

For the purposes of this exercise, Iceland stores 2 tonnes of gold at the Bank of England.



Ghana’s central bank, the Bank of Ghana, holds 8.7 tonnes of gold in its official reserves (precisely 280,872.439 ozs). Of this total, 39.3%, or 3.42 tonnes is held at the Bank of England, with 27.5% at the Federal Reserve Bank of New York, and 29.5% with investment bank UBS. See 2014 annual report.

Interestingly, Ghana refers to its gold account at the Bank of England as a ‘gold set aside’ account, which is the correct name for a Bank of England gold custody account of allocated gold. Probably more interestingly is that most central banks do not use this ‘set aside’ term.

Bank of Ghana



A number of central banks refuse to confirm the location of their gold reserves. I will document this in a future posting. Some of the large holders undoubtedly hold quite a lot of gold at the Bank of England, as do a number of smaller holders. Countries that could fit into this category include Spain, France, Colombia, Lithuania, Sri Lanka, Mauritius, Pakistan, Egypt, Slovenia, Macedonia, Malaysia, Thailand and South Africa. In fact any central bank which has engaged in gold lending is a candidate for having some of its gold stored at the Bank of England.

Spanish people take note. Spain refused to say where its 281.6 tonnes of gold is stored, and Banco de España has the dubious record of being Europe’s least transparent bank as regards gold reserves storage locations. Maybe a project for Spanish journalists.

Banque de France keeps 9% of its 2,435 tonnes of gold reserves abroad, and has in the past engaged in gold lending. So this 9%, or 219 tonnes, is probably stored at the Bank of England.

The ECB and BIS  no doubt have more gold stored at the Bank of England than the figures currently reflect. This would also increase the ‘known gold’ total. Egypt is another country which has had a gold set aside account at the Bank of England so is in my view an obvious candidate for the list.

Adding to the known total is therefore a work in progress.

Venezuela’s Gold Reserves – Part 2: From Repatriation to Reactivation

This is Part 2 of a two-part series. Part 1, titled “Venezuela’s Gold Reserves – Part 1: El Oro, El BCV, y Los Bancos de Lingotes“, provided a historical overview of Venezuela’s gold and looked at where the gold, and the claims on gold, were located just prior to repatriation in 2011, especially the gold held abroad.

Part 1 was necessary so as to set the scene for the, in some ways, theatrical gold flights and convoys of Part 2, and to also illustrate that a percentage of Venezuela’s gold (50 tonnes) was retained in the vaults of the Bank of England so as to be available for activation into international gold transactions.

And so, the analysis below covers Venezuela’s actual gold repatriation operations in late 2011 and early 2012, especially the first and last flight. You will see that the first batch of gold bars came in on an Air France cargo flight, which opens up key questions about France and the Banque de France as a source for some of the repatriated gold. You will also see the arrival and unloading of the last flight, a World Airways cargo freighter.

The analysis wraps up with a look at the gold swap discussions between Venezuela and a set of investment banks which culminated in a gold swap being agreed with Citibank. The question then arises as to whether further similar gold swaps are in store for Venezuela’s domestically held monetary gold.


The Repatriation – Flights and Convoys

The Venezuelan gold repatriation transport operation took just over two months to complete, beginning on 25 November 2011, and winding up on 30 January 2012. During this time, 23 shipments (by air) are said to have arrived in Caracas, with 160 tonnes of gold flown in.

As Banco Central de Venezuela (BCV) governor Nelson Merentes stated in an end of year 2012 report (page 16):

“In 2012, the central bank completed the repatriation of monetary gold , which began in late 2011. This unprecedented process, which reaffirms the sovereignty of the nation, constitutes the largest movement of physical gold in the world market in recent years . A total of 23 gold shipments were moved, totalling 160 tonnes of metal that had been custodied abroad.”

Notwithstanding the fact that the German Bundesbank claims to have quietly and secretively moved 940 tonnes of its gold from the Bank of England in London to its Bundesbank headquarters in Frankfurt between 2000 and 2001, the Venezuelan gold repatriation is still probably the “largest movement of physical gold in the world market” since that time.

merentes car

The first and last shipments of Venezuela’s gold repatriation arrived into Maiquetía Airport (aka Simón Bolívar International Airport) in Venezuela’s capital, Caracas, so the presumption is that the other shipments did also. Both the first and last shipments received huge media coverage in Venezuela and extensive coverage internationally. Given that the Venezuelan State facilitated and encouraged this domestic media coverage, as well as street scenes thronged with Chavez supporters, this is not surprising. The majority of the other shipments after the first and before the last ones got little or no coverage, probably due to security procedures.

Reuters quoted Nelson Merentes on the day of the first shipment arrived as saying that:

“We cannot give exact dates (for when the rest of the bars will arrive) due to questions of security. When we bring the last shipment, the people will learn about it.

The Reuters report also quoted a Venezuelan government source as saying that there would be ‘several’ cargo flights.

“A senior government source involved in transporting the bars, which amount to 90 percent of Venezuela’s gold held abroad, has told Reuters they will be shipped in several cargo flights that will be completed before the end of the year.

The total cost of the operation will be no more than $9 million, the source said, without elaborating.”

The First Shipment (by air) came from France

The gold from the first shipment, which consisted of 5 tonnes of gold, was moved from Maiquetía airport to the central bank vaults in Caracas on Friday 25 November 2011 amid much fanfare and coverage. Although the airport to bank journey happened on 25 November, an article here claims that the “the repatriation of gold reserves began on 23 November”.

In various news footage videos below, which cover the transport of the gold from the airport on 25 November 2011, there are no shots of any aircraft being unloaded, which may suggest that the first shipment did indeed arrive prior to 25 November, possibly on 23 November. The first shipment was flown in using Air France (see below).

In contrast, during the last operation on 30 January 2012, the arrival of the aircraft into the airport played a starring role in proceedings, possibly because the shipments were then being wrapped up and there was little harm in broadcasting the identify of aircraft, which you will see below was a chartered World Airways MD-11 cargo freighter.

The first video below from 25 November 2011 shows black plastic crates (presumably with the gold in them) on pallets which in turn are on trailers, positioned beside a line of armoured cars ready for loading.

Very interestingly, central bank governor Merentes (at 0:22) states that this first shipment of gold came from European countries “via Francia” (by way of France).

This is very odd that the first shipment came from France. Given that the gold was stored at the Bank of England and with the BIS, none of the Venezuelan gold should ever have been in France. And with air charters from Europe, there would be no need to fly into and out of a French airport en route from London to Caracas.

A November 2013 article from Venezuelan newspaper ‘El Nacional’ stated that the first batch of gold had come directly from France:

Los primeros lingotes vinieron de Francia en medio de un operativo denominado Oro Patrio y en el que participaron más de 500 funcionarios.”

The first ingots came from France in the middle of an operation called Golden Homeland and in which over 500 staff participated.”

The most compelling piece of evidence, however, that the first shipment came from France is the fact that the gold was flown into Caracas on Air France, and there were labels on the side of the crates stating this. See screenshot below taken from one of the videos:

Air France - air waybill

This label above shows the ‘Air Waybill No’ of ‘057-53208470′, the ‘Destination’ of CCS (Caracas), and the ‘Total No of Pieces’ – 10, i.e. 10 crates.

See also the below photo of one of the crates, with the same Air Waybill number 057-53208470, after it was loaded into the back of one of the armoured security cars:

Air France labelled crate on pallet

Air France Cargo fleet consists of 2 long-range Boeing 777- 200LRF cargo freighters, registration numbers F-GUOB and F-GUOC. You can see a video of F-GUOC taking off (from another airport) here.

These 777F aircraft have “a maximum payload of 102 tonnes, a total capacity of 37 pallets and a maindeck that can take 3-metre pallets“. The videos below of the first gold shipment, and the video of the last unloading on 30 January 2012, shows these huge 3-metre pallets on the ground and, in the case of the last shipment, being unloaded.

Since the gold in the first shipment was flown from France, this gold may have come from the Banque de France in Paris, which would suggest that the bullion banks and/or the BIS had to resort to sourcing gold from the Banque de France. BNP Paribas was one of the five bullion banks that had a borrowed gold liability to the BCV, so this fact may be relevant. (See a section below about the French connection).

The second Venezuelan video from 25 November 2011 states that gold which was located in US, Canadian, and English banks was being repatriated to Venezuela. This does not mean, however, that the gold flights originated in all or any of these locations. The US, Canada and England just refer to the headquarters of the bullion banks involved in the repatriation.

The third video from 25 November 2011 refers to “foreign banks,” “principally in Europe,” and mainly English banks.

Reuters quoted Merentes as having said that “The gold comes from several European countries.


1. Length: 2:26 – Nelson Merentes interview, and gold ready for loading. 25 November 2011


2. Length: 2:06 – Armoured cars and convoy getting ready to leave the airport, and then departing the airport. 25 November 2011


3. Length 1:53 – Convoy leaves airport and drives to the central bank. 25 November 2011


4. Length 11:03 – Air France label is shown beginning at 9:42. This longer video has extended footage of the unloading and loading operation. 25 November 2011


The BCV’s 2011 Economic Report (see link above, page 92) states that the first shipment on 25 November 2011 consisted of 5 tonnes of gold. In the media coverage of the first shipment, the exact tonnage of gold involved was not stated beyond the fact that  “Nelson Merentes said a little over 300 million dollars was brought in the first batch of gold that came to the country on Friday.”

At a price of $1,688 per ounce on 25 November 2011, that would be roughly 5.5 tonnes. Whether it was 5 tonnes of 5.5 tonnes is not that important. With each of the crates holding 500 kgs or 0.5 tonnes, that would be 10 – 11 crates in the first shipment. There appear to have been 10 crates given that’s what it said on the crate labels and that’s what the BCV maintain their were.

Once the gold was loaded up into the fleet of security vans, a huge convoy of military vehicles and personnel (said to be between 400 – 500 personnel) accompanied the vans out from the airport (by the ocean) and around the mountain to the central bank building in downtown Caracas, on a route, some of which was lined with Chavez’ supporters, especially where they had congregated near the bank’s entrance.

 As mentioned, there was little coverage after the first shipment, although a local media article referred to a second shipment arriving from Europe on Tuesday 6 December 2011. After this, the media didn’t really cover the repatriation until the last shipment arrived by air on Monday 30 January 2012.

repatriation gold caracas

The Last Shipment – The Final Flight of MD-11, N275WA

The final shipment arrived into Maiquetía – Simón Bolívar airport on Monday 30 January 2012 consisting of 14 tonnes of gold in 28 boxes. The novel significance of the media coverage on this day was that news crews were allowed to film the airplane taxiing into the landing area and unloading its cargo.

The arriving aircraft was a three-engine long-range McDonnell Douglas MD-11 CF (convertible freighter), registration number N275WA, serial number MSN 48631, registered to World Airways. You can see the fleet number (nose code) of ‘275’ above the front (nose) wheel in the photo below.

flight N275WA

Six of these MD-11 CFs were built and World Airways were flying two of them at this time. Ironically, the parent company of World Airways, called Global Aviation Holdings Inc, filed for chapter 11 bankruptcy protection on 5 February 2012, six days after N275WA had delivered the last shipment of Venezuela’s gold to Caracas. Interestingly, Global Aviation Holdings was also “the largest commercial provider of charter air transportation for the US military”.

Other photos of World Airways’ N275WA from around the world can be seen here and here. N275WA, which had been converted into a freighter in 2002, went out of service and into storage in July 2012. Global Aviation Holdings again entered bankruptcy in November 2013, after which time World Airways was shut down. This explains why one of the MD-11 captain for World Airways (possibly captaining some of the gold flights) left World Airways in March 2014.

See video below of aircraft N275WA arriving into Caracas on 30 November 2012


5. Length 1:53 – N275WA arriving and unloading its cargo on 30 November 2012


6. Length 3:27 – This is a well produced promotional video from “Servicio Pan Americano de Protección”, the company that transported the gold from the airport to the bank. The video shows the entire unloading and loading operation from 30 January 2012 and is well worth watching.


An MD-11 CF freighter can transport 26 large pallets and has a maximum payload of 89,000 kgs (or 89 metric tonnes). Technically, Venezuela could have had all of its repatriated gold flown in on a lot less than 23 flights. Insurance and other risk management considerations probably dictated the diversification requirement, as well as the gold possibly only becoming available in piecemeal fashion from November 2011 to January 2012.

BCV address and lot 20

If there were indeed 23 flights over 2 months totalling 160/161 tonnes, each flight could have flown in 7 tonnes of gold, since this adds up to 161 tonnes (23 * 7). Given that the last batch was said to be 14 tonnes and the first batch 5 tonnes, each of the other 21 flights could have carried a batch of about 6.70 tonnes.

However, a number of batches could have arrived on the same flight, such as the last flight which is said to have flown 14 tonnes. Video footage from the last shipment day, 30 January 2012, shows a crate with lot number ’20’ displayed on it – See above screen shot. So there were at least 20 ‘lots’. Overall, there would have been about 360 crates.

Given that Venezuela was able to repatriate 160 tonnes of gold in cargo flights over the Atlantic Ocean from Europe within 2 months, this proves that the German Bundesbank could have easily repatriated its intended target of 300 tonnes of gold from New York in 2013, by flying the entire 300 tonnes over to Frankfurt within 4 months. Venezuela’s successful operation proves that the Bundesbank’s seven-year repatriation plan is laughable, and that the excuses coming out of Frankfurt are hiding something far more critical to the Bundesbank and the Federal Reserve and US Treasury than logistical flight details.


The French Connection – Banque de France

It’s not clear where the last gold shipment on World Airways N275WA aircraft originated from, although Nelson Merentes made the general statement for the overall operation that “the gold comes from several European countries.

However, in the case of the first shipment on Air France from France, there are not that many places where the flight could have come from, the main suspect being from Charles de Gaulle airport (CDG) in Paris, where Air France has one of its two main cargo hubs (the other hub being Amsterdam – i.e. these are Air France-KLM’s two cargo hubs). This then also makes a good case for the first shipment of gold having come from the Banque de France. If this was the case, then it meant that bullion banks and/or the BIS needed to source gold from the Banque de France. Would this have been feasible? Yes.

A May 2012 article from CentralBanking.com (subscription only) quoted George Milling-Stanley, independent gold consultant, and formerly of the World Gold Council, who had some interesting insights into the role of the Banque de France in being able to mobilise gold:

‘”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. The London vaults of JPMorgan, HSBC, and other bullion dealing investment banks have a similar status,” says Milling-Stanley.’

‘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”.’

Milling-Stanley’s reference to the Banque de France acting as an interface to the BIS and commercial banks in Europe may be implying that the Banque de France was a party to the 2010 BIS gold swaps which involved 10 commercial banks including BNP Paribas, Societe Generale and HSBC.

In July 2010 the FT said 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 in a series of unusual deals.” Note that BNP Paribas and HSBC are two of the five bullion banks with which the BCV had outstanding gold loans to in August 2011.

Despite the BIS’ cryptic, short, and obscure explanation that in these swaps, the commercial banks provided gold to the BIS in return for US dollar liquidity, it could be the case that commercial bullion banks borrowed central bank gold held at the Banque de France via financing from the BIS as part of a tripartite transaction.

Under this type of tripartite transaction, which was first proposed by Adrian Douglas, a Venezuelan – Banque de France version would have involved the Banque de France arranging gold lending to the 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 Banque de France, or owe a cash obligation to the Banque de France. The gold is recorded in the name of the BIS but is actually kept in the Banque de France until required by the bullion banks who borrowed it, then, when needed, gold is withdrawn by the bullion banks and used to pay back central bank gold lenders such as Venezuela’s BCV. Either French gold or Banque de France customer gold (such as IMF gold in Paris) could have been used in such a transaction. This would explain why Venezuela received crates of gold flown in to Caracas by Air France cargo.

The FT also noted in its 2010 BIS gold swap article that “In a short note in its annual report, published at the end of June, the BIS said it had taken 346 tonnes of gold in exchange for foreign currency in “swap operations” in the financial year to March 31.” (2010)

This 346 tonne BIS gold swap figure was said to have continued to grow after March 2010 and was estimated to be as high as 380 tonnes by July 2010.

Venezuela’s 50 tonnes of gold at the Bank of England

At the time of the arrival of the last gold shipment to Caracas in January 2012, Nelson Merentes was reported to have noted that “gold stored in BCV will reach 86% of the total while the rest, about 50 tonnes, will stay in the banks in which the Republic needs to maintain open accounts for international financial operations.” In August 2011, Chavez had referred to wanting to reach a target of 90% of the gold being stored in Caracas, but 86% is quite close.

The 50 ton amount remaining at the Bank of England was possibly chosen as a ’round number’ tonnage by the BCV and its international advisors. From the above bar/ingot total calculations, it seems that there were 4,089 good delivery bars left in London. This 50 tonnes, left in situ in London in January 2012, was to play a far greater role in Venezuela’s international financing arrangements than many envisaged at the time.




The Reactivation of Venezuela’s Gold Reserves

The death of Venezuelan president Hugo Chavez in March 2013, and the election of Nicolás Maduro as his successor marked a re-establishment of the relationship between the international investment banks and the Venezuelan central bank.

Recall that in August 2011 when Chavez called for the repatriation of Venezuela’s gold reserves, he also called for the transfer of the BCV’s operating reserves away from US and European banks. These operating reserves, such as cash deposits and short-term fixed interest investments, had been invested with the BIS (BPI in Spanish), Barclays, JP Morgan, BNP Paribas, Deutsche Bank, the FRB (repos), the World Bank and Bladex (the Panamanian based LatAm trade bank). Sight deposits were with JP Morgan, time deposits with the other commercial banks and the BIS, and it negotiable (fixed rate) instruments with the BIS (FIXBIS). See “Proposed Relocation of the International Reserves“.

Operating Reserves August 2011

Prior to the Chavez about-turn, Venezuela had cultivated close working relationships with some of the biggest global investment banks (or vice-versa), and seemed to be especially fond of Wall Street banks. This is illustrated, obviously, by the manner in which it used the investment banks to invest both the operating and gold components of its international reserves, where the names involved read like a who’s who of investment banking giants. But as important as the deposit taking banks appear to be to Venezuela, the advisory and corporate finance relationships look to be as equally important.

According to the Venezuelan media, in the early 2000s, JP Morgan was said to be very close to the Venezuelan finance ministry and finance minister Alejandro Dopazo, and Credit Suisse New York was also said to have had a close relationship with the government.

The use of Venezuelan gold as loan collateral was also not something new to the Maduro years. A Venezuelan media report from August 2011 claims that a few years prior to 2011, Venezuela was involved in financing discussions with New York based investment banks where the banks raised the issue of gold collateral as a means of lowering the required coupon in the financing strategies and products being discussed. These meetings were said to have taken place in the New York offices of Francisco Illaramendi, former manager of the PDVSA pension funds. According to the media report, Deutsche Bank, Credit Suisse and Barclays separately proposed that in order to  “avoid the penalty of high coupons, Venezuela could place ‘equivalent in gold in the banks’ to support the issue”, with Credit Suisse proposing that Venezuelan gold be deposited with it in London and Barclays proposing likewise.

Since the Maduro presidency, the investment banks, and especially the Wall Street based banks, have been actively involved again in Venezuela’s financial affairs. Late last year, in December 2014, Venezuela sold Goldman Sachs a $4 billion credit owed to Venezuela by the Dominican Republic which was outstanding under the Petrocaribe arrangement. Petrocaribe is a regional oil programme by which Venezuela supplies oil to other countries in the region.

Lazard, the French investment bank, is a financial advisor to the state of Venezuela, and last year Lazard was chosen by Venezuela to handle the sale of Citgo Petroleum on behalf of the Venezuelan state owned oil company PDVSA (Petróleos de Venezuela S.A.). Citgo is a US subsidiary of PVDSA. This sale didn’t go ahead but then Deutsche Bank’s New York office was chosen in January 2014 to handle a bond and loan capital raising exercise for Citgo and advisory services for PDVSA. Deutsche had previously worked with PDVSA.

Bank of America-Merrill Lynch also now has a close relationship with the Venezuelan central bank and the Venezuelan government in the form of its chief economist for the Andean region, Francisco Rodríguez. Rodríguez, was chief economist to the National Assembly of Venezuela from 2000-2004, and joined Bank of America in 2011. More about Rodríguez below.


Goldman Gold Swap Plan

The first sign that Venezuela’s gold was back in the sights of the investment banks came in November 2013, when it was reported that the BCV (and the Venezuelan government) were in negotiations with Goldman Sachs about the arrangement of a gold exchange, in other words, a gold – US dollar swap with gold as collateral. A lot of the reporting at the time did not provide very much detail about this swap, so here are some summary details of the Goldman gold swap.

The gold swap was to be between the Central Bank of Venezuela (BCV) and Goldman Sachs International in London. Eudomar Tovar was BCV president at that time. The swap would involve Venezuela swapping gold from it’s reserves with Goldman Sachs international in exchange for a US dollar loan, with the gold serving as collateral for the loan.

The swap was to be for a four-year duration between 2016 and 2020 (although another media source said it was to be for a seven-year duration from late 2013 until late 2020). The swap was to be for 1.45 million ounces of gold (or nearly 1.45 million ounces according to one media source) which was expected to be deposited at the Bank of England and transferred to Goldman Sachs International at an agreed time. At the time, 1.45m ozs of gold was valued at over $1.85 billion at the then market price of $1,282 per ounce. Venezuela would also pay an annual interest rate of 8% on the loan.

BCV Goldman Adar gold swap

The above screenshot is from a document here.

If the price of gold fell over the life of the swap, the BCV would need to deposit more gold into a margin account. If the price of gold rose, Goldman Sachs International would be required to deposit more currency into a margin account.  At the swap’s maturity, the contributions made by each party into the margin accounts would be returned to the respective parties.

The swap was said to contain a built-in hedge that would benefit Goldman, which reflected a 10% adjustment of the value of the swap if the gold price fell. The gold swap was said to be tradable on the market. The terms of the swap allowed the BCV to repay the loan and keep the gold, but if the BCV didnt repay the loan, the gold would go Goldman. One report said that the gold would continue to appear on the BCV’s balance sheet throughout the term of the swap.

The BCV had contracted Adar Capital Partners (of which Diego Marynberg is a director), as a consultant to design the swap with Goldman Sachs International. Adar Capital Partners would received 0.25% per annum of the value of the gold in the contract at beginning of each year over the life of the contract.

Any dispute between the parties would  be resolved in English courts. Some media articles on the BCV-Goldman gold swap can be viewed in Spanish here and here and here.

Given that there were said to be 16,908 of Venezuela’s gold bars held abroad, of which 12,819 bars were repatriated, this left 4,089 of Venezuela’s bars in the vaults of the Bank of England from early 2012. These 4,089 bars are roughly equal to 51 tonnes, or 1.635 million ounces. It looks like the Goldman swap factored in a 10% adjustment on 50 tonnes of gold (roughly 1,607,500 ozs) at the Bank of England,  to arrive at 1.45 million ounces (i.e. 1,607,500 * 0.9 = 1,446,750 ozs). This is the 10% adjustment referred to above. So Goldman would have had an extra buffer built-in as protection against a downward gold price movement.

The discussion of the swap at the time in November 2013 did not reveal what US dollar amount the BCV was to receive from Goldman in exchange for transferring 1.45 million ozs of gold to Goldman. i.e. it did not reveal the intended discount that the BCV was expected to take on gold with a US dollar value of $1.85 billion.

The BCV maintains that this gold swap with Goldman Sachs International did not go ahead, despite what look like detailed terms and negotiations. But the framework of the gold swap discussed with Goldman Sachs looks very similar to the swap structure that was ultimately chosen in April 2015, so it appears that the BCV re-used in some way the plan that they had drawn up with Adar Capital Partners and Goldman Sachs.

Goldman and Ecuador

Where Goldman did get a Latin American gold swap out the door was Ecuador, approximately six months after its negotiations with Venezuela hit a wall.

In early June 2014, it was announced that Ecuador had agreed to swap 1,165 bars of gold as collateral with Goldman, and in return Goldman agreed to provide Ecuador with “instruments of high security and liquidity” i.e. a loan. This gold swap was for 3 years, from 2014 to 2017 after which it will be reversed and Ecuador will get its gold back and pay the 2017 gold price to Goldman.

Rodríguez, Bank of America and the BCV vault visit

In September 2014, there was a rather unusual story from Bloomberg in which Francisco Rodríguez, the Bank of America economist (see above), related the fact that he had been allowed a rare visit into the Venezuelan central bank gold vault to view the gold bars. Rodríguez maintains that he was at a routine meeting in the BCV headquarters when his request to see the gold was granted, and that he and four other people who had attended the meeting were brought down to the underground vault in which all of the gold was stacked in “five small cells that were not even full to the top”, and that the bars were of “different types”.

While Rodríguez is said to be close to the BCV and the Venezuelan government, it still seems odd that at a routine meeting, a Bank of America representative (and some unnamed others) would pop down to see the gold in the vault, while external attendees at countless other meetings at the BCV’s headquarters would not do this tour. Could it he that the Bank of America was running the slide ruler over the Venezuelan gold in preparation for a loan of their own to the Venezuelan State?

Role Call Recall

At this point its worth recalling some of the banks that were interacting with the Venezuelan state and finance ministry, and/or interacting with the BCV (not including the gold deposits and gold lending).

In 2011, Venezuela’s operating reserves were invested with Barclays, JP Morgan, BNP Paribas and Deutsche Bank. Earlier in the 2000s, JP Morgan, Credit Suisse and Deutsche were said to be close to or working with Venezuela on various financing matters.

It was also said that a few years prior to 2011, Barclays, Credit Suisse and Deutsche, at meetings in New York held in the PDVSA offices, had proposed that Venezuela could put up gold as collateral so as to lower coupons on unspecified products.

Then there was Goldman Sachs purchasing outstanding debt that the Dominican Republic owed to Venezuela. Then there were Lazard and Deutsche advising the PDVSA and/or Citgo in the US. Finally there was Goldman Sachs negotiating a gold swap with Venezuela in 2013, and Bank of America taking a look at the gold in the BCV vaults in 2014.


Investment Bank beauty parade – March 2015

The topic of Venezuelan gold swaps was again raised on 10 March 2015 when Reuters reported that the BCV was said to be in advanced discussions with a group of Wall Street banks about conducting a 4 year gold swap for 1.4 milion ozs of gold, and that the swap operation would be agreed by the end of April. Reuters reported that the discussions involved at least two institutions, namely “Bank of America and Credit Suisse”.

At the time, the swap was said to involve an exchange of 1.4 million ozs (43.5 tonnes) of Venezuelan gold for cash, on which interest would be paid, and that Venezuela had the option of re-purchasing the gold after the expiry of the 4 year term. Interestingly, it was also said that Venezuela “would most likely be able to maintain the gold as part of its foreign currency reserves” during the swap, i.e. double-counting of gold reserves.

Amid the publicity about these March 2015 swap discussions, confusion arose as to whether the Goldman Sachs gold swap had happened or not, but the BCV stated generally that although it had “received proposals to carry out a similar operation” in late 2013, it “denied any agreements had been completed.“

Local media went further, and named additional investment bank names said to be involved in the pitch to secure the gold swap deal. On 5 March 2015, Nelson Bocaranda Sardi claimed in Venezuelan newspaper El Univeral that there was a pitch competition (implied to be for effect) by Credit Suisse, Goldman, BTGP Brazilian, Deutsche, Bank of America and Citibank, and that it was really a three horse race in which Deutsche Bank, Bank of America and Citibank would be chosen for the gold swap, but for $500 million each. Furthermore, Sardi said that Venezuela was paying $70 million to each bank as a risk premium. El Universal was previously said to be critical of Chavez, but may now not be so critical of Maduro.

On 12 March, on a web site of an organisation called Aporrea, Fresia Ipinza retorted (possibly with more up-to-date information) that rumours were saying that the gold swap would be over 4 years for 1.4 million ozs, and that allegedly Bank of America and Credit Suisse were involved. Aporrea were known to be Chavez supporters.

So, its very possible that the list of investment banks pitching to Venezuela for the gold swap were as follows: Bank of America, Credit Suisse, Citibank, Deutsche Bank, Goldman Sachs and BTGP. BTGP refers to BTG Pactual, a Brazilian investment bank.

Citigroup Rescue


The Citibank Gold Swap

In the last week of April 2015, it emerged that Citibank had exclusively won the mandate for the gold swap with Venezuela. It was reported that Citi was chosen from a group of ‘five’ banks that had pitched.

A combination of sources (see links) yield the following details about the gold swap with Citi. The details are said to be derived from newspaper ‘El Nacional’ and also a former director of the BCV, and also from Reuters.

Venezuela (via the BCV) will put up 1.4 million ozs of gold as collateral in exchange for a $1 billion loan of foreign currency from Citibank. Since 1.4 million ozs of gold, valued at the late April 2015 price of $1,200, is roughly $1.68 billion, then Venezuela is having to accept a near 40% discount on the specified gold collateral. Venezuela also pays interest on the loan at between 6% and 7% per annum.

The swap is for a 4 year duration, and Venezuela will have the “right of first refusal” to re-purchase the gold after 4 years. The 1.4 million ozs of gold (43.5 tonnes and just less than 3,500 Good Delivery bars equivalent) will be held at the vaults of the Bank of England. If Venezuela does not pay the interest payments on time, Citibank can gain control of the gold. The loan was expected to be for $1.5 billion but its unclear why this changed, but probably would have something to do with a bigger haircut being imposed.

According to ‘Venezuela Analysis‘ the “current value [of the gold] will continue to appear on the Central Bank’s balance sheet – an advantage that Goldman Sachs denied the country in earlier talks.” ‘Venezuela Analysis’ also said that some sources think Citibank holds title to the gold, while other say Venezuela holds title. Another relevant newspaper link is here.

None of the media commentary mentioned Adar Capital Partners Ltd in conjunction with the Citibank swap but its possible that this company could have been involved in the more recent swap negotiations, given that it was involved in the late 2013 gold swap negotiations involving Goldman Sachs and a lot of the swap terms are similar. On the other hand, the BCV could have just taken its gold swap file on the Goldman proposal out of the top drawer and reused the Goldman – Adar plan.

Why might Venezuela need a loan now?

Does Venezuela really need extra foreign currency now? In some ways, yes. Venezuela’s international reserves keep falling and as Nathan Crooks of Bloomberg said recently, reserves are now under $18.8 billion and at the lowest level since October 2003.

Venezuela’s international reserves fell by about US$2 billion during April from a level of $20.8 billion at the beginning of April. Lower oil prices have impacted the country’s ability to comfortably meet principal and interest payments on foreign bond borrowings and  for financing imports. Inflation in Venezuela is running high, and there are reports of a shortage of essential goods and an impact on some public services. In short, the economy is contracting.

Rodriguez, the Bank of America economist, said that the gold swap was the ‘logical’ course of action for Venezuela to take. As to why Venezuela can’t negotiate oil swap deals in the current environment or get more financing from the BRICS or China, that is probably more of an international political issue and a reputational issue with the international capital markets.


Maria Corina Machado

On 12 March 2015, Maria Corina Machado, a deputy in the Venezuelan National Assembly and political leader of the opposition party, sent an offical letter to Nelson Merentes, president of the BCV, asking the following 5 questions about the gold swap, which at the time, in early March, was being rumoured.

Questions 1 and 2 are quite standard and to be expected in light of the general rumours about the swap, but questions 3, 4, and 5 seem to suggest that Machado had heard something about the negotiations that made her think that the size of the swap was going to be far larger ($2.6 billion), and that there would be a ‘second operation’ with an even larger swap, and that this would require moving gold out of Venezuela again. See the 5 questions below:

  1. ¿Está todo el oro de las reservas venezolanas en las bóvedas del BCV de Venezuela tal como afirmó el ex presidente el Hugo Chavéz 17 de agusto 2011, cuando ordenó “repatriacion de nuestro oro”?

Are all of Venezuela’s gold reserves in the vaults of the Central Bank of Venezuela as stated by the former president Hugo Chavéz on 17 agusto 2011, when he ordered “repatriation of our gold”?

2. ¿Está el BCV en negociación con la banca extranjera para la venta o empeño del oro monetario?

Is the BCV in negotiations with foreign banks for the sale or pawning of monetary gold?

3. ¿Es cierto que en la operacion de empeño del oro actualmente en discusión se pretende disponer de oro por un valor de mercado de 2,6 mil millones US$?
¿Esto representaría comprometer casi el 20% del total de reservas en oro de la Républica en esta primera operación?

Is it true that in the operation to pawn gold currently under discussion, it is intended to dispose of gold with a market value of US$ 2.6 billion?
Does this represent / involve almost the 20% of the total gold reserves of the Republic, in this first operation?

4. ¿Es cierto que estarían negociando una segunda operacion de empeño similar a la anterior por un monto aun mayor?

Is it true that they would be negotiating a second operation similar to the previous one for an even greater amount?

5. ¿Estas operaciones implican sacar el oro de las bóvedas del BCV y regresarlas al exterior?

Do these operations involve removing the gold from the vaults of the BCV and returning it abroad?

In the letter, Machado claimed that “the [gold swap] exchange would jeopardize the achievement of economic stability” and “would compromise the future of the Republic and the welfare of millions of Venezuelans“.

She also called for the monetary gold bullion held by the BCV and the exact amount held abroad  to be “certified by an independent and trusted international body”.

There does not seem to be any publicly available response from the central bank to Machado’s letter, so its unclear as to which answers, if any, Machado received from the BCV. However, given the deteriorating state of Venezuela’s international finances and international reserves at the present time, it may be sooner rather than later before Venezuelan gold could be on the move again out of the country.

One thing is for sure. Gold leaving Venezuela on a flight back to London, New York, or elsewhere, will not get the fanfare and celebration that was accompanied by the same gold’s arrival into Caracas a few short years ago.


The Keys to the Gold Vaults at the New York Fed – Part 2: The Auxiliary Vault

The FRBNY’s Auxiliary Vault

As mentioned in Part 1 of Keys to the Gold Vaults at the New York Fed, there are two gold vaults at the New York Fed, the main vault and the auxiliary vault. Very little is written anywhere about the FRBNY’s auxiliary vault, or the ‘aux vault’ as it has sometimes been referred to.

The auxiliary vault also fails to make an appearance during the New York Fed’s famous gold vault tour. It’s as if the Fed specifically wants to keep this aux vault off the radar, or at least flying under the radar.

Although neither the 1991 nor the 1998 versions of the Fed’s publication ‘Key to the Gold Vault’ (KTTGV) refer to the auxiliary vault, the 2004 and 2008 versions do (in passing) as follows:

Bullion at the Federal Reserve Bank of New York belonging to some 60 foreign central banks and international monetary organizations is stored in 122 separate compartments in the main and auxiliary vaults.” (page 5, 2004)

Bullion at the Federal Reserve Bank of New York belonging to some 36 foreign governments, central banks and official international organizations is stored in 122 separate compartments in the main and auxiliary vaults.” (page 5, 2008)

All four of the on-line versions of ‘Key to the Gold Vault’ that I sourced (from 1991 – 2008, see Part 1) state that the “main vault was opened in September 1924” and so this statement indirectly implies that there is another ‘non-main’ vault.

The reference to the auxiliary vault in the more recent 2004 and 2008 versions of KTTGV seems to imply that the aux vault is still in active use for gold storage. Otherwise, why would the Fed mention it?

Just to clarify what auxiliary means. Various dictionary definitions of ‘Auxiliary’ include the following: supplementary, additional, subsidiary capacity, backup reserve. In the context of space, auxiliary refers to additional space.

New York Fed writer Charles Parnow’s ‘A Day at the Fed – Charles Parnow’ publication (first published in 1973) explicitly refers to the auxiliary vault with a quite precise reference. This is probably the only detailed description of the auxiliary vault that’s on record, and it states:

A smaller auxiliary vault built in 1963 holds three accounts. One account with 107,000 bars of gold is stacked with bricklayer precision into a solid wall 12 feet high, 10 feet wide, and 18 feet deep.” (From: ‘A Day at the Fed’)


The above photo from the NY Fed shows a self-described ‘wall of gold’. If you look closely to the very left of the photo, the number ‘2’ is visible about half way up the white column beside the wall. This vault layout is very different to the small cages or compartments featured in most of the FRBNY’s gold vault photos. Therefore this wall of gold shot appears to be from a totally different location than the main vault.

Could this be a shot taken in the auxiliary vault? Most probably. Apart from the above photo, there are two additional photos below that I believe are also shots taken within the auxiliary vault. One shows 3 men with clipboards, presumably Fed staff and auditors, looking at a wall of gold. The other shots shows 2 Fed vault workers, with protective magnesium shoe covers, adding bars to a wall of gold, and out of shot a third person consulting some type of weight list.

If, in the early 1970s, when Charles Parnow’s above comment was first penned, the aux vault stored gold for only three customers, then the Fed may have simply just used three areas or alcoves in the aux vault, listed as 1, 2 and 3, in which to store customer gold for three customers. However, without knowing the vault layout its difficult to say.

Wall of Gold

This literal ‘wall of gold’ is also mentioned in the 1991 ‘Key to the Gold Vault’ but is attributed to a ‘compartment’ and there is no mention of the auxiliary vault. Another mysterious omission by the Fed. The comment is as follows:

The gold in compartment number 86, which faces the vault entrance, is arranged as a display. The compartment contains 5,160 bars valued at about $87.1 million at the official rate of $42.2222. Its capacity of about 6,000 bars makes it one of the smaller compartments.

The largest compartment contains about 107,000 bars—literally a wall of gold 10 feet high, 10 feet wide and 18 feet deep.”

(KTTGV 1991 – notice the dimensions quoted of the wall are slightly different in height to those specified in the previous specification 12 x 10 x 18).

As an aside, who would be holding 107,000 bars of gold (more than 1,300 tonnes) at the FRBNY back in 1973? By a process of elimination, I think it was the Swiss National Bank (SNB). This is so because, in my view, the only other realistic candidates that held so much gold in New York were the IMF and West Germany, and each of these customers held more than 1,300 tonnes of gold at the NY Fed at that time.

Tours of the Vault(s)

Since the FRBNY never really writes about the aux vault, I emailed the ‘Media Relations Department’ of the FRBNY last year (2014) and asked them to explain the reference to the auxiliary gold vault that was opened in 1963.

The Fed replied by email that “the auxiliary vault is a vault located near the main gold vault; hence it’s referred to as an auxiliary vault.

Not a very full answer, but at least it’s a confirmation from the NY Fed that there is an auxiliary vault and that it is located ‘near’ the ‘main gold vault’. And the Fed didn’t deny that it was opened in 1963.

When I worked in New York in 1999 my employer booked us a tour of the Fed’s gold vault. During the tour, there was no mention of the auxiliary vault and the gold vault visit just consisted of going into the entrance of the main vault where some gold was brought out from the weighing room for people to pass around.

The FRBNY gold vault tour (open to the public) is quite famous and has been written about extensively, but neither the promotional material for the tour nor the media coverage ever seem to mention the auxiliary vault.

Just to double check what the current tour covers, I recently emailed the Fed gold vault tour people and asked them if the auxiliary vault is included in the current tour in addition to the main vault. Their succinct reply was that “the tour covers the main vault“. Yet again, another very short reply  from the Fed and in this case no extra information about the auxiliary vault was volunteered.

Since discussion of the FRBNY’s  auxiliary vault is quite rare, its worth looking at the few web references to the aux vault which do exist.

One such reference about the aux vault comes from well-known New York writer Andrew Tobias who appears to have visited the auxiliary vault while on a private or customised tour of the NY Fed in June 2010. In his blog, Tobias wrote that “the door to the auxiliary vault weighs 30 tons, yet is so precisely balanced that I was able to swing it open and shut.”


Where is the Aux Vault?

The exact location of the FRBNY’s auxiliary vault appears to be something that the Fed doesn’t wish to discuss. It’s therefore interesting that there is a comment on the web that appears to state exactly where the aux vault is located.

In July 2002, a forum contributor called Woodman wrote in a bulletin board at www.freerepublic.com that the Federal Reserve aux vault is located at Level B5 of 1 Chase Manhattan Plaza.

While discussing the gold supposedly stored under the WTC, Woodman wrote “…all of the Gold stored in the WTC was really stored 3 blocks east in the basement vaults of the Federal Reserve Bank and the aux. at 1 Chase Manhattan Plaza B5.

For those not familiar, the vault at 1 Chase Manhattan Plaza (CMP) on the fifth sub-level (B5) is the famous Chase (now JP Morgan) vault, supposedly the largest bank vault in the world. Some of the details of this vault were uncovered in 2013 and can be read here on Zerohedge.

The interesting angle about the 2002 comment is that, how, in 2002, could someone refer to the Chase Manhattan Plaza (CMP) B5 vault as the aux (auxiliary) of the FRBNY vault unless they knew details about these two adjacent vaults?

Back in 2002, the Chase – JP Morgan merger had only just been completed the previous year, and JP Morgan’s 1 CMP B5 vault was not yet a licensed Comex depository for gold and silver (it only became Comex licensed in 2011). So, in 2002 the Chase (JP Morgan) vault wasn’t yet on the radar (even to the CFTC) as a JP Morgan Comex precious metals vault.

Therefore, in 2002, to refer to the FRB’s aux as 1 Chase Manhattan Plaza – B5, was a very specific statement.

To recap, the main Fed New York gold vault is in basement E of the fifth sub-level. The Chase vault is on B5, also on the fifth sub-level. Indeed, it was highlighted (via a ZeroHedge contributor) that there is a tunnel between the FRBNY and CPM vaults. While discussing the Fed’s gold vault facility, the contributor wrote:

Chase Plaza (now the Property of JPM) is linked to the facility via tunnel… I have seen it. The elevators on the Chase side are incredible. They could lift a tank.”

Ironically, this Zerohedge comment was originally posted to an article about ‘Key to the Gold Vault’, on 24th January 2012.

Given that the FRBNY auxiliary vault was opened in 1963, around the same time that 1 Chase Manhattan Plaza was completed, it would seem logical that the Fed’s aux vault was built in parallel with the construction of the Chase Manhattan Plaza vault.

Where Charles Parnow states that this auxiliary vault was ‘built in 1963’ he probably means opened in 1963, since like the main vault, although it was opened in 1924, it’s construction was part of a building project which took a few years over 1921-1923.

The Chase Manhattan Plaza building and vault construction project ran from around 1959 to 1963, and the Chase building was fully functional by 1963. Parts of the building were fully functional and occupied in 1962.

Working on a gold wall at the FRBNY

Mosler vault doors

The precisely balanced door of the auxiliary vault (referred to above by Andrew Tobias) sounds very different to the cylindrical design of the vault entrance of the main FRBNY vault, opened in 1924.

In the 1991 ‘Key to the Gold Vault’, the ‘door’ of the main vault is described as follows:

There are no doors into the gold vault. Entry is through a narrow 10-foot passageway cut in a delicately balanced 9-feet tall, 90-ton steel cylinder that revolves vertically in a 140- ton steel and concrete frame. The vault is opened and closed by rotating the cylinder 90 degrees so that the passageway is clear or blocked.

If, as was claimed above, the Fed´s auxiliary gold vault is situated in the Chase Manhattan Plaza vault facility, or is even part of the Chase vault, then the door of  this auxiliary vault would be similar to the vaults doors of the Chase Plaza vault.

As explained below, Andrew Tobias’s description of a 30 tonne door that swings open and shut sounds very similar to the doors of the Chase / JP Morgan vault across the road at 1 Chase Manhattan Plaza, level B5. These vault doors were built by Mosler.

A number of newspaper articles from 1960 and 1961 provide additional perspective on the Chase Manhattan Plaza vault doors, with slightly differing door details.

This newspaper article from July 1961 says that there are actually 6 doors to this cavernous Chase vault:

On the lowest level, ninety feet below the street, is the world’s largest bank vault, 350 feet wide and 100 feet long. The vault has six massive doors, each twenty inches thick, which weigh a total of 250 tonnes.

This New York Times article from May 1960 states that:

The Chase-Manhattan bank building is on a two-block site bounded by Nassau, William, Liberty and Pine. 8th May 1960.

With delivery last week, of six doors weighing an average of forty-five tons each, a bank vault that will be the world’s largest is rapidly nearing completion.”

The vault weighing 985 tonnes and occupies 35,000 square feet of floor space.”

newspaper article from August 1961 confirms the above vault details, and includes a description of the vault doors being able to be opened and closed with one finger, which is uncannily like Andrew Tobias description.

The new skyscraper bank just finished here naturally has the world’s largest bank vault, I found on peeking in. its length is 350 feet and width 100 feet, with the height being over 8 feet. Concrete walls seven feet thick encase it and the whole thing weighs about a thousand tons.

Although these stainless steel doors weigh 45 tons each, they can be opened or closed with one finger, I was told.

Recall Tobias´s phrase of “so precisely balanced that I was able to swing it open and shut.”

A photo of one of the six doors of the vault under 1 Chase Manhattan Plaza can be seen here in this old Mosler advert. See photo 7. Notice how the door is of the standard rectangular swinging variety.

The vault doors at Chase Plaza  are said to be Mosler Century  doors, some weighing 45 tons and 20 inches thick and also some 35 tonnes doors. If 4 of the 6 doors each weighed 45 tons, and the remaining 2 doors weigh 35 tons each, that would give a total weight of 250 tons, as quoted above.

These vault doors were also featured in a reference to the November 1961 issue of Mosler’s newsletter “Mosler Messenger”, as mentioned here. Why there would need to be 6 separate doors to the Chase Plaza bank vault is not clear. Perhaps there are 6 different sections to the vault, each with a distinct entrance door.

Unfortunately, there is little or no information in the public domain about the Chase Plaza vault, despite the fact that there apparently used to be tours of the Chase Plaza building (and vault areas) back in the 1960s.

Corner of Liberty Nassau at Fed

Structure of the main vault

To appreciate possible construction approaches to the Fed’s auxiliary vault in the early 1960s, and why it would have made sense at the time to leverage the nearby Chase Plaza vault area, it’s worth examining the structure of the FRBNY’s main vault and how it was constructed.

It’s possible that an auxiliary vault could have been built in the early 1960s within the Fed´s existing level E basement by, for example, converting an existing storage room or similar into a reinforced vault room. Whether such a suitable available space would have been adjacent the main vault is unclear.

However, if space constraints dictated the need for further excavations beyond the perimeter of the building at basement level E, then evidence suggests that creating this space would be most practical by excavating south near the corner of Nassau Street and Liberty. The fact that, luckily enough, there were already excavations being done south of Liberty in 1958-1960, makes it entirely logical that the New York Fed piggybacked on the Chase Manhattan vault project.

The main gold vault lies at the bottom of the FRBNY’s, 5 basement level, headquarters in Manhattan. The building is bordered by four streets, namely, Maiden Lane, William St, Liberty, and Nassau St. For ease of explanation, (but simplified slightly) Maiden Lane is roughly to the north of the building, William St to the east, Liberty to the south, and Nassau St to the west.

The main gold vault is actually the bottom level of a three-tier vault structure known as basement levels C, D and E. This three-tier vault was lowered into an excavation that had been dug down to the Manhattan bedrock.

The vault sits within this excavation or ‘hull’, with a corridor running all the way around between the vault and the outer walls of the hull. The walls of the vault, as well as the walls of the corridor are lined with reinforced concrete. Hence the main vault has been, at times, described as a double-vault.

In a section about the HQ building, the Fed’s current website has a few references to the main vault as a “triple-tiered vault system” with a “nine-foot door and door frame (weighing 90 and 140-tons, respectively)” that was “lowered to the bedrock foundation”. Notably, the ‘About the Building’ web page says nothing about the auxiliary vault.

The perimeter of the FRBNY HQ is a trapezoid with the west side wider than the east side, i.e. the length of the perimeter adjacent to Nassau St is a lot longer than the perimeter adjacent to William St.

FRBNY basement A plan and layout

Floor plans of some of the higher basement levels of the FRBNY HQ are viewable on Cryptome.org here, and were sourced from  the Avery Library at Columbia University. You can see the blueprints of Basement A here. Notice that the largest open type space of the basement (with what looks like pillars) is to the west of the building, running north to south.

Staircases and elevators etc are positioned more in the centre, or core, of the building. A narrower open space seems to run west to east parallel to liberty. Thick external walls (and possibly corridors) seem to be indicated around the entire plan and also within the plan one third the way to the left. Although this is said to be Basement A, this drawing would be in keeping with the description of the lower basement levels:

The main vault is described in some detail in the Fed´s older educational material:

The gold is secured in a most unusual vault, an impressive chamber nearly half the length of a football field”. KTTGV 1991

The gold vault is actually the bottom floor of a three story bunker of vaults arranged like strongboxes stacked on top of one another. The massive walls surrounding the vault are made of reinforced structural concrete” KTTGV 1991

The vault’s interior, encased by steel-and-concrete walls several yards thick, resembles a cell block with 122 triple-locked storehouse compartments.” A Day at the Fed 1997

Additional details of the main gold vault structure can be gleaned from old newspaper coverage, including the corridor running all the way around:

A four-foot corridor surrounds the vault itself and at each turn a mirror is arranged so that a guard standing before the vault may look all the way around it without moving.Newspaper article 1925

Completely around this double gold-vault ran a narrow alleyway, with mirrors set at the corners, so that a guard standing at any one point could see the entire circuit. The outer face of this passageway was a concrete wall, set in the foundation rock.” Newspaper article 1931

The vault below has three floors: bar gold and coins on the bottom, currency on the second, securities on the third.” New Yorker, September 1931


The construction of the main vault faced a number of construction challenges, but you have to go right back to 1921 when it was still being constructed to grasp what these challenges were. Additional information from 1930 provides some more background.

During the FRBNY HQ foundation excavation, the bedrock of Manhattan first appeared at a depth of 87 feet at the corner of Nassau and Liberty streets (south-west). The presence of this bedrock meant that the gold vault couldn’t be much lower than about 80-85 feet below street level (curb), even though the rock undulated lower over other parts of the site.

Because it’s so far down, there was also the problem of the water table to deal with, especially in an area (Manhattan) surrounded by rivers. The water issue was most problematic on the three sides away from the Nassau/Liberty corner.

Page 41 of the FRBNY 1921 Annual Report states that:

The rock underlying the site has proved to have an undulating surface. At the corner of Liberty and Nassau streets it is 87 feet below the curb. At other parts of the site it is as much as 117.3 feet below this same curb. Owing to this condition, to the varying kinds of foundations which support the adjacent buildings, and to the depth of the excavation, the construction of the foundation is considered to be one of the most difficult and exacting pieces of foundation engineering ever undertaken.

Page 40 of the same FRBNY annual report states:

The vault is a three story structure with its lowest floor 80 feet below the curb at Liberty and Nassau streets. The entire vault is below tidewater level.” 

A 1930 edition of Popular Mechanics expands on the water issue while constructing the main vault:

eighty-five feet below high curb line of the street and fifty-six feet below ground water level. On one side of what used to be a hole there is a piece of the solid rock of Manhattan. The other three sides are held against the pressure of underground water from the East and North rivers by walls of iron rods and concrete, ten feet thick, even stronger than the natural rock.

This is the hull of the bank’s vault, a massive vessel, five stories deep, protected on three sides by a terrific pressure of muck and water. Within that buried hull is the vault itself, a structure of three levels contained within walls of steelcrete – a combination of metal and concrete – a construction developed particularly to protect the treasure of the federal reserve banks.

(The World’s Greatest Treasure Cave”, Popular Mechanics, January 1930, Volume 50, Number 1, by Boyden Sparks)

With such treacherous and water problem surroundings, especially in the surroundings away from the corner of Nassau and Liberty, any extension of space in those directions would be challenging. The easier option would be to excavate or extend to the south from the area near the Nassau / Liberty corner.

With the Chase vault being built to the south under Liberty, the only construction work to do from the Fed side would be the construction of a link corridor or tunnel to connect the two facilities.

The effort and cost put in by the Fed in the 1920s in researching the structure and strength of the main vault should not be underestimated, as this somewhat humorous quotation demonstrates (1921 FRBNY Annual Report):

During 1920-21 the Federal Reserve Board conducted a series of tests of different types of vault construction by attacking them with explosives and other modern implements, at the conclusion of which this and other Federal Reserve Banks were enabled to add greatly to the strength of their vaults, and at the same time greatly to reduce their cost. It is believed that the vault of the Federal Reserve Bank of New York will be not only by far the strongest, but by far the cheapest for its size ever built.”

Presumably the Fed Board didn´t carry out these vault attacks themselves. In fact, Popular Mechanics suggests hat they outsourced this job:

the vault was built in accordance with the findings of a group of scientists of the bureau of standards, army engineers and architects. Previously there had been tests in which every known type of construction was subjected to attack with explosives, oxyacetylene torches that cut steel as a knife cuts cheese, and pneumatic hammers and chisels which are equally effective on concrete. As a result it was found that a fabric of concrete and steel formed an alliance which best resisted all these forms of attack.

On a more serious note, the above shows that the construction of a standalone auxiliary vault on Basement Level E by converting an existing space within the basement isn´t the simple task of putting a vault door on to a store room. The vault walls would also have to be built up and strengthened substantially.

Would it not be as easy to just burrow through a linked tunnel under Liberty, near the Nassau / Liberty corner and fit out a corridor to the environs of the Chase vault? In that case the aux vault would still be very near the main vault and at the same subterranean level, and substantial construction work in the tight space of the existing E level basement would be avoided.

One Chase Manhattan Plaza - the model

Why the Secrecy?

When JP Morgan’s 1 CMP B5 vault became a licensed depository of NYMEX/COMEX in 2011, COMEX’s owner, the CME Group, submitted to the CFTC a summary of requirements document as part of the vault application. This summary of requirements (for the JP Morgan vault to act as a licensed vault) took the form of two appendices (Appendix A and Appendix B). This would have included a vault inspection description and vault classification report.

As part of the application, the CME also requested confidential treatment of the vault details from the CFTC on the grounds that disclosure of Appendix A and/or Appendix B would reveal confidential commercial information of the submitters (NYMEX and COMEX) and of other persons.

The CME also requested that this confidential treatment continue “until further notice from the Exchanges”, and that if any Freedom of Information Act (FOIA) requests were received by the CFTC about the vault that the CFTC should notify the CME “immediately after receiving any FOIA request for said Appendix A, Appendix B or any other court order, subpoena or summons for same.

Unbelievably, the CME also requested that they “be notified in the event the Commission intends to disclose such Appendix A and/or Appendix B to Congress or to any other governmental agency.

So why would JP Morgan, as a commercial precious metals vault operator, be asking for an FOIA exemption when two other vault operators, namely Brinks and Scotia Mocatta, submitted vault licensing applications, here and here that did not see the need to ask for confidential treatment on the basis of “confidential commercial information”?

Looking at a list of possible FOIA exemptions, there is nothing in the list that would apply to JP Morgan but not to Scotia Mocatta and/or Brinks, except perhaps the first type of FOIA exemption in a scenario in which, were the aux vault at level B5 in the Chase Manhattan Plaza complex, then it could be included under foreign policy considerations i.e. “Those documents properly classified as secret in the interest of national defense or foreign policy”. i.e. that the Chase vault facility conducts business for a ´Federal´client and on behalf of foreign central banks and international monetary organisations.

In summary, there is a lot of circumstantial evidence to suggest that the Fed’s aux vault is indeed located at 1 Chase Manhattan Plaza, B5, accessible from the Fed’s Vault E via a link corridor or tunnel structure.

Until the FRBNY writes publicly about its auxiliary vault, which seems unlikely, then circumstantial evidence remains as the only evidence on which to go on.