Tag Archives: LBMA

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.


Lukewarm start for new London Gold Futures Contracts

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

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

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

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

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

cme ice lme

Two Launches – No Volume

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

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

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

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

“Has the London Spot Gold contract started trading yet?


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

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

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

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

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

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

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

LMEprecious – To Launch Monday 5 June 2017

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

LME update header

LME footer

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

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

ICE London gold futures settle via unallocated accounts:

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

CME London gold futures settle via unallocated accounts:

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

And for LMEprecious, settlement will be:

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


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

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

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.


Swiss gold refinery Argor-Heraeus to be acquired by Private Equity investors

News has just emerged in the gold market that the giant Swiss precious metals refiner, Argor-Heraeus, has held discussions to be acquired, and that the likely outcome is an acquisition by a private equity group. This private equity group is believed to be London-based WRM CapInvest, part of Zurich headquartered WRM Capital. Other interested buyers are also believed to have examined a bid for Argor-Heraeus, including Japanese refining group Asahi and Swiss refining group MKS-PAMP, however, neither of these are thought to be in the running at this stage. Since this news is developing, details of the discussions and potential acquisition are still thin on the ground.

If Argor-Heraeus is acquired, it will mean that 3 of the 4 giant Swiss gold refineries will have been taken over within less than a year and a half of each other.

In July 2015, Indian headquartered Rajesh Exports, the world’s largest gold jewellery fabricator, announced the agreed acquisition of the giant Swiss gold refinery Valcambi. See BullionStar article “Swiss Gold Refineries and the sale of Valcambi” for full details. In July 2016, Japanese precious metals refiner Tanaka Kikinzoku Kogyo K.K , part of the Tanaka Precious Metals group, announced the agreed acquisition of Metalor Technologies, another of the large Swiss gold refineries. Retrospectively, the acquisition of Valcambi by Rajesh Exports now looks to have initiated a flurry of take-over activity in the normally low-key Swiss precious metals refining world.

While Metalor is based in Marin-Epagnier in the Canton of Neuchâtel in northwest Switzerland, the other 3 giant Swiss gold refineries, Argor-Heraeus, Valcambi and MKS-owned PAMP are all located literally within a few kilometres of each other in the Italian speaking Canton of Ticino, in southern Switzerland, near the Swiss-Italian border. Argor-Heraeus is in Mendrisio, Valcambi is in Balerna, and PAMP is in Castel San Pietro. Mendrisio is 4 kms from Balerna and 2kms from Castel San Pietro.


The Golden Triangle of Swiss gold refineries, Canton of Ticino

Argor-Heraeus is currently jointly-owned by German bank Commerzbank, German industrial and refining group Heraeus, the Austrian Mint, and Argor-Heraeus management. See BullionStar Gold University for a full profile of Argor-Heraeus.

Commerzbank owns 32.7% of Argor-Heraeus’ share capital. The Austrian Mint holds another 30% of Argor-Heraeus shares. In its annual report, Heraeus doesn’t reveal its holding in Argor-Heraeus, but with the Austrian Mint and Commerzbank owning a combined 62.7%, this means 40.2% of the shares are held by Heraeus and Argor-Heraeus management. On the Argor-Heraeus website, Heraeus is listed first on the shareholder list, which could signify that it’s the largest shareholder. This would put Heraeus’ shareholding above Commerzbank’s 32.7% stake, and mean that Argor-Heraeus management probably hold a shareholding somewhere below 7%.

A Precedent for Private Equity Ownership

Interestingly, there is a precedent of private equity ownership in the Swiss precious metals refining sector. Until Tanaka’s take-over of Metalor technologies last July, Metalor was majority owned by French private equity company Astorg Partners and Belgian private equity company Sofina, which between them held approximately 60% of Metalor’s shares. The remainer of Metalor’s shares were held by Metalor management, as well as by Martin Bisang and Daniel Schlatter. Bisang and Schlatter are connected with Swiss boutique investment bank Bellevue Group, which has in the past also acted as a strategic adviser to Metalor. Bisang had bought into Metalor in 1998 along with Swiss executives Ernst Thomke, Rolf Soiron and Giorgio Behr, and an additional group of Swiss executives bought into Metalor in 2004. These additional buyers were a secretive bunch, only known as the ‘Partners Only’, a group which was said by Swiss media at the time to have been connected to the Swiss Roche group.

Likewise, when Valcambi was sold to Rajesh Exports in July 2015, the then owners of Valcambi were a combination of US gold mining company Newmont (with an approximate 60% shareholding) and a group of shy Swiss private investors (who held the remaining shares) the largest of which were Emilio Camponovo and the Camponovo family. Technically, you could call these Swiss private investors direct private equity investors, or equivalent.

Even the PAMP refinery, which is owned by the Geneva based MKS-PAMP group, could be described as private equity, or at least concentrated privately-owned equity, since the group is controlled by the founding Shakarchi family. Note that MKS-PAMP has a parent company MKS PAMP Group BV based in Amsterdam, but this appears to be purely for corporate structure reasons.


The Sellers – Heraeus, Commerzbank and Austrian Mint

Since Argor-Heraeus has multiple owners, any sale would in theory be more complex than if the refinery only had a single owner. Looking quickly at the current owners, Commerzbank in its bullion banking marketing literature usually draws attention to the fact that its partial owner of a gold refinery, and uses this as a selling point by trumpeting the fact that it has direct connections to the physical gold world. Selling Argor would probably be a negative for Commerzbank, however, it may need the cash given that german banking is in a crisis at the moment. The Austrian Mint is owned by the Austrian central bank (OeNB), which in turn is owned by the Austrian State. Any sale of the Austrian Mint’s shares in Argor would be a one-off profit boost to the OeNB. In 2015, the Austrian Mint sold a stake it held in Casinos Austria (yes, a casino company), so maybe the Mint has a new-found strategy to jettison its non-core investments. Although presumably the Mint gets preferential precious metal supply from Argor, or one would think that it does.

Heraeus also has close relationships with Argor-Heraeus, for example, in the production of various precious metals products, so a sale by Heraeus of its stake in Argor could in theory affect these synergistic relationships. All of these shareholders also receive a substantial annual cash dividend from Argor-Heraeus which is a nice to have to say the least. Selling their stakes would obviously be a loss of their cash dividends. I personally was surprised that Argor-Heraeus would be up for sale, since it definitely has what looks like a very stable, secure and content set of shareholders. As per BullionDesk coverage of this potential deal, Commerzbank and Heraeus have yet to respond or comment on the potential sale of Argor-Heraeus.

Interested Parties in an Argor Bid

Presuming that the private equity company WRM CapInvest, as well as Asahi Refining, and MKS-PAMP all looked at potentially acquiring Argor-Heraeus (and that’s the word in the gold market right now), let’s have a quick look at these players.

The current Asahi Refining group, headed by Asahi Holdings, owns precious metals refinery operations in 5 locations worldwide, namely Tokyo, Salt lake City, Utah (US), Brampton, Ontario (Canada), Mexico City, and Santiago (Chile). Some readers will be familiar with Asahi’s takeover of the US and Canadian gold and silver refining operations of Johnson Matthey, which was completed in March 2015.  If Asahi had emerged as the favourite suitor to acquire Argor-Heraeus, it would mean that 2 Japanese headquartered precious metals refiners, Tanaka and Asahi, would both own a Swiss precious metals refinery, namely Metalor and Argor-Heraeus. Market sources indicate that Asahi’s bid value for Argor-Heraeus wasn’t as high as the bid tabled by the favoured private equity group bidder. Argor-Heraeus also operates a precious metals processing plant in Santiago in Chile, which could feasibly provide synergies to Asahi, since Asahi runs a refining operation in Santiago.

Its interesting that MKS-PAMP has been mentioned as a possible acquirer of Argor-Heraeus. As mentioned, the PAMP precious metals refinery is literally ‘down the road’ from the Argor-Heraeus refinery, i.e. 2 kms down the road. PAMP is a prestigious global brand in precious metals refining and bar production, and so is Argor-Heraeus. But would the resulting consolidation in the Swiss precious metals refining industry make sense, and how would this affect the PAMP and Argor-Heraeus brands. That’s a difficult question to answer, and only PAMP could accurately answer that at this time. Market sources say that MKS PAMP was shy in revealing its full financials, data that would presumably be necessary if it put in a bid for Argor-Heraeus.

Argor-Heraeus opened a new refining headquarters in Mendrisio in 2013 which doubled its former refining capacity. According to its 2014 corporate responsibility report, the new Argor-Heraeus refinery has an annual refining capacity for gold of between 350 and 400 tonnes. The PAMP refinery has an annual refining capacity of 450 tonnes of gold, and an annual silver refining capacity of over 600 tonnes.  A merged PAMP and Argor-Heraeus would have an annual refining capacity for gold of about 900 tonnes. Their neighbour Valcambi has an annual refining capacity for gold of 1600 tonnes. A combined PAMP and Argor-Heraeus would therefore start to approach the production capacity of Valcambi. Each of Valcambi and a combined PAMP ~ Argor would also have a refining presence in India also, since PAMP has an Indian refining joint-venture with MMTC, and Valcambi, owned by Rajesh Exports, has refining operations in India. Argor-Heraeus is also one of only five refinery members of the London Bullion Market Associations (LBMA) good delivery referee panel. PAMP is also on this panel, as is Metalor and Tanaka. This panel assists the LBMA is maintaining quality standards of refinery members worldwide. Argor-Heraeus is also a full member of the LBMA, one of the few refineries to be a full LBMA member.

Finally, turning to the private equity company WRM CapInvest, which is said by sources in the gold market to be the preferred bidder for Argor-Heraeus, what is known about this company? According to its website,  WRM CapInvest is a division of the WRM Capital group of companies. The WRM Group was founded by Raffaele Mincione, who is Italian, but who resides in Switzerland. WRM Group seems to have started as a private wealth management / family office type company but has expanded into private equity.

WRM CapInvest is based in Berkeley Square in Mayfair in London, Mayfair being a very popular location for hedge funds and private equity funds to locate in. WRM CapInvest was incorporated in the UK in March 2012 as Capital Investment Advisors Ltd, but changed name to WRM CapInvest on 11 May 2016. The original single director of WRM CapInvest was Massimo Cattizone, also an Italian. Massimo Cattizone and Raffaele Minicone were listed as shareholders, with Minicone holdings 80% of the WRM CapInvest shares and Cattizone holding 20% of the shares. In July 2013, Leonidas Klemos (Italian), and Michele Cerqua (Italian) were appointed as directors of WRM CapInvest, and Massimo Cattizone ceased to be a director. Between May 2014 and March 2015, Roberto Agostini (Italian) was also a director. In July 2015, Raffaele Minicone was appointed as a director. In February 2016, Leonidas Klemos ceased to be a director. By April 2016, Raffaele Minicone was listed as owning the entire share capital of WRM CapInvest. The current directors are therefore Raffaele Minicone and Michele Cerqua. The reason for listing the above is to highlight that all the directors of WRM CapInvest since it was incorporated have been Italian, and there is a Swiss connection since Raffaele Minicone is based in Switzerland, and the WRM Group is headquartered in Zurich, Switzerland.

Therefore, the fact that Argor-Heraeus is based in the Italian speaking Swiss Canton of Ticino, right beside the Italian border, and that CapInvest is operated by an Italian team, owned by an Italian, and part of a Swiss based group is probably of relevance to a potential acquisition of Argor by CapInvest. Additionally, Knight Frank, a large commercial real estate agent, mentioned on its website in a 2013 article that “CapInvest, which is also backed by private Italian investors, purchased 60 Sloane Avenue for US$206m.”

So the question is, assuming CapInvest acquires Argor-Heraeus, is it acquiring the company on behalf of CapInvest, or on behalf of some other Italian or Swiss investors, or Italian Swiss, or Swiss Italians? And if an acquisition is on behalf of other investors, who are these investors? Could the private investors who were involved in Metalor (such as Martin Bisang and his circle of business acquaintances), or the private investors that were involved in Valcambi (such as Emilio Camponovo and friends) be re-entering the Swiss refining industry with an acquisition of Argor-Heraeus. They would definitely be some of the best placed people around that understand how the precious metals refining industry works, given their experience. Or possibly the Argor-Heraeus management and other local business people in Ticino are moving to take ownership of Argor through a private equity route?

Another potential connection is UBS. Swiss investment bank UBS previously owned the Argor-Heraeus refinery, and only exited its shareholding in 1999, so it’s also possible that a UBS connection could pop up in a Argor-Heraeus acquisition deal. This has a precedent since when Valcambi was acquired by Rajesh Exports in 2015, Credit Suisse, which itself used to own Valcambi (and which Valcambi executives had close ties to), provided strategic corporate finance advice on the Valcambi acquisition and also actually partially funded the Rajesh acquisition.

Whatever the outcome of these developments with Argor-Heraeus, further details should emerge sooner rather than later. So, as they say, watch this space.

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.

Chinese Gold Bar Photos – Lost in Translation

China is now in pole position as regards annual global gold mining output. Much if not all of Chinese domestic gold mining output is refined into standard gold by Shanghai Gold Exchange (SGE) approved refiners and then sold through the SGE.  A lot of recycled gold in China also flows through the same refineries. As of 2013, there were at least 35 refiners across China accredited by the SGE to deliver gold ‘Ingots’ (bars of weights 12.5 kg, 3 kg and 1 kg) on the Exchange. The list is probably longer now, and although the sheer scale of the Chinese gold refining sector is hard to keep track of, you get the picture as to its size.

It was therefore surprising that recently, while working on a particular task that required images of gold bars produced by Chinese refiners, I found that the selection of Chinese branded gold bar images on ‘the web’ (i.e. Google.com) seemed extremely limited. As it turns out, there are many many images of Chinese brand gold bars, you just need to know how and where to look. Nearly all of these images have never been seen before in “Western search engines”.

Who makes the most bars – The Top Refiners

Some of the large Chinese gold refineries are owned by, or affiliated with, large Chinese gold mining companies. My first approach was to determine the largest gold mining companies in China. These gold mining companies are:

  • China National Gold Group Corporation, also known as China Gold or CNG. CNG’s major gold mining asset is Zhongjin Gold. CNG also has a 39% stake in “China Gold International Resources Corporation” which is basically its international arm (it also mines gold in China).

The 3 next biggest Chinese gold mining companies are as follows. I’m not sure about how they rank in terms of positions 2-4, but probably in this order:

Using the names of these gold mining companies, we can see which of them refine their own bars. Taking a look at some of the main Chinese gold refineries reveals the following refining companies are owned by the miners, so its looks like they all refine their own gold bars, as would be expected:
  • Zhongyuan Gold Smelter of Zhongjin Gold Corporation, Sanmenxia City [owned by China Gold Corp]
  • Zijin Mining Group Company, Shanghang
  • Shandong Gold Mining Company, Laizhou City
  • Shandong Zhaojin Gold and Silver Refinery Company, Zhaoyuan City

There are 9 Chinese gold refineries accredited to the London Bullion Market Association’s (LBMA) Good Delivery List for gold. This list, which is analogous to an A-List, includes gold refiners around the world which produce large gold bars (400 oz), and whose production meets the very high quality standards laid down by the LBMA. Only Japan, with 11 gold refineries on the LBMA list, has a higher number than China. Russia has 8 of its gold refineries on the LBMA gold list. The above refineries of Zhongyuan, Zijin, Shandong Gold, and Shandong Zhaojin are on this LBMA Good Delivery list.

Cross-referencing these names with a list such as the top refinery suppliers of gold bars to the Shanghai Gold Exchange (see table below) also validates that the refineries of (Henan) Zhongyuan, Zijin Mining, Shandong Gold, and Shandong Zhaojin are amongst China’s largest gold refiners.


Shanghai Gold Exchange – 2011 Top 10 gold refiners supplying SGE


The ‘limited results’ Search – Google.com

With 4 accredited refineries on the LBMA list, one might think that photos  / images of the gold bars output by these refineries are easy to find. Next step is to see if any images of these refiners’ gold bars are available “on the web”. The short answer is that a few images are available (see below), but they seem to be very rare and not saved very widely ‘on the web’ (Google.com).

1. Zhongyuan Gold Smelter

LBMA bar mark description – “Current Bar Mark: Circular logo round Chinese character with CHN GOLD below.


‘China Gold’ brand bars (i.e. Zhongyuan Gold Smelter bars) are not widely found by Google image search. The above image that Google does find is sourced from page 10 of a Gold Bars Worldwide brochure, which is titled “Shanghai Good Delivery Gold Ingots and Bars“, published by Grendon International Research Pty Ltd in November 2014.

(Notice the bar mark in the image says CHNGOLD and the SGE marking).

2. Zijin Mining Group Company

LBMA bar mark description – “Current Bar Mark: Double crescent logo with ZIJIN MINING in Roman and Chinese characters. Circular assay mark with ZIJIN MINING in Roman and Chinese characters.



This image is a ZIJIN ‘double cresent’ bar. Notice the SGE marking. Again, Google finds this image by sourcing it from page 10 of the same GoldBars Worldwide brochure here, as it only seemed to be found by Google.com at that source. The photographs in this brochure were actually supplied to Grendon by the refineries, so without this brochure, Google would even have one less source to use.

Note: if you look in the pdf in the above link, the Gold Bars Worldwide brochure actually labels this bar image as a Henan Zhongyuan bar which looks wrong. The double crescent insignia shows that it’s actually a ZIJIN bar, as per another Zijin bar on page 9 of the same brochure.

3. Shandong Gold Mining Company

LBMA bar mark description – “Current Bar Mark: Circle surrounded by TAISHAN in Roman and Chinese characters within a square comprising four stylised S’s.”

During the test, Google didn’t find any images of Shandong Gold Mining gold bars, However, conveniently, a Shandong Gold bar is on the BullionStar site here, which Koos Jansen used to illustrate SGE bar markings.
Notice the circle, the SGE marking, and the ‘Taishan’ marking in the above image.

4. Shandong Zhaojin Gold

LBMA bar mark description - “Current Bar Mark: Triangle with two interlocking half circles and ZHAOJIN in Chinese characters within the triangle.”

The only images I could find of Shandong Zhaojin gold bars using Google.com were these ones, which are on the actual Shandong Zhaojin Import and Export Co Ltd website



Notice the SGE markings. Notice also the Shandong Zhaojin bar logo is the same as the Shandong Zhaojin company logo.


As an aside, on its website, Shandong Zhaojin Import and Export Co Ltd claims to export gold. I find this surprising due to China’s strict gold export rules. Perhaps they mean gold exports as part of the processing trade gold exports.
In conclusion, the above Google.com search exercise of 4 refineries led to the conclusion that Chinese gold bar photos are very hard to find…at least on English-speaking internet sites.
Note that since the publication of this article that you are reading, Google has started to find the images that you see here and the images listed below. That’s the beauty of the web, in that the more links to pages and images that exist, the easier it is for web bots to find and index said pages and images. Therefore, if you test Google.com now for these gold bar brands, Google finds more gold bar images of the refineries described here, precisely because thats the way Google works.

The ‘Motherlode results’ Search – Baidu.com

The very limited search results above suggested a different approach was needed. Like a lot of people, I’d heard about the Google Chinese site http://www.google.cn, and its re-consolidation to operate from http://www.google.com.hk a few years ago, as Google scaled back its CHinese presence. I had also vaguely heard of Baidu.com, the Chinese search engine, but I had never had the need to use it before.

The first port of call was to consult with Koos Jansen, resident China gold expert here at BullionStar.  Koos advised the following approach: “Get the Chinese names of the refineries, and search Baidu“. Seems pretty obvious in hindsight…:)
For non-Chinese speakers, like myself, there are 2 ways to establish the Chinese names of the refineries. The first is to use a refinery’s website. This works most conveniently with dual-language websites (since you can toggle between the Chinese and English names of the company to establish what the Chinese characters are), and it goes without saying that it only works if the Chinese refinery (or mining company) actually has a website, which isn’t always the case. The second approach is to use a Shanghai Gold Exchange list of SGE members names which includes their English names alongside the Chinese names (in Chinese characters). Such a list can be seen here.
Not to put too fine a point on it, but the results of using this approach in Baidu are astounding compared to using Google.com. There are huge amounts of gold bar image results for the Chinese refiners. Here’s a flavor:

Zhongyuan Gold Smelter – owned by Zhongjin Gold

China Gold aka Zhongjin Gold = 中金黃金
gold bar = 金條
Search in Baidu image search (http://image.baidu.com) for “中金黃金” 金條
LBMA description – Circular logo round Chinese character with CHN GOLD below

Zijin Mining

Zijin Mining = “紫金矿业”

gold bar = 金條

Search in Baidu for “紫金矿业” 金條
LBMA description  – Double crescent logo with ZIJIN MINING in Roman and Chinese characters.
These Zijin Mining gold bar images were sourced from here.

Shandong Gold

Shandong Gold “山东黄金”

gold bar = 金條

Search for “山东黄金” 金條
Baidu image search for Shandong Gold Group mostly retrieves gold bars for a brand called SD Gold, which is a ‘Shandong Gold’ bar brand:
To retrieve images for the Shandong Gold Mining Company bars with the “Taishan” design, you need to search for:
Shangdong Gold Mining Company “山东黄金矿业股份有限”
Gold Bar 金條
Taishan 新寧
Search Baidu for  “山东黄金矿业股份有限”  金條  新寧
This image is sourced from Chinese gold site http://ccne.mofcom.gov.cn, which is a Ministry of Commerce site called ‘China Commodities’ which looks like a reseller site, which contains various listings of different gold bars such as this list.

Shandong Zhaojin

Shandong Zhaojin “山东招金”

gold bar = 金條

Search for “山东招金” 金條
LBMA bar mark description - Triangle with two interlocking half circles and ZHAOJIN in Chinese characters within the triangle.”

How does Google Hong Kong perform in comparison?

Searches for Zhongyuan Gold (China National Gold), Zijin Mining, Shandong Gold and Shandong Zhaojin using  Google Hong Kong (English version) bring back very limited bar image results, which are mostly images from the ‘Gold Bars Worldwide’ brochures.

The Chinese equivalent name searches in Google Hong Kong (Chinese language) bring back reasonable gold bar image results for each of the 4 refiners above, but not nearly as many image results as retrieved from Baidu. For example, Google Hong Kong (Chinese version) finds the below Zhaojin image in a directory called http://www.zhaojin.cn/imageRepository. But Google.com draws a blank on this directory.

Based on this relatively brief overview, it would appear that Baidu provides the most comprehensive results for gold bar images of Chinese gold refiners.

With China an increasingly critical part of the world gold market, its gold bar brands (and photos of said bars) still do not appear to have registered more than a ripple outside the world of the Chinese internet. This can be explained by the fact that a) China doesn’t generally allow gold bars to be exported therefore few people outside of China have ever seen a Chinese gold bar, and b) Google has retreated from the Chinese web search market, but the dominant player, Baidu is not widely used outside of China.
More importantly, non-Chinese readers and publishers with the frequent or infrequent need to use an image of a Chinese gold bar in blog posts, articles or tweets etc, now no longer have to keep recycling the same old Chinese bar images that get picked up in Google.com search results. With Baidu image search, the world of Chinese gold bar photos opens up considerably.

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

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

Off and On Market

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

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

Strauss-Kahn – Yes, that guy

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

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

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

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

DSK has left the building
DSK has left the building

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

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

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

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

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

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

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

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

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

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

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

Transparent approach

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

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

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

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

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

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

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

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

Lip Service to Transparency

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

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

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

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

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

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

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

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

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

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

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

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

International Monetary Fund

Monthly Report on Sales of Gold on the Market

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

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

IMF SB March 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Purely a Pricing Exercise?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Magic 7

Top Secret Foot Notes

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

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

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

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

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

Access will be given as follows:

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

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

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

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

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

02 August 2015: My first question

Hello Archives,

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

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

3 August: IMF Archives reply

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

3 August: me

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

4 August: IMF Archives

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

4 August: me

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

5 August: IMF Archives

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

5 August: me

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

6 Aug: IMF

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

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

12 Aug: IMF

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

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

12 August: me

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

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

14 Aug: IMF Archives

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

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

22 August 2015: Me:

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

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

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

24 August: IMF

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

2 October 2015: me

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

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

2 October: IMF

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

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

2 October: IMF

“Dear Mr. Manly,

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


2 October: Me

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

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


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

5 October: IMF

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

We apologize for any inconvenience this may cause.”

5 October: Me

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

7 October: IMF

“Dear Mr. Manly,

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


IMF Archives”

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

Sensitivity of Subject Matter – China and Bullion Banks

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

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

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

Chinese discretion – Market Speculation and Volatility

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

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

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

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

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

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

BIS Swaps and Bullion Bank Bailouts

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

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

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

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

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

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

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

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

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

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

Modalities of Gold Sales

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

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

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

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

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

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

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

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

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

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

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

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

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

IMF Comedians

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

Five Supporting Banks

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

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

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

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

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

Unallocated Balances, Unsecured Creditors

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

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

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

Additional LBMA definitions of unallocated transactions are as follows:

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

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

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

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

LME bows to LPMCL

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

LME potential credit models

In the same pitch, the LME also stated that:

LME Clear fully respects existing loco London delivery mechanism and participants

[See bottom line in below slide]:

LME Pathway to cleared solution

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

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

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

Recall that in October 2015, the LBMA announced that:

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

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

Even COMEX has more Transparency

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

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

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

LBMA stall on Trade Reporting, LPMCL clear as Mud

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

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

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

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

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

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

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

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


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

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

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.

LPPM – The London Platinum and Palladium Market

The platinum and palladium markets arguably receive more focus during the third week of May than at any other time of the year. This is due to a series of events hosted in London known as London Platinum Week. London Platinum Week, which also covers other platinum group metals such as palladium, is coordinated by the London Platinum and Palladium Market (LPPM) association and its members. This year, London Platinum Week runs from Monday 16 May until Friday 20 May.

The LPPM is intrinsically linked to London Platinum Week. Indeed, London Platinum Week is specifically held in the month of May because it commemorates the fact that the LPPM was founded in May, in 1987.

‘L-Phabet Soup': LPPM, LPPFC, LBMA and LME

To coincide with London Platinum Week, this article looks at the relatively low-key organisation known as the London Platinum and Palladium Market (LPPM), and associated entities such as the London Platinum and Palladium Fixing Company (LPPFC), as well as the more recent platinum and palladium fixings, which are now administered by the London Metal Exchange (LME) on behalf of the London Bullion Market Association (LBMA). It is also timely to take a look at LPPM since it will most definitely cease to exist as a stand-alone entity later this year after it merges into the LBMA through a series of manoeuvres which have already been planned and scheduled, the first of which is a general meeting of the LBMA on 29 June.



LPPM is a trade association representing the interests of its members on the London platinum and palladium markets. LPPM operates the London/Zurich Good Delivery List for refiners of platinum and palladium, and also liaises with UK regulators and bodies such as HM Revenue and Customs.

Although it’s an association, the LPPM also describes itself conceptually as a members-only ‘Market':

“The LPPM operates on an OTC basis…with trades being undertaken in troy ounces of platinum and palladium. Full membership of the Market is open to those companies in the UK currently engaged in trading in the metals [platinum and palladium] and offering services in the UK to the market, including market-making, clearing services, refining or manufacturing.”

Full LPPM member Tanaka of Japan describes LPPM as:

“an international self-management industry organization controlling Platinum and Palladium fair trade and appropriate products”.

Without stating the obvious, the London Platinum and Palladium Market (LPPM) is worth being familiar with because it oversees the London platinum group metals markets. More importantly, the LPPM members, especially its market making members, have a very influential input into daily price discovery in the global platinum and palladium markets, which in a real way impacts all users of and investors in platinum and palladium around the world. And given that LPPM appears to be run in a very informal clubby style with the same opacity and barriers to entry that surround the London Gold and Silver Markets, this should be concerning to platinum and palladium users and investors worldwide.

As an entity, LPPM is structured as an association, but unlike the London Bullion Market Association (LBMA), the LPPM is not a registered company. Both organisations are most usefully viewed as the public faces of the member entities, especially the banks, that operate in the precious metals markets. Currently, LPPM has 17 full members (10 of which are banks), 35 associate members and 52 affiliates.

The full members of LPPM that are banks are JP Morgan, HSBC, Goldman Sachs, UBS, Bank of Nova Scotia, ICBC Standard Bank, Credit Suisse, Deutsche Bank, Standard Chartered and Toronto-Dominion Bank. All of these 10 banks are market-making members of LPPM along with BASF Metals, which is also a full member. The remaining 6 full members of LPPM are precious metals refiners, namely, Johnson Matthey Plc of the UK, Tanaka Kikinzoku Kogyo of Japan, Germany’s Heraeus, and Metalor, PAMP and Valcambi of Switzerland. Tanaka only became a full member of LPPM in March 2015, where its full membership was voted on at the LPPM AGM. This illustrates that it is not a matter of merely applying for membership when attempting to become a full member of LPPM, the application has to be endorsed by the existing full members. Barclays and Mitsui & Co Precious Metals Inc were also still listed as full members of LPPM as recently as January 2016, but both have now been reclassified as associate members.
The associate members of LPPM also include a large number of banks such as Citibank, SocGen, Morgan Stanley, Merrill Lynch, Barclays, Commerzbank, Natixis, RBC and BNP Paribas as well as commodities trading companies, brokers and the trading arms of platinum and palladium producers.  LPPM therefore appears to be a private, members only trade organisation dominated by a small number of bullion banks, and in that regard is rather like the LBMA.

The London Bullion Market Association (LBMA) is a company incorporated on 14 December 1987 in England and Wales with Company Number 02205480, and it has a set of directors. As the LBMA’s Memorandum of Association states:

“The Company’s name is “The London Bullion Market Association”

The 1987 incorporation document of the London Bullion Market Association can be seen here, with its first registered office of ‘New Court, St Swithins Lane’, i.e. the headquarters of N.M Rothschild in London. The LBMA was founded by N.M. Rothschild & Sons Limited, J.Aron & Company (UK) Limited, Mocatta & Goldsmid Limited, Morgan Guaranty Trust Company of New York, Sharps Pixley Limited, and Rudolf Wolff & Company Limited.

LPPM was also established in 1987. Technically, LPPM was established so that the London platinum and palladium markets could be added to the UK’s Terminal Markets Order (TMO) exemption list so as to receive a zero rate of VAT from HM Revenue & Customs on sales of metal between LPPM members and non-members. LPPM was added to the VAT (Terminal Markets) Order by an amendment to the Order on 5 May 1987.

LPPM was established as an ‘Association’ via a ‘Deed of Establishment’. LPPM confirmed to me recently that it doesn’t have a Memorandum of Association nor Articles of Association, which seems odd given that its structured as an ‘Association’. According to a UK government website on legal forms for business:

“Unincorporated Associations are groups that agree, or ‘contract’, to come together for specific purpose. They normally have a constitution setting out the purpose for which the association has been set up, and the rules for the association and its members. They are typically governed by a management committee”.

LPPM therefore must have a deed of establishment and probably has a constitution, but where these documents are publicly filed, if at all, is anybody’s guess.

The founding members of LPPM in 1987 were:

  • Samuel Montagu
  • Ayrton Metals
  • Sharps Pixley Ltd
  • Mase Westpac
  • Johnson Matthey
  • Englehard Corp

All of these 6 founding members of LPPM are still full members of LPPM in one shape or another. Samuel Montagu through it being part of Midland Bank became part of HSBC, as did Mase Westpac which was bought by Republic National Bank of New York in 1993 which was then acquired by HSBC. Aryton Metals became part of Standard Bank in 1994. ICBC has recently acquired Standard Bank, and is now known as ICBC Standard Bank. BASF acquired Engelhard in 2006, hence the entity that was formerly known as Engelhard Metals is now known as BASF metals. The old Sharps Pixley business was bought by Deutsche Bank in 1993. Johnson Matthey still exists today as John Matthey.

It’s very revealing that these founding entities of LPPM represent 4 of the 5 current fixing members (HSBC, BASF, ICBC Standard and Johnson Matthey) in today’s platinum and palladium daily price auctions. These price auctions are widely used throughout the global platinum and palladium industry as valuation and contract benchmarks. The 5 member participants in the daily platinum and palladium price auctions in London, administered by the London Metal Exchange (LME) are:

  • BASF Metals Ltd
  • HSBC Bank USA NA
  • Johnson Matthey plc
  • ICBC Standard Bank plc
  • Goldman Sachs International

Note that 4 of the 5 platinum and palladium auction participants are founding members of LPPM. More on the daily platinum and palladium auctions below.

As of 2001, there were still only 9 full members of LPPM (7 of which were banks), namely:

  • J Aron & Company (UK)
  • Engelhard Metals Ltd
  • HSBC USA (London Branch)
  • Morgan Guaranty Trust Company of New York (London)
  • Johnson Matthey Plc
  • NM Rothschild & Sons Ltd
  • Standard Bank London Ltd
  • UBS AG
  • Credit Suisse First Boston (London Branch)

LPPM currently has a 9 person management committee, comprising a chairman from Johnson Matthey Plc, a vice chairman from ICBC Standard Bank,  and committee member representatives from HSBC, BASF Metals, SocGen, Toronto-Dominion Bank, Metalor, Heraeus and Anglo Platinum Marketing Ltd. Notably, 4 of the 9 members of the LPPM management committee, ie Johnson Matthey, HSBC, BASF Metals and ICBC Standard Bank, also represent 5 of the 6 founding members of LPPM and are also 4 of the 5 members participants in the daily London platinum and palladium price auctions.


London by name, but no London office

In addition to the fact that it’s a private association without any public filings, there are a number of organisational aspects about LPPM which indicate that it is run on a much more piecemeal style than the LBMA, with a setup more akin to a local golfing society than the global representative of the world’s biggest platinum and palladium trading hub.

Although ‘London’ is in the title of the ‘London Platinum and Palladium Market’, the LPPM doesn’t even have a permanent London address, but sometimes uses the rotating chairman’s company addresses in London for correspondence. The LPPM support staff and setup seems to be summed up as “anywhere but in the City of London”:

  • The LPPM’s Secretary and office address of LPPM is in Redbourn, Hertfordshire, 30 miles outside London.
  • The LPPM website address lppm.com is registered to Sharps Pixley at a Suffolk address, some 60 miles outside London. [The LPPM website also states that the site created by a web development company “for Sharps Pixley Ltd”]
  • The LPPM’s treasurer, who is also the administrative contact for London Precious Metals Clearing Ltd (see lpmcl.com) has his mail server registered at an address in Surrey, 22 miles from London. [The LPPM treasurer was also the administrative contact for the old Gold Fixing and Silver Fixing websites (www.goldfixing.com and  www.silverfixing.com)]
  •  The LPPM’s inter-organisational relations contact is a former Chair of LPPM, who at the time represented LPPM member Mitsui, but Mitsui exited the precious metals markets in London last year, although this former chair is still involved through this LPPM role, but at what address?

There are no published details or minutes of LPPM AGMs and very few press releases – ever. The only press releases that are retained on the LPPM website are here, with a few others traceable here and here.  All in all, quite a strange and secretive organisation that makes the LBMA look like the epitome of transparency.

London Platinum and Palladium Fixing Company Limited (LPPFC)

The London Platinum and Palladium Fixing Company Limited (LPPFC) is another low-key entity within the London platinum and palladium market, and not surprisingly it has very very close connections with LPPM. LPPFC is a private company made up of directors from HSBC, Goldman Sachs, ICBC Standard Bank and BASF Metals. As its name suggests, LPPFC was established for the purpose of operating the Platinum and Palladium price auctions. LPPFX was incorporated on 3 December 2004, and operated the platinum and palladium fixing auctions up until 1 December 2014, i.e. for 10 years exactly.

LPPFC is still an active company in the UK, despite it ceasing to run the daily platinum and palladium price auctions in London, and despite the LBMA legal counsel saying on one occasion in 2015 that LPPFC has been dissolved. According to the LBMA legal counsel:

The three fixing companies who had historically administered these prices are now dissolved and responsibility for the prices has transferred into the hands of independent administrators”

However LFFPC has not been dissolved, nor has the London Gold Market Fixing Company been dissolved, nor has the London Silver Market Fixing Company been dissolved. “The dissolution of a corporation is the termination of its existence as a legal entity.” LFFPC continues to exist as an active legal entity, company number 05304018. LPPFC made an annual return in January 2016. LFFPC even had a director appointed to it as recently as February 2016. The company secretary for LPPFC is Reed Smith Corporate Services of Broadgate Tower, 20 Primrose Street, in the City of London.


The reason LFFPC has not been dissolved is that it is a currently one of the defendants in a consolidated class action suit taking place in the Southern District court in New York, where it is accused of platinum and palladium price manipulation along with the fixing members of LPPFC, namely Goldman Sachs Group Inc, HSBC Bank USA NA, ICBC Standard Bank PLC, and also UBS (not a fixing member of LPPFC). This class action was filed on 21 April 2015. In late 2015, the defendants tried to have the plaintiff’s motion dismissed but this was not upheld by the court. The class action suit against LPPFC and its member companies is in many ways similar to class action suits currently running against the London Gold Market Fixing Company and its members and the London Silver Market Fixing Company and its members, although the gold and silver class actions have received more publicity than the platinum / palladium suit.

The platinum / palladium class action case is “In re Platinum and Palladium Antitrust Litigation, No. 14-cv-9391” and is being heard by Judge Gregory D Woods. Plaintiffs are represented by Berger & Montague, and Labaton Sucharow. A few recent submissions by the plaintiffs lawyers to the court can be seen here (Berger Montague and Labaton Sucharow). Some of the defendant’s  submissions in late 2015 to dismiss the motion (which was unsuccessful) can be see here (LPPFC motion to dismissICBC motion to dismissBASF motion to dismissUBS motion to dismiss).

LPPFC hands the platinum and palladium fixings to LME

In the summer of 2014, during the period when the London Silver Fixing auctions were transitioning to a new platform via a high-profile competition that eventually resulted in the new LBMA Silver Price auction system being administered by Thomson Reuters (the award of which was announced on 11 July 2014), the LPPFC made a few stealthy moves to jettison its own operational role in the platinum and palladium fixings. These moves went mostly unreported and un-scrutinized in the financial media.

On Thursday 31 July 2014, LFFPC announced via a press release on the LPPM website that it would:

shortly commence an RFP [Request for Proposals] process with a view to appointing a third party to assume responsibility for the administration of the London Platinum and Palladium Fixing“.

The press release also stated that “The RFP process will be launched shortly. Expressions of interest in that process should be directed to enquiriesptpdfixing@lppm.com by no later than 6 August 2014.” Given that 6 August (a Wednesday) was 3-4 business days after the announcement that an RfP process was being launched, this is extremely short notice for intending applicants to signal their interest in such a process, especially since it was the August holiday season in the City of London and the London financial services and technology industries. It’s as if the LPPFC did not want any potential applicants to express interest in the RfP.

At that time, the LBMA was silent on its role in the RfP process for the platinum and palladium fixings.  On 31 July 2014, Bloomberg  wrote a story highlighting that the LBMA’s public relations officer, Aelred Connolly, declined to explain the LBMA’s role in the platinum/palladium RfP:

“Aelred Connelly, a spokesman for LBMA, declined to comment on the association’s role in the platinum and palladium request-for-proposal exercise.”

However, a LBMA to LPPFC connection is apparent in a move by the LPPFC on 4 August 2014 when it announced (on the Sharps Pixley website) the appointment of Jonathan Spall as the ‘independent chair’ of the platinum and palladium fixing calls, a role that was said to commence that day on 4 August 2014. Jonathan Spall (ex Barclays and ex London Gold Market Fixing Company) at that time was acting as a consultant for the LBMA in the Silver Price auction competition process. LPPFC also said in the same announcement that Mr Spall would be supporting the LPPFC Board’s “assessment of responses to the RFP process announced by LPPFC on 31 July.”

More notably, there was nothing reported by LPPFC nor by LPPM nor by the financial media about this RfP process, nor about what happened after ‘expressions of interest’ were received by 6 August, until an announcement was made by LPPFC on 16 October 2014 (11 weeks later), again announced on the LPPM web site, that:

“Following completion of the RFP process announced by The London Platinum and Palladium Fixing Company Limited (the LPPFCL) on 31 July 2014, the LPPFCL is pleased to confirm that the London Metal Exchange (LME) has been selected and has committed to become the new administrator of the London Platinum and Palladium Fixing”

Given that there is no evidence to suggest that there were any applicants to this process, not any short list,  nor any competition, it would appear that the contract was merely handed to the London Metal Exchange. I asked the LPPM recently to confirm how many applicant companies participated in the LPPFC RfP process that took place between August and October 2014, and of the applicant companies, could they confirm how many applicants were shortlisted and their identities? LPPM eventually responded that they did not carry out the RfP process and had passed my query on to the then chair of the fixing company [LPPFC] who would respond to me ASAP. When no response was received after a week of waiting, I asked the LPPM to confirm who my query had been passed on to. This question itself was not responded to by the LPPM. Hence, my conclusion is that neither the LPPM nor LPPFC wish to discuss the matter, and my conclusion is that there was no contested RfP process to run the replacement platinum and palladium fixings, and that the process was merely handed to the LME.

The reason why this is not surprising, apart from the secretive and stealthy operational culture of the LPPM / LPPFC, is that there is good reason to believe that the LME was being sweetened and placated with the platinum and palladium fixings administrator role after it failed to secure the administrator and operator role in the LBMA Silver Price competition in July 2014,  a role which was awarded to Thomson Reuters and the CME Group. I have heard from a number of people in the precious metals sector in London that the LME was not happy about the way in which the LBMA awarded the silver price auction contract.


LME Downplays Silver auction after being awarded Platinum / Palladium

On 19 October 2014, the Wall Street Journal in an article titled “LME Wins Tender to Manage Platinum and Palladium Price Fixing”, said the following:

“Matthew Chamberlain, the LME’s head of business development, said the group had only been able to get ‘a bare bones’ pitch together in time for the deadline for proposals on the silver fix. For platinum and palladium, ‘we had time to get our technology in place,’ he said.”

Frankly, this ‘bar bones’ pitch statement by Chamberlain in bizarre and preposterous, in light of the fact that the LME is on record during the Silver auction competition in July 2014 as saying it had a full and complete solution that it claims was considered the best solution by much of the market. The reference to not having enough time is also bizarre and hard to fathom.

Proving that the Wall Street Journal reporters don’t seem to read their own previous articles on the same subject, the Wall Street Journal reported in a 29 May 2014 article titled “CME Group, LME Separately Work on Hosting a New Silver Fix” that the LME proposal was at that stage in late May 2014, more advanced that the ultimately winning CME proposal:

While the LME’s proposal is relatively advanced, CME Group is only in the early stages of considering a new silver fix, people with knowledge of the matter said.

“The LME went one further, saying it already has a proposal that will ‘provide best-practice regulatory compliance while maintaining the global position of the London market.’ The LME, which is owned by Hong Kong Exchanges and Clearing Ltd., said it would give more detail “at the appropriate time once the market consultation is complete.”

It can only be concluded that the LME was seriously downplaying the Silver Price competition in October 2014, since by that time it was satisfied in getting the platinum and palladium business. Consider the following timeline which shows that the LME had weeks and weeks in which to devise a solution for the Silver auction:

14 May 2014 – LBMA launches consultation on London Silver Market

16 May 2014 – LBMA launches online survey as part of market consultation on London Silver Market

23 May 2014 – LBMA issues update on the progress of its online survey

5 June 2014 - LBMA announces general survey results for its London Silver Price consultation

13 June 2014 – LBMA announces market seminar on the London Silver Price – seminar open to LBMA members and presenters – 10 applicants

19 June 2014 – LBMA provides details on 7 short-listed applicants, which includes the LME, that would present at the seminar

24 June – LBMA published executive summaries and/or slides from the 7 proposals that were presented at the seminar. Some presenters, such as LME only allowed an executive summary of their presentation to be published on the public version of the LBMA website

The LME’s Executive Summary of Silver Price solution

“Our silver auction is based on market best-practice with rigorous regulatory and compliance features, and will be ready for demonstration on our production systems by Friday 27 June.

“We are the natural London home for silver”

“We have reacted to strong market demand – from both physical and financial players – for the LME to deliver the London Silver Price, and our solution incorporates significant market feedback from across the silver community. Our dedicated team of precious metals experts is ready to support delivery of the solution, and ensure market continuity on 15 August 2014.”

On Wednesday 9 July, 2014, the LME announced that it had formed an alliance with financial technology company Autilla to provide a joint solution in the London Silver Price competition. The LME stated in a press release on that day that:

“’Throughout the LBMA’s process, the market has consistently indicated that Autilla’s technology and the LME’s compliance and price discovery systems are market-leading, and LME and Autilla have received numerous requests from the market to provide a joint solution,’ said Garry Jones, CEO of the LME.”

Two days later on 11 July 2014, the LBMA announced that CME / Thomson Reuters had secured the silver price auctions contract, news which must have caused much chargin and gnashing of teeth to LME and Autilla.

LME amends Press Release and deletes reference to central clearing

On Thursday 16 October 2014, the London Platinum & Palladium Fixing Company Ltd (LPPFC) awarded the contract to run the platinum and palladium price auction fixings to the London Metal Exchange (LME). LPPFC communciated this appointment in a press release which was published on the LPPM website (another example of the unhealthy inter-connectedness between the LPPM and LPPFC).

But the more interesting announcement that day came from the LME’s own web site where it issued a press release that was 7 paragraphs long, and also contained 2 ‘Notes to Editors’ bullet points.

The final two paragraphs of the LME’s press release that morning on 16 October 2014 explained the LME’s plan to use its LME Clear clearing service for platinum and palladium, so as to overcome the problem of bi-lateral credit risk between auction participants in the platinum and palladium auctions. This bilateral credit risk is huge barrier in the London Silver and Gold Price auctions as creates an obstacle for a wide-range of participants such as miners, refiner and mints to (on a practical level) taking part in the auctions. For background on the obstacle posed by not having central clearing, see for example “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing“.

The LME original press release included the following two paragraphs:

To maximise participation in the London pricing mechanism, the LME also plans to introduce a cleared platinum and palladium service, which 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.

I tweeted about this at 11:24 am London time that morning, with a link to LME press release, saying:

I also tweeted a second time at 11:29 am London time, saying:

Less than 3 hours later (somewhere between 13:34 and 14:21), the LME removed these 2 critical sentences from its press release and reissued an amended version of the press release on its website. The 13:34 and 14:21 time-stamps are based on Google cache which had made an imprint of the original press release at 16 Oct 2014 13:34:19 GMT and had found the amended press release at 16 Oct 2014 14:21:49 GMT.

Luckily, at least one financial news site, Finance Magnates, used the original press release, and reported as follows:

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

LME Clear, launched on 22nd 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.”

Therefore, between 1:34pm and 2:21pm, someone at the LME deleted the two sentences on clearing from the press release and the reference to LME Clear. LME Clear was launched on 22 September 2014. The LME press release now remains on its web site in its second incarnation. The most important question is why was this press release altered as soon as it was released, and who requested that it be altered. Was it too revealing to the incumbent parties that central clearing would blow apart current clearing status quo and make redundant the argument that widespread participation in the precious metals auctions is a difficult process? Because with central clearing of auction trades, direct participation in the platinum and palladium auctions for hundreds of platinum and palladium entities around the world would be a very simple process.

Screenshot of original LME press release on 16 October 2014 – Platinum / Palladium

Very interestingly, there was also one other change to the 2nd version of the LME press release in the ‘Notes to editors’ section where it was amended as follows:

Original: “The go-live date of 1 December is dependent on the ongoing participation of the four participating members of the LPPFCL.”

Revised: “The pricing mechanism is dependent on market participation. The LME has worked with the LPPFCL to ensure that its solution can be adopted on 1 December by both existing LPPFCL members, and new participants.”

This looks like a re-edit that was designed to distract from the fact that the LME auction was merely the same 4 old fixers in a different disguise, or in other words, “meet the new boss same as the old boss”, or “same old wine, in a new bottle“. It’s highly comical that the exact same participants that were in the old platinum and palladium auctions now appear in the new platinum and palladium auction as the only participants, and the LPPM, LBMA, LPPFC and LME have the gall to keep a straight face when reporting this. In fact, it would be a complete joke, if it were not for the fact that the topic of global price discovery of platinum and palladium is critically important. And finally, neither of the LME executives that were interviewed by Reuters that same week of October 2014 , in an article about the platinum and palladium contract award titled “LME CEO plays Asia card as gold market decides on fix replacement”  even mentioned LME Clear to Reuters. Hmm, I wonder why?

The LME’s brochure about LMEBullion now states that “All transactions in platinum and palladium are Loco London and are settled on a bilateral basis“. Again, no mention of LME Clear or the central clearing capabilities of the LME.

The LME Fixings

On the day the LME platinum and palladium price auctions went live on 1 December 2014, it was announced by the LBMA that the auction / benchmark prices would be called the LBMA Platinum Price and the LBMA Palladium Price. This, according to the LBMA, was due to the LPPFC having asked the LBMA to take over the intellectual property for the two sets of daily prices before the new auctions were launched.  Trademarks for the LBMA Platinum PriceLBMA Palladium Price and also LBMA Platinum and Palladium Price  were registered by the LBMA on 28 November 2014, and a LBMA company called ‘Precious Metals Prices Limited’ was incorporated on 1 December 2014 to manage the intellectual property rights of the LBMA Platinum Price, the LBMA Palladium Price, the LBMA Silver Price and the LBMA Gold Price.

LBMA Platinum Price and LBMA Palladium Price auctions take place twice daily at 9:45am and 2pm London time. The platinum auction is schedule to run first, followed by the palladium auction. LME runs the daily auctions for platinum and palladium on an electronic auction system called LMEBullion.

The are only 5 member participants of LMEBullion, namely:

  • Goldman Sachs International
  • HSBC Bank USA NA
  • ICBC Standard Bank plc
  • BASF Metals Ltd
  • Johnson Matthey Plc

The 4 LPPFC members (Goldman, HSBC, ICBC Standard and BASF) were the only member of participants of LMEBullion when it was launched on 1st December 2014. Johnson Matthey Plc joined as a member participant of the auctions on 19 January 2015, a day on which the LME stated that:

“We believe that wider participation will maximise the effectiveness of the process, and we look forward to broadening participation further.”

However, since January 2015 however, no other member participants have joined. Why not? And why are there no industry participants directly participating in the auctions?

ETF Securities, which operates the ETFS Platinum Trust (PPLT) that uses the afternoon LBMA Platinum Price (the PM fix) as a valuation price source, states in an official filing dated 31 December 2015 that:

Formal participation in the LME PM Fix is limited to participating LPPM members, each of which is a bullion dealerTwelve LPPM members are currently participating in establishing the LME PM Fix (Barclays Bank PLC, BASF Metals Limited, Credit Suisse, Deutsche Bank AG, Goldman Sachs International, HSBC Bank USA NA, ICBC Standard Bank PLC, JP Morgan Chase Bank, Standard Chartered Bank, The Bank of Nova Scotia, ScotiaMocatta, The Toronto-Dominion Bank and UBS AG). Any other market participant wishing to participate in the trading on the LME PM Fix is required to do so through one of the participating LPPM members.”

Similar wording and the same list of 12 banks is also stated in the official filings of the ETFS Palladium Trust (PALL). Therefore, according to ETF Securities, participation in the LBMA Platinum and Palladium daily price discovery auctions is also a closed-shop in a similar way that participation in the LBMA Gold Price and LBMA Silver Price auctions is a closed-shop, with only a handful of dominant bullion banks being allowed to directly participate.

Since the beginning of 2016, Barclays has withdrawn from some activities in the precious metals markets in London. Excluding Barclays from the above list and excluding BASF Metals Ltd, then all of the other 10 banks that are allowed to participate are the only banks that are full members of the LPPM. Therefore, the rules of the auctions are de facto limiting ‘formal participation’ in the platinum and palladium auctions to LPPM bullion dealer full members (i.e. bank entity intermediaries), and by extension, excluding every other platinum and palladium market participant in the world of which there are thousands.  

Note that 7 other banks, namely, JP  Morgan, Scotia, Barclays, UBS, Deutsche Bank, Toronto Dominion Bank,and Credit Suisse, are ‘participating’ in the fixes in addition to the 5 member participants. Some readers will recognise that 4 of these additional banks, JP  Morgan, Scotia, Barclays, and UBS, are clearing members of the London precious metals markets along with HSBC and ICBC Standard through their membership of London Precious Metals Clearing Limited (LPMCL). The power of LPMCL banks in all four of the London precious metals markets, and their obsession with maintaining the clearing status quo, should not be underestimated, but it is a point which seems to have been ignored by the London financial media.

Participation and Governance of the LME administered prices

There does not appear to be any information on the LME website or associated uploaded documents that explains how interested participants can become participating members in the LBMA Platinum and LBMA Palladium auctions, or what the participation criteria is. These auctions therefore look like private clubs in the same vain of the LBMA Gold Price and LBMA Silver Price auctions, but even more closed and protected than their silver and gold counterparts.

The oversight committee for the platinum and palladium price auctions is even stranger. There is nothing independent about it. On the LME website, a document titled “Control Framework for LPP Prices“, paragraph 14, refers to an LPP Prices Oversight Committee for the Platinum and Palladium fixings, comprising 3 LME representatives, a possible 5 representatives (one each from the 5 member participants) and a potential LBMA observer:

“The Oversight Committee shall be composed of at least three senior individuals from the LME to serve as LME members on the Oversight Committee. These individuals will be appointed by the LME’s Executive Committee. Each member participant may also
nominate a qualified individual to act as a representative on the Oversight Committee. The London Bullion Market Association is entitled to nominate an observer to attend meetings of the Oversight Committee.”

However, the LME website shows that this Oversight Committee only consists of 3 representatives from the LME and no one else. It doesn’t even contain representatives from the member participants. Even if it did though, it’s still not independent, since there are no representatives from the wider global platinum / palladium sectors. Even the LBMA Gold Price and LBMA Silver Price administrators operate independent oversight committees, which while not perfect, are far more diverse than the LME Oversight Committee. See ICE Benchmark Administration (LBMA Gold Price) oversight committee and Thomson Reuters (LBMA Silver Price) oversight committee.

LBMA merger with LPPM

Apart from the fact that a lot of the same bullion banks and refiners have the strongest voices in both the LBMA and LPPM, the two bodies already collaborate on various initiatives, the most high-profile of which is the annual LBMA / LPPM precious metals conference. Up to a few years ago, this conference was described as “the LBMA Conference in association with the LPPM“, but is now billed as “the LBMA/LPPM Precious Metals Conference“, with LPPM having equal billing. The LBMA and LPPM have also on occasion jointed produced publications such as “A Guide to the London Precious Metals Markets“.

The LBMA’s roadmap for consolidating its power in the London precious metals markets has been well telegraphed since 2014. The fragmented nature of the 3 sets of precious metals fixings in London with 3 different platforms and 3 administrators is one aspect of the ‘Problem-Reaction-Solution’ agenda that has been played out by the LBMA and LPPM strategists since the 2nd half of 2014. An early inception of the idea of the LBMA and LPPM coming together was placed into the ‘Market’ in the October 2014 issue of the LBMA’s Alchemist magazine when LBMA consultant Jonathan Spall, in an article titled ‘No More Fixings‘  posed the question:

“Do we need an umbrella organisation with a strong voice to promote the interests of our rather small area of the global financial community?”

The ‘New World Order’ agenda was again pushed and crafted in the LBMA’s orchestrated ‘LBMA Strategic Review’ conducted by EY consultants,  a review which was not open to public consultation during the consultation phase, and the full findings of which have never been published. By June 2015, the LBMA CEO stated that the LBMA was planning to:

“Develop the precious metals market landscape to meet the current and future needs by implementing new services, new corporate structure and new governance

By October 2015 during the LBMA annual conference in Vienna, the LBMA CEO stated more specifically that:

A New Trade Association for all four metals will be formed which will hold the current assets of the market such as the Good Delivery List as well as develop new Financial Services to support market trading.”

Bloomberg summed up this October 2015 news as follows:

“The association [LBMA] is considering expanding its oversight to include platinum and palladium, rather than just gold and silver, Chief Executive Ruth Crowell said Monday at the conference, citing regulatory, political and competitive changes. Having all four metals under one group would make sense from a banking and vaulting perspective and LBMA members will be asked to vote on the change at the annual general meeting in June [2016], she said.”

The LBMA now plans to “update its legal structure and governance and a General Meeting has been called on June 29“. Note that this General Meeting is not the AGM. The implication here is that the proposals being tabled will be voted through by the members as the LBMA expressly wants them to be voted through. This General Meeting on 29 June has pushed back the scheduling of the LBMA Annual General Meeting to 27 September which will now “incorporate, into the constitution of the LBMA, the governance and legal structure changes agreed at the General Meeting in June.” So again, there is a presumption on the part of the LBMA that the proposed changes will go though. And there is no reason to doubt that these changes will not be implemented given that the entire plan has been in the works since at least mid 2014.

This whirlwind tour of the LPPM and associated entities will hopefully provide some pause for thought during London Platinum Week.

Deutsche Bank agrees to settle with Plaintiffs in London Silver Fixing litigation

In a surprising development, a group of plaintiffs in an antitrust litigation case against Deutsche Bank, HSBC Bank plc, the Bank of Nova Scotia, and UBS AG, have just announced that Deutsche Bank is in the process of negotiating the formal terms of a settlement agreement with the plaintiffs. Deutsche Bank, HSBC and Scotia are the only members of the London Silver Market Fixing Limited, a private company that had operated the London Silver Fixing auctions until mid August 2014, after which time that auction was superseded by the LBMA Silver Price auction.

The case (# 1:14-md-02573-VEC) is being overseen as a class action suit by federal judge Valerie E Caproni in the US District Court for the Southern District of New York. A large number of different plaintiffs had taken similar actions and the cases were consolidated into one class action suit. The plaintiffs allege in the suit that Deutsche Bank, HSBC and Scotia colluded to fix the price of silver futures by publishing false silver prices, so that they, as members of London Silver Market Fixing Company would benefit (from the price movements).

The full 1 page letter from the plaintiffs legal representatives Lowey Dannenberg, Cohan & Hart can be read here -> Deutsche letter to Caproni – 13 April 2016 – London Silver Fixing – Lowey Dannenberg Cohen Hart.

In a shocking development for the remaining defendants and the entire future of the current LBMA Silver Price auction, owned by the LBMA, administered in London by Thomson Reuters and calculated by the CME Group,  the letter states that:

“In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants.

The plaintiffs include Modern Settlings LLC (of New York and Florida), American Precious Metals Ltd, Steven E Summer, Christopher Depaoli, Kevin Maher, Jerry Barrett, Rebeccca Barrett, KPFF Investment Inc, Don Tran, and Laurence Hughes.

The defendants include Deutsche Bank AG and various other Deutsche Bank entities, HSBC Bank Plc, HSBC Bank USA NA, HSBC Holdings Plc, and various other HSBC entities, The Bank of Nova Scotia, and various other Scotia entities, and finally The London Silver Market Fixing Ltd.

Coming on the heels of the unresolved and unexplained fiasco that is the LBMA Silver Price auction and the broken promises by the London Bullion Market Association (LBMA) about greater auction transparency and wider participation in the new Silver auction (see BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing“) it seems difficult to envisage that the LBMA Silver Price can survive in its current form, with its current participants, of which 2 of the remaining 5 participants are HSBC and Scotia. It will also be interesting to see what the Financial Conduct Authority (FCA) will say about this development with Deutsche Bank, especially in light of the fact that HSBC and Scotia are now participating in a ‘Regulated Benchmark’ (the LBMA Silver Price), where price manipulation can be criminally prosecuted.

London Silver Market Fixing Limited

The directors of the London Silver Market Fixing Limited company in the months before it ceased doing the London Silver Fixing auctions, were Simon Weeks of Scotia, Matthew Keen of Deutsche Bank, and David Rose of HSBC, with alternate directors of David Wilkinson of Scotia, James Vorley of Deutsche Bank and Peter Drabwell of HSBC. Since the above list was drawn up, UK Companies House filings show that, for London Silver Market Fixing Limited, David Rose ceased to be a director on 5 January 2016, David Wilkinson ceased to be a director on 16 October 2015, James Vorley ceased to be a director on 27 May 2014, and Matthew Keen ceased to be a director on 18 February 2014. According to those filings, it means that Simon Weeks of Scotia and Peter Drabwell of HSBC are still directors of the company that is a defendant in the above New York class action suite.

Surprisingly to some, Simon Weeks of Scotia is listed on the website of LBMA Silver Price administrator Thomson Reuters as still being a member of the LBMA Silver Price Oversight Committee. See list here. Furthermore, the same Simon Weeks is still listed as being a member of the LBMA Gold Price Oversight Committee, chaired by ICE Benchmark Administration. See list here.

Some of the above directors names will also be familiar to readers as directors of the London Gold Market Fixing Limited company, as profiled in the ZeroHedge article “From Rothschild To Koch Industries: Meet The People Who “Fix” The Price Of Gold“.

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.


G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out

On 8 January 2016, Reuters broke the news that ICBC Standard Bank has purchased the lease on Deutsche Bank’s gold vault in London, and that ICBC Standard intends to become a member of the clearing syndicate, London Precious Metals Clearing Limited (LPMCL):

“ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market..”

ICBC.. has also applied to become a clearing member of the London gold and silver over-the-counter business.

The vault became operational in June 2014 and has a capacity of 1,500 tonnes. It was built and is managed by British security services company G4S.

These moves by ICBC Standard Bank have now put both the G4S vault and LPMCL, (a private company), back in the spotlight.

The Background to the G4S Vault

On 20 March 2012, Deutsche Bank issued a press release announcing that it had contracted security company G4S to construct and manage a precious metals vault on Deutsche’s behalf in London. Critically, this was a substantial long-term partnership between Deutsche Bank and G4S, with G4S doing the actual work of building and then operating the precious metals vault. Deutsche stated at the time in March 2012 that the new vault would be for the exclusive use of Deutsche Bank clients, and that it would available for use by these clients during 2013:

“Deutsche Bank and G4S are pleased to announce that they are to join forces in establishing a new vault for the storage of precious metals in the UK.”

The new vault will be built and managed by G4S, the world’s leading international security solutions group, for the exclusive use of Deutsche Bank and its clients and will be an enhancement to Deutsche Bank’s already extensive metal trading and clearing capabilities. 

“‘It will position us well to quickly become a leading metals clearing and custody house,’ commented Raymond Key, Global Head of Metals Trading at Deutsche Bank. The vault, which will be constructed and run to industry-leading standards of security, will be available for clients in 2013.

Likewise, on 20 March 2012, G4S released its own press release in which it revealed that the contract with Deutsche Bank was a 10 year commercial deal and that discussions about building the vault had commenced in 2009:

“Working in partnership with Deutsche Bank, the business has secured a ten year commercial arrangement to establish a state of the art precious metals vault that will be built and managed by G4S, and will enable Deutsche Bank to extend and enhance their metal trading and clearing capabilities.

Discussions started with Deutsche Bank back in 2009 when increased economic volatility started to cause a rise in interest levels among investors for precious metals.”

“James Dinsdale, Managing Director, G4S Cash Solutions, said: ‘We’re delighted to have secured this partnership with Deutsche Bank….. This agreement represents a strategic move in the UK market place for G4S.”

Law firm Clyde & Co acted as advisor to G4S for the Deutsche vault project, and it too issued its own press release on 19 March 2012:

“Clyde & Co has advised global security and logistics company G4S in relation to a project for Deutsche Bank.

G4S will build and manage a gold bullion secure storage vault in the UK for Deutsche Bank.”

What none of the press releases mentioned was that the precious metal vault was being integrated into the basement of a new G4S operating centre in Park Royal, London.


As it turns out, Deutsche did not deliver on its self-publicised deadline for the new vault becoming available to its clients in 2013. However, on 9 June 2014, over 2 years after announcing the London vault project, a much reduced Deutsche Bank London precious metals business that had substantially stepped back from the London Gold Market, confirmed to Reuters that it had finally opened its new London precious metals vault. Note that Reuters is usually the first distribution channel that the London Gold Market PR machine contacts to get its stories out on to the newswires.

According to Reuters’ coverage of the June 2014 Deutsche opening announcement:

“Deutsche’s new vault has been built in partnership with logistics company G4S and is open to institutional investors, and commercial and central banks.”

The vault has a capacity of 1,500 tonnes, making it significantly bigger than a 200-tonne storage facility that the bank owns at the Singapore Freeport.

The period from late 2013 to early 2014 turned out to be a turbulent period for Deutsche Bank’s precious metals operations in London, during which time:

- German financial regulator BaFin began an investigation into the London Gold and Silver Fixings, of which Deutsche Bank was a fixing member (November 2013)

- Deutsche Bank announced that it would withdraw its participation in the London Gold and Silver Fixings and sell the Fixing seats (January 2014)

- Deutsche Bank ceased contributing to the GOFO benchmark and ceased being a LBMA market maker for precious metals forwards (February 2014)

- Deutsche Bank ‘failed to sell’ its gold and silver fixing seats (despite ICBC Standard Bank being interested), and Deutsche then merely resorted to withdrawing from the fixings (April/May 2014)

- Deutsche Bank’s Matthew Keen, who was a director of London Gold Market Fixing Limited (LGMFL), London Silver Market Fixing Limited (LSMFL), and  London Precious Metals Clearing Limited (LPMCL) resigned from Deutsche Bank, prompting the appointment of other Deutsche representatives to those company directorships (January 2014)

- Deutsche Bank’s representative on the London Bullion Market Association’s (LBMA) management committee, Ronan Donohoe, resigned from the LBMA management committee on 5 March 2014, only 7 months into a 2 year appointment (March 2014)

Given all the above retrenchments affecting its precious metals activities in London, it is slightly odd that Deutsche Bank still went ahead in June 2014 and announced the opening, at least in name, of its London precious metals vault collaboration with G4S. Perhaps it had a contractual obligation with G4S to do so.

But odder still is that less that 5 months after announcing the opening of the new vault, Deutsche Bank then stepped back even further by closing its physical precious metals trading operation in London in November 2014, and then announced in December 2014 that it would actually be interested in selling its London gold vault. This decision is beyond bizarre given the huge level of commitment that Deutsche Bank had made to the development of the vault for at least 4-5 years beginning in 2009.

As Reuters reported on 24 December 2014:

“Deutsche Bank is open to offers for its London-based gold vault following the closure of its physical precious metals business, three sources familiar with the matter said on Wednesday. ‘If the right offer came along, then the bank would sell the London vault,’ one source close to the situation said.

The German bank shut its physical precious metals trading arm last month as it further reduced its exposure to commodity markets.”

Deutsche declined to comment on the status of its vaulting operation.

 “…it could be difficult for Deutsche Bank to find buyers among its nearest peers. But sources familiar with the matter said a Chinese entity could come forward. ICBC is trying to build a presence in London and the sources said it was a likely candidate. ICBC declined to comment.”

The key question is did this Deutsche Bank vault in London, operated by G4S, ever do any precious metals business in the time between June 2014 and November 2014? If it did, then this activity could not have been substantial.

Deutsche Bank clients holding allocated gold and other precious metals with Deutsche in London would not have been impressed if they were told their holdings were being moved to the new vault in the summer of 2014, only to find out a few months later that Deutsche was looking to exit its involvement with the vault.

While the G4S / Deutsche vault sales process seemed to remain on hold for the entire year of 2015 with no announced activity from either Deutsche bank or ICBC, and no media scrutiny, Deutsche continued to exit the physical gold business in London amid a number of other significant developments. In August 2015, Deutsche departed from the London Precious Metals Clearing Limited (LPMCL) company, leaving HSBC, JP Morgan, Bank of Nova Scotia, Barclays, and UBS as the remaining 5 members of the London gold and silver clearing consortium.

On 20 August 2015, Reuters reported that:

“Deutsche Bank is to sever its last link with commodity trading by resigning as a clearing member of the London gold and silver over-the-counter business..” [LPMCL]

It’s a little known fact that London Precious Metals Clearing Limited (LPMCL) (company number 04195299) is a UK private limited company with the same registered address as the London Gold Market Fixing Limited and the London Silver Market Fixing Company Limited. This registered address is C/O Hackwood Secretaries Limited, One Silk Street, London EC2Y 8HQ.  Indeed, Hackwood Secretaries Limited is the Company Secretary for LPMCL. Hackwood Secretaries Limited is one of the companies Linklaters uses to offer its company sectretariat services. And Linklaters is one of the better known ‘magic circle’ global law firms that is headquartered in London.

While LPMCL has so far managed to steer clear of US class actions suits concerning precious metals manipulation accusations, its fellow Linklater registered gold and silver fixing companies, London Gold Market Fixing Limited and the London Silver Market Fixing Company Limited, both of which have had a lot of the same directors as LPMCL, have not been so lucky on the class action front, and both companies are now facing live consolidated class action suits in New York courts.

Each member bank of LPMCL usually appoints two directors who are senior staff members of that investment bank. So with 6 investment banks within LPMCL, there are usually 11-12 LPMCL directors, give or take a few people who would invariably be moving bank at any given time.

Deutsche Bank’s two last-serving directors of LPMCL, Raj Kumar and David Mitchell-Innes, actually resigned from LPMCL on 9th February and 1st September 2015, respectively. The February 2015 LPMCL resignation by Kumar seems to have been precipitated by his internal move within Deutsche Bank for a short while to the role of Global COO for Commodities, but then significantly, Kumar left Deutsche Bank in July 2015 to take up a role in ICBC Standard Bank in September 2015 as a managing director in ICBC Standard’s  precious metals business, as Reuters reported on 17 September:

“London-based ICBC Standard Bank Plc named Raj Kumar head of its precious metals business development, effective immediately.

Kumar, who will be based in London, joins from Deutsche Bank AG, where he was managing director of precious metals business.”

 This Deutsche Bank – ICBC Standard Bank – LPMCL link in the form of Raj Kumar was undoubtedly useful to ICBC Standard in its move to take on Park Royal vault lease from Deutsche Bank, and could help facilitate ICBC Standard’s stance in an application to become a member of LPMCL.

However, the 20 August Reuters report also interestingly stated that Standard Chartered might be interested in becoming a LPMCL member:

“…there is one other bank, Standard Chartered, that could become a gold and silver clearing member in the next few months.”

Could this be a typo by Reuters when it meant to say Standard Bank? Possibly, but most likely not. Standard Chartered is an important bank in the London Gold Market in its role as a LBMA market maker in spot and options for gold and silver which it secured in February 2015. But Standard Bank is not to be confused with Standard Chartered bank. They are two entirely separate banking institutions, albeit with historical connections.

Standard Chartered is headquartered in London, and is well-known for its emerging markets focus, particularly in Asia and Africa. The ‘Standard’ in Standard Chartered in some ways does refer to the South African ‘Standard Bank’, since Standard Chartered was created in 1969 through the merger of Standard Bank of British South Africa and Chartered Bank of India, Australia and China. However in 1987, Standard Chartered sold its shareholding in Standard Bank.

In another LPMCL related link that could involve Standard Chartered, Martyn Whitehead, former director of LPMCL for Barclays, left Barclays in May 2015, and joined Standard Chartered in August 2015, as MD and head of Commodity Sales.

In April 2015, Reuters said of Whitehead’s pending departure from Barclays:

“Barclays’ global head of metals and mining sales Martyn Whitehead will leave the bank as part of its restructuring and exit from some parts of its commodities business, a source familiar with the situation told Reuters on Monday.

Whitehead was Barclays’ only representative listed with London Precious Metals Clearing Ltd. Barclays is one of the six banks that organise and co-ordinate bullion clearing and vaulting in London.”

Therefore, could two former directors of LPMCL, namely Raj Kumar and Martyn Whitehead, now be spearheading applications on the part of their respective new employers, ICBC Standard Bank and Standard Chartered, to both join the private club that is London Precious Metals Clearing Limited, and have access to the exorbitant privilege of being part of the London Gold Market’s private gold clearing consortium, and preferential treatment form the Bank of England gold and foreign exchange desk?

Standard ICBC


China’s largest bank, Industrial and Commercial Bank of China (ICBC), has been eager to become a premier player in the London Gold Market for some time now. Although it became an Ordinary Member of the LBMA in 2012, ICBC had stated in 2012 its desire to become a LBMA Market Making Member. ICBC was also interested in buying Deutsche Bank’s seat in the old Gold Fixing in 2014, but strangely this sale never happened. See my BullionStar blog “Chinese Banks as direct participants in the new LBMA Gold and Silver Price auctions? Not so fast!” from March 2015 under section “ICBC and Standard Bank” for more details on this.

One key development for ICBC was crystalised in February 2015,  when ICBC finalised its acquisition of 60% of Standard Bank Plc (the UK arm of Standard Bank) from Standard Bank of South Africa, to create the entity now known as ICBC Standard Bank. See also the press release ICBC completes acquisition of 60% of Standard Bank Plc 20150129. The LBMA website nows list ICBC Standard Bank as an Ordinary Member of the LBMA in lieu of listings for both ICBC and Standard Bank.

ICBC also stated in June 2015 that it wanted to become a direct participant in the LBMA Gold Price auction, but again strangely this has not yet happened despite 2 other Chinese banks, namely Bank of China and China Construction Bank (CCB), eventually being authorised by the LBMA to join up to the LBMA Gold Price auction on 22 June 2015 and 30 October 2015, respectively.

Prior to the controlling interest purchase by ICBC, Standard Bank was no stranger to London Gold Market gold vaulting, and a 2009 report from Abu Dahbi’s “The National” on United Arab Emirates related bullion stated that gold had:

“moved to the vaults of Standard Bank of South Africa, located in the London offices of JPMorgan Chase at 60 Victoria Embankment, Blackfriars, London.”

The ‘vaults of Standard Bank‘ reference just refers to allocated or sub-leased space in the JP Morgan vault in London in the name of Standard Bank of South Africa.

Finally, ICBC also has a strategic interest in the London platinum group metals market through Standard Bank Plc’s existing participation in the London Platinum and Palladium Market especially through the daily platinum and palladium fix auctions, which are now administered by the LME on behalf of the LBMA.


The Park Royal VAULT

As first revealed by Zerohedge in December 2014, the London precious metal vault that was built by G4S on behalf of Deutsche Bank is located at in the Park Royal area of London at 291 Abbey Road, London NW10 7SA.

This Park Royal location was actually telegraphed by G4S itself as early as July 2013 when ‘G4S Cash Solutions’ advertised for “Precious Metals Vault Officers” for the new vault in a job advert on the careers section of its own website, which listed the job location as ‘Park Royal, West London‘. Not really a very security conscious approach for whats purports to be one of the world’s foremost security companies. The job adverts included the following:

Precious Metals Vault Officers

Location: Park Royal, West London

Number of Positions: 16

Closing Date: November 2, 2013

G4S Cash Solutions, in partnership with one of the world’s leading financial institutions, is launching a Precious Metal Vault in West London.  The vault which has been created with innovative, state of the art design and technology is at the leading edge of the global bullion storage industry.

We are now recruiting an exceptional team of Precious Metal Vault Officers who will operate and secure our vault in this exciting, new venture.”

  • “responsible for processing all inbound, outbound and stock management transactions and movements of Precious Metals”
  • “The operation and use of a Vault Management System together with specialist Precious Metals equipment”
  • “The conduct of receipting, weighing and stowing of Precious Metals including their physical movement in and around the Vault “

Other roles at the new vault were also advertised on the G4S website, such as  “Vault Manager – Precious Metals” which included information such as:

Vault Manager – Precious Metals

Location: Park Royal

Number of Positions: 1

Closing Date: November 2, 2013               

G4S is the largest secure solutions company in the world…Our Cash Management Solutions business has expertise in cash and valuables transportation, cash processing, ATM and cash centre outsourcing, secure storage and retrieval.”

“Responsible for the management, security and operations of the precious metals vault including security and traceability of all assets entering and leaving the vault.”

  • “To work closely with internal management on the strategic global growth of our bullion projects; offering product, operational knowledge and LBMA expertise.”
  • “To train vault officers to ensure they are working within the LBMA / LPPM /  LPMCL guidelines…”  
  • A strong working knowledge of LBMA, LPPM and LPMCL codes of practice and proven experience of implementation of these codes
  •  ** Proven experience of working within a Precious Metal vault **
  • Proven experience of working within LBMA, LPPM and LPMCL codes of practice  (including weighing of bullion)”


…and a Weighmaster job role which included:


Location: Park Royal

Number of Positions: 1

Closing Date: December 31, 2015


  • Planning and implementing the conduct of receipting, weighing and stowing of precious metals including their physical movement in and around the vault
  • Planning for and implementing the conduct of picking, packing and shipping of precious metals including their physical movement in and around the vault


There were also similar job adverts on the G4S website for other positions at Park Royal including  “Precious Metals Shift Manager” (Positions: 4, closing date 31 October 2013), and “Secure Driver” (Positions:15, closing date 23 June 2014, “Deliver cash and valuables to various customers in a physically active role“).

Note that the closing date for the Secure Driver applicants was a few weeks after Deutsche Bank had announced on 6 June 2014 that it had opened the gold vault. So if the drivers hadn’t even been hired in June 2014 and probably not in July 2014 either, then there was nothing being moved in or out of the vault at that time, and there was most likely never any Deutsche Bank precious metals moved in or out of the G4S vault, which would also explain why, in December 2014, “Deutsche declined to comment on the status of its vaulting operation”, and would therefore make the vault an extremely bad and money losing investment decision for Deutsche Bank, as well as a bizarre business decision to commit substantially investment to the vault and then walk away from it 2 years later. 

From July to August 2013, G4S even tweeted about these Park Royal roles on its Twitter account and stated the locations of the jobs roles and locations, for example, for “Vault Manager – Precious Metals in Park Royal“.

Not only that, but G4S even advertised these precious metals vault positions to the world on Facebook, complete with the specification of the Park Royal location.

Park Royal

Where is Park Royal? Most people in London, if they know Park Royal at all, would recognise the name as a tube station (train station) and as an area of North West London. Park Royal is just off the North Circular Road, in an industrial area, frequently congested with traffic, just down the road from Hanger Lane roundabout, another often traffic gridlocked area. But as the crow flies, Park Royal is not too far from Heathrow Airport, or the M25 ring-road, or Central London.

As well as telegraphing the general Park Royal area where the new vault was to be built, G4S also went further and specified the exact address of the new operating centre in a planning application document available on the web, conveniently pinpointing the vault building location in this large industrial sprawl, chock full of industrial parks and warehouses:


Page 13 of document: Reference Number OK0229598 SI


Director(s): KEVIN O’CONNOR, Margaret Ann Ryan, Declan Hunt.


New operating centre: PARK ROYAL, 291 ABBEY ROAD LONDON NW10 7SA

New authorisation at this operating centre will be: 45 vehicle(s), 0 trailer(s)

In this case, the planning reference was referencing an increase in the number of vehicles allowed on the site. However, the more interesting planning applications are to be found not in the Office of the Traffic Commissioner, but in the website of Brent Council. These plans give a good overview of some of the details of the basement and vault that ICBC Standard Bank has just taken on the long-term lease for.

Park Royal tube

Planning applications for 291 Abbey Road NW10 7SA

The Park Royal area, including 291 Abbey Road NW10 7SA, is under the remit of Brent Council Borough of London. Brent Council planning applications are available on the Brent Council Planning web site. On the Brent Council web site, there are 5 planning application ‘Case Numbers’ for 219 Abbey Road NW10 7SA submitted since 2012. The sequential nature of there being 5 case numbers just means that after the initial application was made, various details of the application were amended, which necessitated the applicant making subsequent submissions to the Council requesting the changes. This allows the amended plans of the G4S development to be compared to the initial plans. Each of the 5 applications have multiple scanned documents uploaded and attached to the applications.

Case Number 12/2112:  This is the original planning application

Erection of new 2-storey storage facility (Use Class B8)”. Use Class B8 means Distribution or Storage. B8 building use is for storage or as a distribution centre. This application was submitted on 9 August 2012, and the application was granted on 9 November 2012.

Applicant: S Williams, G4S, Sutton House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD

Architects: Pick Everard, Leicester

Pick Everard architectural practice describes itself on its website as “a leading independent, multi-professional consultancy practice working within the property, infrastructure and construction industry.

There are a number documents in the Case Number 12/2112 planning application, the most interesting of which is the initial floor plan diagram of the construction project: Project Park Royal – Document 120437 A 105 B Typical floor plans and sections.

Notice that on the diagram, there is a square-shaped basement specified on the floor plans, listed as ‘Basement Storage’, and this basement is specified as 1178 square metres. This 1178 sq mt space is approximately 34 metres * 34 metres. Furthermore, the ground floor level is listed as “Industrial Warehouse”, 1132 sq metres, with “Vehicle Loading Bays” at the rear, and the 2nd Floor level is listed as “Offices”.

On 20 September 2012,  the London Bullion Market Association (LBMA) published the following guidelines on the location of new precious metals vaults in London: Best Practice Guidelines Used by ‘Loco London’ Vaults – Opening a new vault for the storage of precious metals, in which it stated:

If you wish to store the higher value precious metals then you may find that insurers insist that your vaults are subterranean.

It appears that these guidelines were specifically written for Deutsche Bank and G4S to follow since they were the only parties submitting a planning application for a new precious metals vault in London at that time, and the dates fit exactly. Case Number 12/2112 also includes an initial site location plan Project Park Royal – Document 120437 A 001 J Site Location Plan showing an overview of the site, with car park at front, building in the middle with truck loading bays at the back of the buildings, and truck parking at the rear of the site.

Case number 12/3371: Some small extra details

Case 12/3371 is just an application containing extra details about construction materials etc and security gates, barriers etc. This application was submitted on 18 December 2012, and granted on 12 February 2013.

Case Number 12/3344: Some small extra details

Case 12/3344 just covers some extra details such as car park spaces at the front of the site, for 32 cars, 30 staff/visitor spaces, and 2 disabled spaces. That application was submitted on December 2012, and granted on 13 February 2013.

Case Number 13/0722: Some important revisions to the Project, including a reduction in the size of the Basement

Case Number 13/0722 is interesting in that it included a reduction in the size of the basement from 1178 sq metres in the original application, to 750 sq metres. This application was submitted on 25 March 2013, and granted on 22 April 2013.

The accompanying Delegated Report specified a “Non-material amendment application to: (a) reduce basement area, and other changes such as (e) alterations to fencing, (f) reduction in number of vehicle loading bay shutters from 6 to 5.

“It is proposed to reduce the size of the basement from 1178sqm (as approved) to 750sqm. This is below ground level and will not have a material impact.”

Applicant: Stacy Williams, G4S, Sutton House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD

In the revised floor plan Project Park Royal – Document 120437 A 105 C Typical floor plans and sections, the basement, still listed as ‘Basement Storage’, has been remodelled as a rectangular space and reduced in size to 750 square metres from 1178 sq metres, i.e. a reduction of 428 square metres compared to the original submission. This new 750 sq metre size, as a rectangular area, is roughly 19 metres * 38 metres. See revised floor plans.  While a smaller basement does not necessarily mean a smaller vault, the basement size was more than likely reduced specifically because the vault size had been reduced.

If this was the case, then its possible that Deutsche Bank communicated to G4S that the vault size was to be reduced due to gold bullion exiting London for Asia (via Switzerland) in 2012 and especially during early 2013, and a fear that the previous planned size for the vault would be too big for the intended London bullion activity requirements.

The floor plan diagram specifying the reduced basement was actually created on 26 April 2013, which is coincidentally the week following the historic two-day gold price smash that occurred over Friday 13th and Monday 16th April 2013.  Said another way, the amended planning application which specified the basement size reduction was submitted 2 weeks before the historic gold price smash of 13-16 April 2013, and the application amendment to the floor plans was granted the week after the historic gold price smash of 13-16 April 2013.

When the Deutsche/G4S vault opened in June 2014, Reuters reported that the vault’s capacity was 1,500 tonnes of gold. It’s not clear if this capacity statistic was the capacity from a larger vault that would have been in the larger basement area, i.e. 1178 sq mtrs, which a source may have supplied to Reuters at an earlier time, or whether it referred to a smaller vault within the smaller and revised 750 sq mtr basement area. For if the vault can now hold 1,500 tonnes of gold within a smaller basement, the original basement, being 57% larger, may have been designed to hold in excess of 2,300 tonnes of gold.

It’s either a fortunate or unfortunate set of timings that Deutsche/G4S applied to reduce the size of one of the largest ever precious metals vaults in London within a few weeks of the gold price being critically injured by huge gold futures contract short trading over the 13-16 April 2013 period. It would be interesting to know who made the decision to reduce the area of the basement, and on what rationale this decision was based.

Again, as to how much precious metal, if any, Deutsche Bank ever processed or held in the Park Royal vault is debatable, since a) the vault was not operational until June 2014 and b) Deutsche Bank  was rapidly exiting the London Gold Market at that time. It therefore makes this LinkedIn profile of the person who actually performed the job of Precious Metals Manager at the vault all the more interesting,  a role which is stated to have lasted from December 2013 to May 2015, but a profile in which the references to physically related precious metal activities just refer to the job spec bullet points, and the achievements listed predominantly concern the vault and not the contents of the vault.

G4S spec

Likewise, the ‘Bullion Operations Manager‘ at the G4S vault, a vault which was exclusively for Deutsche’s clients, must have seen fallow periods in which no metal passed over the vault’s threshold with the LinkedIn profile predominantly listing job spec bullet points. However, interestingly, the profile refers to ‘Leasing with [a] major financial corporation to ensure compliance to contractual agreements‘, so there were, as would be the case, contractual agreements between Deutsche and G4S. On the Deutsche side, these contractual agreements  would raise the question of what penalties, if any, Deutsche Bank incurred in exiting contractual obligations with G4S, and whether Deutsche would have received a get-out exemption by delivering ICBC Standard Bank as the willing recipient of the vault lease.

G4S bullion


 Galliford Try

The planning applications submitted to Brent Council also include a “Method Statement & Logistics Plan” report written by the construction contractor Galliford Try for the project. On its website, Gallilford Try describes its Construction division as “a leading construction company, carrying out building and infrastructure works across the UK.

Galliford Try’s Method Statement & Logistics Plan report, which is useful as a comparison benchmark to the actual construction that was completed, reckoned that the construction would take 50 weeks to complete, which probably explains why the vault and building was only complete in mid-2014, given that the amended planning application was only granted by Brent Council on 22 April 2013. It still however does not help in explaining why Deutsche Bank initially thought in 2012 that the vault would be ready for its clients to use in 2013.

Crucially, page 4 of the Galliford Try report, in a section titled “Internal Finishes (weeks 27-50)“, sub-section “Basement (weeks 26 -40)“, confirms that “Once the ceiling grid works have been completed the steel / vault doors will be installed“, which proves beyond doubt that the vault is located in the basement of the G4S operating centre. There are also kitchen and toilet areas in the basement as per other London subterranean precious metals vaults.

On page 3, when discussing the basement excavation and basement concrete slab floor, it also states that  “Pockets will be formed in the floor for the fitting of the security doors etc“, and that “the lift pits…will be installed.”


From page 2:


From page 3:


From page 4:


The Park Royal site on which G4S built the operating centre and vault was first put on the market in November 2011 by Clay Street Property Consultants. The site occupies 1.89 acres and was sold (presumably to a G4S related company) in April 2012 for £4.5 million:

  • 291 Abbey Road & 2-4 Penny Road, Park Royal , London
  • Marketed in November 2011 the 1.89 acre site attracted a broad range of interest including institutional investors, property companies, developers and owner occupiers.
  • Securing 15 bids all at in excess of the asking price the site was sold in April 2012 to an owner occupier for £4,500,000 reflecting a price of £2.38m per acre.

A Google Earth image from July 2013  shows the site with the new development in full flight, and the construction of the basement in progress, and so allows a determination of whether the construction was following the last set of plans approved by Brent Council:

July 2013
Google Earth July 2013


Zooming in on the construction of the basement area from July 2013, the image shows the rectangular darker area where the vault was being positioned, and the lift-pits to the right of the image, one lift shaft at the front, and two towards the rear, which would be adjacent to the truck loading bays. This shape is very much in keeping with the basement size reduction to 750 square metres in the ultimate set of plans approved by Brent Council.

Basement Excavation - July 2013
Basement Excavation – July 2013


Finally, a Google Earth image from June 2015 shows an aerial view of the completed G4S development.

June 2015
Google Earth June 2015



The hasty exit of Deutsche Bank from the London Gold Market has never been adequately explained by the media. It remains an elephant in the room that the mainstream media does not seem to want to touch. The composition and operating mechanisms of the private LPMCL club is also another elephant in the room that mainstream media journalists have never adequately analysed and are unlikely to do so.

Now that ICBC Standard Bank has taken on the remaining term of the 10 year G4S lease that was vacated by Deutsche Bank, the key questions for ICBC are to what use will the state-controlled Chinese bank put this precious metals vault to, and whether the 5 incumbent LPMCL members will formally (along with the Bank of England informally) give the go-ahead to allow ICBC become a member of the private syndicate that is London Precious Metals Clearing Limited. The other outstanding question is whether Standard Chartered will also be involved in any extension of membership of LPMCL.

Another little appreciated fact is that during the pitches for the replacements to the Gold Fixing and Silver Fixing auctions, most of the exchanges and companies making the pitches, such as, CME, LME, ICE, all offered working solutions that included centralised on-exchange clearing of precious metals for the London Gold and Silver Markets. These solutions were even included in the various presentation materials of CME, ICE and LME, and made it into market presentations and press releases etc, however, the LBMA and its various associated accomplishes such as the LPMCL, pushed back completely on any part of solution that would have encroached on the existing LMPCL clearing mechanism.

The question of why LMPCL was so ‘precious’ that it needed protection from a transparent on-exchange clearing platform is also a question that mainstream financial journalists seem to have entirely missed. I will write a future blog post on LPMCL so as to shed some light on this thoroughly protected private syndicate of bullion bank clearers.


From Good Delivery bars to Kilobars – The Swiss Refineries, the GFMS data, and the LBMA

In early September 2015, I wrote an article titled “Moving the goalposts….The LBMA’s shifting stance on gold refinery production statistics”, in which I explained how the London Bullion Market Association (LBMA) had, on Wednesday 5 August, substantially lowered its 2013 gold and silver refinery production statistics literally a few days after I had commented on the sizeable figure of 6601 tonnes of 2013 refined gold production that the LBMA had previously published in May 2015.


  • On 5 August, the LBMA substantially altered and republished Good Delivery List gold and silver refinery production statistics in two of its published files: LBMA Brochure Final 20120501.pdf and LBMA Overview Brochure.pdf
  • For gold, the alterations were most pronounced in the 2013 refined production figure which was reduced from 6601 tonnes to 4600 tonnes, i.e. a 2001 tonne reduction
  • Other years’ figures for refined gold refinery output (2010-2012) were also reduced, with the 2008-2009 figures being increased
  • As part of the update, the LBMA linked its amended figures solely to GFMS estimates of gold mining and scrap output,  adding the words ‘estimated to be‘ in front of the 4,600 tonnes figure, and the words ‘owing to recycling of scrap material‘, thereby framing the revised figure solely in terms of scrap gold in excess of 2013 gold mining supply. This use of GFMS data is bizarre because all refiners on the LBMA’s Good Delivery List provide exact refinery production statistics to the LBMA Executive as part of the LBMA Pro-Active Monitoring programme, so there are no need to reference estimates from external data providers
  • In the updated versions of the brochures, the LBMA made no reference to why the gold figures had been reduced, nor what the original figures referred to, particularly for the huge difference of 2,000 tonnes of gold refinery output in 2013 between its two sets of figures
  • By 12 August, the LBMA had again updated its 2013 gold refinery output figure to 4579 tonnes

In my Part 1 article, I had concluded that:

“There are 2,300 tonnes of 2013 gold refining output in excess of combined mine production and scrap recycling being signalled within the  6,601 tonnes figure which was removed from the LBMA’s reports on 5 August 2015.

Could it be that this 6,601 tonne figure included refinery throughput for the huge number of London Good Delivery gold bars extracted from gold ETFs and LBMA and Bank of England vaults and converted into smaller gold bars in 2013, mainly using LBMA Good Delivery Swiss gold refineries? And that maybe this 6,601 tonne figure stood out as a statistical outlier for 2013 which no one wanted to talk about?”

Note that for 2013, Gold Field Mineral Services (GFMS) estimated gold mining production to be 3,022 tonnes, and gold scrap supply to be 1,280 tonnes for 2013, so in total GFMS estimated gold mining + scrap supply at 4,302 tonnes in 2013. Therefore, the LBMA’s original figure for 2013 gold refinery production of 6,601 tonnes exceeded the combined GFMS mine and scrap supply by 2,300 tonnes.

Whose interests are served by replacing actual refinery output figures with far lower estimates comprising GFMS gold mine production and scrap recycling data? What happened to the third major source of gold supply to refineries during 2013, i.e. London Good Delivery gold bars, and why won’t the LBMA reference this? Why would the LBMA go to great lengths to de-emphasise the huge volume of Good Delivery gold bars being sent to gold refineries (especially in 2013) for conversion into 9999 fine kilobars, when its obvious for all to see that this huge migration of bars happened?

This article, which is Part 2 of the analysis into the LBMA’s 2013 gold refinery statistics, looks into this 6,601 tonne number and the 2,300 tonne delta compared to GFMS estimates, specifically examining the mountain of evidence that highlights the huge volume of Good Delivery bars that were processed through the Swiss gold refineries in 2013, and the huge associated shipments of gold from the UK to Switzerland, and onward from Switzerland to Asia.

Part 2 also looks at the extent to which GFMS and the World Gold Council, through their report text and data, addressed, and did not address, the non-stop processing of Good Delivery gold bars into smaller finer kilobars during 2013.

When Part 1 was written, I had also planned that Part 2 would examine the 2013 gold withdrawals from the London-based gold ETFs, and the 2013 withdrawal of gold from the Bank of England, however, these topics were subsequently addressed in a separate piece titled “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“.

That article itself had found a lot of interesting information including:

  • that the entire London LBMA vault network (including the Bank of England) lost 1,500 tonnes (120,000 bars) between 2011 and early 2014, shrinking from 9,000 tonnes to 7,500 tonnes
  • Between the end of February 2013 and the end of February 2014, the amount of gold in custody at the Bank of England fell by 755 tonnes
  • In 2013, the large physically-backed gold ETFs which store their gold in London saw a 720 tonne outflow of gold (GLD 561, IAU 60, ETF Securities’ PHAU 52, ETS Securities GBS 42, ‘Source’ Gold 31)
  • The full set of gold ETFs storing their gold in London can, nearly down to the exact tonne, account for all of the LBMA vaulted gold held outside the Bank of England vaults (See  start of my article titled “Central bank gold at the Bank of England” for an explanation of this)

Note: Deutsche Bank gold ETFs and an ABSA gold ETF also store their gold in London, and during 2013, these 2 sets of ETFs lost approximately a combined 12 tonnes of gold (~9 tonnes from Deutsche and ~3 tonnes from ABSA, so this would increase the 720 tonne ETF loss above, to about 732 tonnes.


Yet another Change to the LBMA Brochure in September 2015

On 29 September 2015, the LBMA made a further alteration to the 4-page LBMA Overview Brochure, the brochure that had featured the shifting gold and silver refinery output statistics.

On this occasion, although the data in the table remained unchanged, some unusual footnotes were added underneath the table of refining statistics. The text, table and the new footnotes are as follows:

LBMA brochure refining Sept 2015 text

The footnotes are highlighted as per yellow box:

LBMA brochure refining Sept 2015 footnotes and table

Let’s look at these 3 footnotes one by one.

Note 1): The data for 2008-2013 contains estimates which will be updated when actual data becomes available.

This note is illogical, since the LBMA already has all of the exact data of gold and silver output per refinery. This was stated in the previous versions, and it’s all detailed in my previous article.

Also, specifying ‘Figures correct as at September 2015’ is illogical since the LBMA states that the data is ‘estimates’ and not ‘actual data’. Correct relative to what? How can ‘estimates’ be deemed to be correct if the ‘actual data’ is not published?

That would also explain the bizarre note number 2.

Note “2) Refined production should include only the refinery’s output that has gone through a refining process”.

Footnotes to tables are normally used to explain data, not to justify the data. This Note 2 sounds more like a pronouncement or a direction from a LBMA communication to the refineries rather than an explanatory footnote.

In English grammar, ‘Should‘ means to give advice, a recommendation or a suggestion, and to express obligation or expectation. This footnote looks like it has been lifted out of a directive from the LBMA to the member refineries.

Converting a 995 fine Good Delivery ~400oz bar into a series of 999 kilo bars does involve a a chemical refining process in addition to melting and pouring. The transformation by the refineries of large bars into smaller bars is still throughput, and is a refinery process (as you will see below).

Also problematic to the LBMA’s footnote is that converting 9999 fine scrap (in the form of old bars) to new 9999 bars, which sometimes happens, would not necessarily be captured in the above LBMA footnote, so this approach to seemingly attempt to tie in the LBMA data to GFMS mining and scrap refining data opens up a can of worms.

Note 3): the production of newly accredited refiners excludes production in the years prior to accreditation.

Note 3 should be obvious, and besides, it wouldn’t change much in terms of the huge gaps in the numbers between 6601 tonnes in 2013, and the GFMS figure of 4302 tonnes.


Macquarie 2013 – Where has the ETF gold gone

In August 2013, Macquarie Commodities Research, in its report “Where has the ETF gold gone” commented that:

“over 1H 2013 it [the UK] has exported 797 tonnes [of gold], equivalent to 30% of annual gold mine production”

“…gold bars from ETFs have gone to Switzerland, where most of the world‟s gold refining capacity is, to be remelted into different size bars and coins and then sold on end consumers, predominantly in Asia, specifically China and India.

“Trade data also backs up this movement of gold – Hong Kong customs reported imports of gold from Switzerland of 370t in 1H 2013, up 284t on 1H 2103 (fig 3), while Indian imports from Switzerland appear to have risen by more than 100t YoY.

It is not really very surprising that the gold has found its way from vaults in London (and most likely the US and Switzerland) to Asia via Swiss refineries. We have repeatedly noted that gold ETFs are part of the physical gold market and if investors don’t want the gold it has to go somewhere else.”

Since the four large Swiss gold refineries account for the lions share of worldwide annual gold refinery output (See my article “Swiss Gold Refineries and the sale of Valcambi“), its important to examine what the Swiss gold refineries had to say about the smelting of London Good Delivery gold bars into smaller bars in 2013, as well as their comments about the dramatic reduction in gold scrap coming into the refineries during that time.

Note that London Good Delivery gold bars are variable weight bars that weigh about 400oz each (12.5kgs). These are the standard type of gold bars stored in central bank vaults and held in physically backed gold Exchange Traded Funds (ETFs) such as the SPDR Gold Trust (GLD).

 Swiss Gold Imports from the UK: 2013

In 2013, Switzerland imported more than 2,600 tonnes of gold and exported approximately 2,800 tonnes of gold. That year’s gold import and export totals were the highest ever annual totals recorded for Switzerland. See chart below from Nick Laird’s Sharelynx.

Although Switzerland doesn’t possess any major gold mines, it does host one of the largest physical gold markets in the world, which regarding investment gold, primarily comprises the large Swiss gold refineries along with some bullion banks (including UBS and Credit Suisse), the Swiss National Bank and the Bank for International Settlements (BIS), and the Swiss wealth management and private banking sector. But the throughput and precious metal processing of the four large gold refineries accounts for nearly all the country’s gold imports and exports.


The UK is consistently the largest import source of gold into Switzerland. In 2013, Switzerland imported nearly 1,400 tonnes of gold from the UK during the year, with hardly any gold moving back in the opposite direction. Notwithstanding the fact that the UK does not have any producing gold mines, 1,400 tonnes is 46% of GFMS 2013 global gold mining production estimate of 3022 tonnes. And despite the fact that GFMS itself stated that the UK only contributed 41 tonnes of gold scrap to the 1280 tonne global gold scrap total in 2013, 1400 tonnes of UK gold exports to Switzerland is 109% of GFMS’s 2013 global gold scrap estimates.

So why is the LBMA not including all of this 1400 tonnes of UK to Switzerland gold exports in its 2013 gold refinery production statistics?


Even Swiss gold imports from the United States in 2013, at 267 tonnes, paled into comparison compared to Switzerland’s imports of 1,373 tonnes of gold from the UK, and left all other import sources such as Italy and France in a distant third.


Thanks to Nick Laird of Sharelynx for permission to use the above 3 charts.

Swiss Refineries – From the Horses’ Mouths

Let’s look at what the Swiss gold refineries had to say about the conversion of Good Delivery gold bars into smaller bars during 2013. You will see that the large Swiss refining companies treat Good Delivery bars as one of three sources of supply coming in to their refineries.

It’s important to note that the transformation of London Good Delivery bars of 995 fineness into, for example, kilobars of 9999 fineness, still involves the use of chemicals in reactions, albeit smaller amounts than when refining mining ore, and is not just a simple melting and re-casting exercise.

Argor-Heraeus’s perspective on Good Delivery bars in 2013

In its 2013 Corporate Sustainability Report, Argor-Heraeus had the following comments to say about the 400oz bar to smaller bar transformations:

In 2013, we consumed 3,120,603 kg of chemicals, 4% less than in 2012, despite a slight increase in precious metals processing. This decrease derives from the fact that a large percentage of gold processing involved the re-smelting of metal already in circulation (Good Delivery) to obtain high-fineness ingots, which are in great demand. The processing of a metal that is already pure requires smaller amounts of chemicals in reactions, as opposed to the refining of raw materials from mines.”

Argor-Heraeus even divides the gold inputs that go into its refining process into three distinct categories, namely, a) Scrap, b) Mines and c) Good Delivery, such is the importance of the Good Delivery refining activity to the refinery. See the following graphic from the Argor-Heraeus 2013 Sustainability report, complete with descriptive icons of the three input sources inputs of metal:

AH flow


The text box from the left-hand corner of the above graphic has been zoomed in and magnified below to aid readability:

AH text

Elsewhere in the same report, Argor-Heraeus reiterates the same 3 sources of gold supply that come in to its refineries for ‘Transformation and Processing‘.

AH graphic

Argor-Heraeus picks up the Good Delivery bar theme again in its 2014 Corporate Sustainability Report, where it produces a similar but slightly more detailed graphic, complete with the icons, and which explains that the Good Delivery bars can be either ‘grandfathered or non-grandfathered‘ and that the materials are ‘already certified Good Delivery, or already high-quality‘. High quality but not good delivery could be signifying gold bar brands on the former London Good Delivery list, or else lower grade coin bars, that had originally been made from melting down and casting into bars the gold coins that were previously  in circulation. Coin bars were at one time on the London Good Delivery list up until 1954.

Grandfathered is a term used by the LBMA in its discussions of ‘Responsible Gold Guidance‘ and is defined as:

Grandfathered Stocks: Gold investment products (ingots, bars, coins and grain in sealed containers) held in bullion bank vaults, central bank vaults, exchanges and refineries, with a verifiable date prior to 1 January 2012, which will not require a determination of origin. This includes stocks held by a third-party on behalf of the listed entities.

 The Argor-Heraeus 2014 graphic referencing Good Delivery bars is as follows:

AH 2014 graphic1


Metalor’s information on Good Delivery bars in 2013

In its 2013 Annual Report (large file 3.4 MBs), within the review of 2013 performance section, large Swiss based gold refinery Metalor Technologies highlights a steady demand for ‘recasting of gold bars for banks':

“Full-year net sales in the Refining business unit declined by 16 percent as precious metal prices remained low, reflecting a weak global economy. The drop in prices negatively impacted the price/volume mix, as reduced quantities were retained at lower prices. This was partly offset by steady demand in less profitable activities, such as the recasting of gold bars for banks.”

Metalor also provided a host of pertinent insights into other drivers of the 2013 gold market:

“The spot-price of gold and silver declined by more than 30 percent over a six-month period, and this prompted sharp sell-offs of the gold stored in ETF (Exchange-Traded Funds) vaults. The consensus is that this surplus was absorbed by strong China based bullion purchases, while price-dependent scrap flow fell rapidly.”

High grade precious metal bearing scrap flows worldwide dropped sharply due to sustained price erosion. This market development created an overhang in refining capacity, and a much more competitive pricing environment, although some of the volume reduction in scrap flows was offset by new mining doré contracts. The drop in price led to strong bullion purchases, mainly driven by China.”

The Refining business unit saw a challenging 2013, due to reduced gold prices. This resulted in a continuous slowdown in the scrap market. …….a decreasing volume of mining doré coming from abroad, due to changes in country regulations.”

“In Asia, the Hong Kong refinery was able to sustain a high level of activity due to strong demand and a high premium on bullion products.”


Valcambi on refining of Banks’ gold

Valcambi has an annual refining capacity “in excess of 1,200 tons for gold and 400 tons for silver“, so is known for having potentially unused refining capacity.

Following the July 2015 Valcambi acquisition by Indian company Rajesh Exports, the acquirer clarified to Indian newspaper ‘Business Standard’ that it was a regular activity for Valcambi to use its excess capacity to meet “emergency” refining requirements for gold held by bullion banks.

In fact, on the recently updated Valcambi website, an entire web page is now devoted to describing how transportation works for banker clients, in addition to clients that are miners, scrap dealers, other refineries, and watch makers. See ‘Transportation for Bankers‘ web page which details the import and exports procedures which the Valcambi refinery offers its banker clients.

Valcambi bankers

Valcambi 1

Under its Assaying web page, Valcambi even sees fit to specifically explain the process for the incoming ‘shipments of Good Delivery (GD) bars‘ which are merely checked to confirm that they haven’t been tampered with, as opposed to the shipments of ‘Non Good Delivery (NGD) precious metals‘, which are subjected to homogeneity checking, sampling and analysis. This shows that the volume of Good Delivery bar shipments into Valcambi is significant enough to warrant specific coverage on its website.

Valcambi Assaying

Valcambi good delivery

Under its Refining web page, Valcambi again details its ‘3’ sources of incoming gold, namely “primary doré supplied by mines”,  “industrial scrap and recycling“, and “metals invested and owned by financial and governmental institutions“, i.e. London Good Delivery Bars.

Valcambi refin

Valcambi refining

On the phenomenon of a low gold price leading to a decline of gold scrap coming into Valcambi, the CEO, Michael Mesaric, recently had the following to say while talking with Indian publication Bullion Bulletin at the India International Gold Convention (IIGC) 2015 in Goa:

Bullion Bulletin: The gold price is coming down continuously, is there any impact on the refinery segment?

Michael Mesaric: There is a small impact as well because if the gold price is very low there is very little scarp coming in.”


Argor-Heraeus interviews -They’re bringing in good delivery bars”

On 4 December 2013, Alex Stanczyk from Anglo Far-East group, in an interview with Koos Jansen published on his BullionStar blog, said that he (Stanczyk) and colleague Philip Judge, accompanied by Jim Rickards, had just returned from a visit to Switzerland where they had met with the managing director of one of the large Swiss refineries. Although the identity of  the refinery was not revealed, Alex Stanczyk said that the refinery MD informed them that there was huge demand for fabrication at his refinery and that:

“They put on three shifts, they’re working 24 hours a day, and originally he (the MD) thought that would wind down at some point. Well, they’ve been doing it all year. Every time he thinks its going to slow down, he gets more orders, more orders, more orders. They have expanded the plant to where it almost doubles their capacity. 70 % of their kilobar fabrication is going to China, at a pace of 10 tons a week.”

They’re bringing in good delivery bars, scrap and doré from the mines, basically all they can get their hands on.”

“…sometimes when they get gold in, it’s coming from the back corners of the vaults. He knew this because these were good delivery bars marked in the (nineteen) sixties.”

The same Swiss gold refinery executive was interviewed by Jon Ward of the Physical Gold Fund in September 2015, with the interview published as a podcast and as a transcript.

Jon Ward: In 2013, I recall you commented on the tightening of physical supply in the gold market and even the difficulties you were having in sourcing material. In fact, as I remember, you remarked that in 30 years, you’d never seen anything like it.”

The exact identify of the Swiss refinery executive was also not revealed in the September 2015 interview, however the executive is most certainly from the Argor-Heraeus refinery. Why? Because, the introduction to the 2015 interview states that:

“The gentleman we are interviewing  is part of senior management of one of the largest Swiss refineries.  His refinery is one of only 5 global LBMA referees…”

The LBMA appoints 5 refinery assay laboratories to help it to maintain the Good Delivery system. These appointees are known as ‘Good Delivery Referees’ and they meet on a quarterly basis at the LBMA. The 5 Good Delivery Referees are Argor-Heraeus, Metalor Technologies and PAMP (all from Switzerland), Rand Refinery (South Africa), and Tanaka Kikinzoku Kogyo (Japan).

Therefore, the interviewee has to be from one of three Swiss refineries, namely, Argor-Heraeus, Metalor or PAMP.

Furthermore, and this is the critical point, during the interview, the refinery executive states that his company has just opened in Santiago, Chile.

“Head of Refinery: ..looking at mining partnerships, we are expanding in Latin America. We have just opened in Santiago, Chile, and are trying to provide even more competitive services for the Latin American mining industry.”

Out of the short-list of Argor-Heraeus, Metalor, and PAMP, the only one of the three to open an operation in Santiago, Chile in 2015 (and the only one of the three to even have an operation in Chile) is Argor-Heraeus. See Argor-Heraeus new item below from the news page of its website dated 16 September 2015:

AH Santiago

The press release for the above Chilean plant announcement is only in Italian, but can be read here.

Lets look at what the Argor-Heraeus refinery executive says about conversion of Good Delivery bars to kilobars, both in 2015 and during the few years prior to that. From his September 2015 interview:

Jon Ward: Over the last couple of years, has this meant that you actually had to melt down and re-refine a whole lot of 400-ounce bars for China? If you have, I’d like to know where the bars come from.

Head of Refinery: The bars are coming from what you could call “the market.” Looking back, there were all these ETF liquidations, and the ETFs were holding bars in the form of 400-ounce bars. At that time a lot of the physical liquidity maintained in the London gold market was actually in 400-ounce large bars. The final customers were not interested in 400-ounce bars, so it was one of our jobs to take these bars, melt them down, refine them up to the 999.9 standard, and cast them into kilo bars.

Jon Ward: Were a whole lot of these bars coming from London?

Head of Refinery: Regarding the ETF liquidations, this gold had to go somewhere, and that was all converted. This is a thing you see every year. You also see some liquidations of physical gold held with COMEX and NYMEX. More or less, these are the sources of gold other than newly mined.

 PAMP – Three Shifts and Full Capacity – Barkhordar

In January 2014, in an article titled “Gold Flows East as Bars Recast for Chinese Defying Slump“, Bloomberg highlighted that the PAMP refinery, owned by MKS (Switzerland) SA, was at full capacity during parts of 2013,  and the article quoted PAMP Managing Director Mehdi Barkhordar as saying that they had to add production shifts to cope with processing demand:

“Gold’s biggest slump in three decades has been a boon for MKS (Switzerland) SA’s PAMP refinery near the Italian border in Castel San Pietro, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry.”

To keep up with orders, MKS added shifts at the PAMP refinery, located about 4 miles (6.4 kilometers) from the Italian border, Barkhordar said in November…”

Furnaces that can process more than 450 tons a year were at full capacity from April to June, melting mined metal, scrap jewelry and ingots at 1,000 degrees Celsius (1,832 degrees Fahrenheit) into the higher purities and smaller sizes favored by Asian buyers.”

“The surge in orders meant some parts of the refinery worked three shifts instead of the usual two, Barkhordar said.”

Again, you can see that there were three sources of supply for the PAMP refinery in 2013, i.e. mining, scrap and ingots (bars). According to GFMS, global scrap gold supply fell by 354 tonnes (21%) from 1634 tonnes in 2012 to 1280 tonnes in 2013, so this did not account for the ‘surge in orders’ and the need to add extra refinery shifts. Likewise, global gold mining output only increased by 160 tonnes (5%) from 2860 tonnes in 2012 to 3022 tonnes in 2013, and much of this increase was in China, Russia, Australia, Kyrgyzstan, and Indonesia which refine their own gold domestically, so this would also not explain the surge in orders, which therefore can only be attributable to recasting existing large gold bars into “smaller sizes favored by Asian buyers“.

Therefore, all 4 of the 4 large Swiss gold refineries are on the record that London Good Delivery gold bars were a very significant source of gold supply into their refineries during 2013 and even since then. So why did the LBMA amend its 2013 gold refining production statistics and seek to purely link its revised ‘estimate’ numbers to GFMS estimates of gold mine supply and gold scrap supply? There is an entire third source of gold supply to the refiners being overlooked because the LBMA dramatically reduced its 2013 gold refining production figure of 6,601 tonnes. Classifying Good Delivery bars as a supply source for refining is as legitimate as classifying gold scrap as a supply source for refining, and both come from above ground gold stocks.


GFMS and the World Gold Council

The well-known gold research consultancy GFMS, as well as gold mining lobby group the World Gold Council, between them produce a number of gold supply and demand reports each year. [Note: GFMS, formerly known as Gold Fields Mineral Services, is now part of Thomson Reuters].

Each year GFMS publishes a gold survey and related update reports later in the year. In 2013, this GFMS gold survey included two update reports. The 2013 survey and its updates were sponsored by Swiss refiner Valcambi and Japanese refiner Tanaka, with ‘generous support‘ from a selection of entities including Swiss refiner PAMP (part of the MKS Group),  South African refiner Rand Refinery, US gold mining companies Barrick and Goldcorp, bullion bank Standard Bank, US futures exchange CME Group, and the gold mining sector backed World Gold Council.

Its notable that the GFMS reports are ‘sponsored’ by some of the large Swiss gold refiners, yet there is nothing in the GFMS reports that puts cold hard factual numbers on the amount of Good Delivery bars processed through the refineries. As you will see below, GFMS mentions the good delivery bar processing in passing in its text, but not in its 2013 gold supply-demand ‘model’.

What, if anything, did GFMS have to say about conversion of London Good Delivery gold bars into smaller gold bars, such as kilobars, during 2013?

In its GFMS Gold Survey for 2013 – Update 1 (large file 11MBs) report, published in September 2013, the report states that:

“Strong trade flows were recorded between the UK and Switzerland, where Good Delivery metal was refined to smaller bars and shipped to India and China.”

The GFMS Gold Survey for 2013 – Update 2 (large file 9.8 MBs), published in January 2014, reiterated this point about large bar to small bar refining. On page 5 of the Update 2 report it states:

The duality of disinvestment in the developed world and an increase in physical demand from Asia was witnessed by the largest movement of gold, by value, in history as bars were shipped to Asia, often being melted down into smaller bars en route.

Notice that not all Good Delivery bars were converted to smaller bars before shipment to Asia. Some shipments went straight to Asia without being melted and converted.

And on page 9 of the same Update 2 report, the source of some of these smaller bars is given, i.e. the source was UK ETF gold holdings:

As a consequence, UK-led ETF outflows found their way to Switzerland, where refiners melted the metal into smaller bars, and shipped them East, in order to satisfy the surge in demand.”

The World Gold Council (WGC), regularly issues its own gold supply demand reports called ‘Gold Demand Trends‘, and publishes these reports in the form of an annual version, followed by shorter quarterly updates. In ‘Gold Demand Trends Q3 2013′, published in November 2013, the WGC said:

“Gold continued to work its way through the supply chain, to be converted from London Good Delivery bar form, via the refiners, into smaller Asian consumer-friendly kilo bars and below. This process is borne out by recent trade statistics. Data from Eurostat show exports of gold from the UK to Switzerland for the January – August period grew more than 10 fold to 1016.3 tonnes. This compares to a total of just 85 tonnes for the same period in 2012.”

In its Full Year 2013 edition of ‘Gold Demand Trends’, published in February 2014, the World Gold Council had this to say about the London Good Delivery bar shipments going to refineries, being transformed into smaller bars, and then recommencing their onward journey to the East:

No review of 2013 would be complete without a mention of the unprecedented flow of gold from western vaults to eastern markets, via refiners in North America, Switzerlandand Dubai.”

These shifts resulted in the shipment and transformation – on an epic scale – of 400oz London Good Delivery (LGD) bars into smaller denominations more suitable for consumers’ pockets.”

Notice the reference to refiners in North America and Dubai also, in addition to Switzerland.

In its ‘Gold Demand Trends Q1 2014‘ published in May 2014, the WGC stated that:

As illustrated last year when gold flowed out of western ETFs, through refineries in Switzerland and to consumers in the East, official trade data can provide insights into global gold flows.”

The full GFMS Gold Survey for 2013 (large file 6.2 MBs), i.e the report before the 2 updates, was originally published in April 2013, and was written too early in 2013 (probably written in March 2013) to really capture the flows of Good Delivery gold bars from the UK to Switzerland that were smelted into smaller bars. This was before the massive gold price smash of April 2013 that got the ETF gold sales going. That report mentions ETF gold outflows of 148 tonnes up to 11th March 2013, including 111 tonnes from the SPDR Gold Trust (GLD), but the 2 GFMS update reports from September 2013 and January 2014 were written at a later date, with a better vantage point, when the 400oz bar to smaller bar trend had gathered momentum.

Where was the Swiss refinery output going to in 2013?

On the outbound export route, Swiss gold exports of 2,800 tonnes in 2013 went primarily to Hong Kong (939 tonnes), India (520 tonnes), China (254 tonnes), Singapore (179 tonnes), Thailand (149 tonnes), Turkey (147 tonnes) and the United Arab Emirates (125 tonnes), with the residual 500 tonnes going to other destinations as detailed in the below chart from Nick Laird’s Sharelynx.




GFMS – Masking the Swiss refining of Good Delivery Bars?

Given that the LBMA decided to compare its amended gold (and silver) refinery production statistics against GFMS ‘estimates’ of gold supply (especially out of sync for 2013), then its important to look at what GFMS claimed gold supply and demand to be in 2013. This may help in determining a possible rationale the LBMA had for reducing its refinery output figures.

So, does the 2013 GFMS gold supply and demand data model show this “largest movement of gold, by value, in history” “on an epic scale” phenomenon from the UK to Swiss refiners to Asia? The answer is explicitly NO, neither in 2013, nor in any prior year, but to a limited extent yes, but only after drilling down into the sub-components of an obscure GFMS balancing items within the GFMS supply-demand equation.

But GFMS precious metals supply data and the way it’s presented does not seem to want to highlight the ‘largest movement of gold, by value, in history‘. So even though GFMS mentions (in passing – see above) the historically important 2013 movement of 400oz bars to refineries through places like Switzerland and their transformation into smaller bars by the large gold refineries, the GFMS gold supply statistics keep some of the relevant numbers locked away and jumbled up within a rather odd rolled up figure that it calls “implied net (dis)investment“. Other relevant data, such as OTC demand data, is not even detailed by GFMS, it’s just assumed.

 GFMS gold supply – Disaggregating the implied figure

Here is how GFMS gold supply statistics looked for 2013, taken from the GFMS Update 2 2013 report published in January 2014. In 2013 GFMS used 4 supply categories, namely, ‘Mine production‘, ‘Old gold scrap‘, ‘Net producer hedging‘ and ‘Implied net disinvestment‘.

GFMS-style gold supply and demand figures, 2013 - from GFMS Update #2 report
GFMS-style gold supply and demand figures, 2013 – from GFMS Update #2 report

The first thing to notice is that there is no GFMS supply category called ‘Good Delivery bars’, unlike the large Swiss gold refiners themselves which actually list Good Delivery bars as a distinct gold supply category, such is the importance of that supply source.

Neither is there any category for Gold ETF outflows. So even though 6,600 tonnes of gold came out of LBMA gold refineries in 2013, if you looked at a GFMS supply demand model from 2013, you would never know this. Apart from gold mine production of 2,982 tonnes and old scrap supply of 1,371 tonnes (which together totalled 4,353 tonnes), the only other non-zero supply figure in the GFMS model was ‘implied net investment’ of 383 tonnes.

On the demand side in 2013, GFMS listed jewellery fabrication (2,198 tonnes), other fabrication (792 tonnes), central bank purchases (359 tonnes), physical bar investment (1338 tonnes), and producer de-hedging of 50 tonnes. Again, looking at this demand side, you would not know that gold refinery output in 2013 reached 6,600 tonnes, and that this figure was 2,300 tonnes more than combined mine production and scrap recycling.

There was also a footnote to the above GFMS supply and demand summary table which defines the GFMS definitions of ‘Net producer dehedging‘ and ‘Implied net disinvestment/investment‘.

GFMS defines ‘Implied net disinvesment‘ or “Implied net investment‘ as a residual figure in its supply-demand table (i.e. a plug figure), and states that this “captures the net physical impact of all transactions not covered by the other supply/demand variables“, So basically, it’s a catch-all plug figure. GFMS says that “the implied net (dis)investment  figure is not independently calculated, but derived as the item which brings gold supply and demand into balance.” See full GFMS explanation below:

GFMS disclaimer

This ‘Implied net’ (investment/disinvestment)’ figure is where the 2013 GFMS supply and demand figures become, in my view, completely convoluted and opaque. GFMS says, in both its 2013 Update 1 and Update 2 reports that:

“It is interesting to examine how the implied figure compares to information on activity within the different arenas of investment over the year, (although given aforementioned limitations in this information, it is not possible to dis-aggregate accurately the implied figure into these components)”.

How GFMS exactly makes sense of its ‘Implied net’ (investment/disinvestment)” figures is hard to fathom because there is no proper explanation of the ‘aforementioned limitations‘ that GFMS alludes to except the fact that it doesn’t seem to be able to offer estimates for physical bar movements in Comex nor physical bar movements in OTC activity, part of which it considers the bar shipments to Switzerland to be.

GFMS could also maybe ask the gold refineries in Switzerland and elsewhere for the throughput figures on what they refined in 2013, be it gold mine doré, scrap metal, or Good Delivery bars, and then use that data also. And GFMS could also ask the SPDR Gold Trust Authorised Participants how much gold each of them took out of the GLD in 2013 and how this gold made its way to Switzerland and elsewhere, did the banks send the gold to Switzerland themselves using secure transporters such as Brinks, or did they sell it to other parties who then sent it to the refineries etc etc. The same question could be asked of the Bank of England and the amount of gold withdrawn from its gold vaults and the bullion bank identities of who withdrew it.

In the GFMS world, demand has to equal supply, so whichever side of the equation is greater, the other side has to have a plug figure. In 2013, GFMS put the above items into the demand side, and arrived at an estimate of 4,737 tonnes for demand. It then did an estimate for supply using only 2 components (mining and scrap), and arrived at 4,353 tonnes for supply. Since demand did not equal supply, GFMS then said that implied dis-investment was 383 tonnes. (The figures are 1 tonne out due to what must be a rounding error).

Here is my quick and easier to read version of the GFMS 2013 gold supply – demand table:

gfms 2013 reformat

GFMS then takes the plug figure of 383 tonnes and thinks about an explanation for it.

In its 2013 gold surveys, GFMS also produced another figure which it called ‘World Investment‘, which it defined as “the sum of implied net investment, physical bar investment, and all coins“. It provided this ‘world investment’ figure for both H1 and H2 2013.

This ‘world investment’ figure includes investment demand for physical gold bars and coins, gold medallions, and imitation coins (made of gold), but it also includes investment in products such as gold-backed ETFs. So if there is a huge outflow of gold from the gold ETFs, as there was in 2013, GFMS did not consider this to be gold supply, but rather, GFMS considered it to be negative demand, that it then buries in the implied net investment category.

Since the Authorised Participants of the large gold ETFs redeemed huge amounts of gold from these ETFs in 2013, especially in the first half of 2013, GFMS refers to this as gold ETF ‘investors’ redeeming gold from the ETFs. This is not entirely true because only large investors can redeem from an ETF such as GLD. Small investors just sell their shares in GLD. GFMS calls these 2013 ETF redemptions ‘implied disinvestment’, and it is this phenomenon that caused the GFMS ‘implied disinvestment’ category to be negative in the first half of 2013, but not in the second half of 2013, when GFMS insists that there was positive ‘implied net investment’.

GFMS calculated that there were 550 tonnes of gold outflows from ETFs in the first half of 2013, and 330 tonnes of gold outflows from the same ETFs in the second half of 2013, making a total outflow of 880 tonnes for 2013. Somehow, although the 550 tonnes of gold that left ETFs in H1 2013 caused the H1 implied net investment to be a negative 613 tonnes (as would be expected), the 330 tonnes of outflow from gold ETFs in H2 2013 did not, in GFMS’s eyes, have the same effect, and GFMS’s implied net investment in H2 2013 was a positive 230 tonnes, meaning that although ETFs had an 880 tonne outflow for the full year 2013, the GFMS implied net investment was only -383 tonnes. This then creates another residual number which would have to have been a positive 497 tonnes from some other type of investment demand.

gfms world inv 2013

What else is buried in this GFMS implied net investment apart from ETF flows? It seems to have been Comex exchange activity and OTC activity that is within this implied figure, but GFMS avoids putting numbers on it, hence the confusion.

The reason given by GFMS for a positive net investment of 230 tonnes in the second half of 2013, which cancelled out approximately 500 tonnes of the ETF gold outflows, was what it calls  “significant net buying” in the OTC market.

GFMS refers to its implied net investment figure as “a proxy for institutional investor activity” and said that it “shifted to negative territory” in H1 2013. I’ve included the GFMS 2013 discussion below, just to should how convoluted and unsatisfactory this GFMS logic was. Firstly, the GFMS Update 1 report discussion on ‘implied net investment':

“The implied net (dis)investment figure is not independently calculated, but derived as the item which brings gold supply and demand into balance. The figure should therefore not be seen as an exact tonnage equivalent but instead an indication of investment activity separate from retail bar and coin demand. Additionally, although a substantial majority of this tonnage will reflect such activity, implied net (dis)investment could also include other flows that, technically, are outside the definition of investment. One example is the impact of any central bank activity that is not being picked up in our official sector figures and that would, as a result, be absorbed within our implied net (dis)investment category.”

“Despite this caveat, implied net (dis)investment typically does provide a clear indication of the overall impact of investor activity on the market for the period discussed. Furthermore, using information collected through field research and publicly available data, Thomson Reuters GFMS performs a ‘reality check’ on these values.”

“It is interesting to examine how the implied figure compares with information on activity within the different arenas of gold investment (although given aforementioned limitations in this information, it is not possible to disaggregate accurately the implied figure into these components).

Due to the nature of gold ETFs and other similar products, we are certain that the near 580-tonne decline in ETF holdings had a one-to-one impact on the volume of investment. The picture is somewhat more opaque when it comes to the futures and OTC markets. As for the former, at end-June, noncommercial and non-reportable net positions in Comex futures were 477 tonnes lower than the end-2012 figure. Turning to the OTC market, however, the first half-year saw robust volumes of investment.

 “As a shortage of bullion rapidly developed in many regional markets and local premia jumped, transactions that were related to physical gold transfer jumped in the London market. Feedback from our contacts, gold trade data and clearing statistics published by the LBMA indicate that a substantial amount of large gold bars (from redemptions of ETFs and sales from unallocated accounts) were shipped to Switzerland from mid-April to be converted to small bars for markets in Asia and the Middle East”.

In its 2013 Update 2 report, GFMS then stated the following. Notice how a lot of the text is copied over from the previous Update 1 report. Update 2:

GFMS update 2 implied

Therefore, GFMS throws a number of items into its OTC category but steers clear from committing itself to really explaining what it means by OTC activity. It states that “the OTC
market is dominated by institutional investors“. It states that  “a substantial amount of large gold bars (from redemptions of ETFs and sales from unallocated accounts) were shipped to Switzerland from mid-April to be converted to small bars for markets in Asia and the Middle East“.

It alludes to “direct shipments, albeit more restrained, from the United Kingdom to the Far East also jumped, as refineries reached full capacity.”

GFMS hazily refers to ‘metal accounts’, which I would consider to be unallocated accounts, and not directly related to absorbing physical ETF gold outflows. GFMS says in its 2013 Update 1 report that “Metal accounts held by western high-net-worth investors also posted a net rise, largely reflecting gold’s traditional role as a means of wealth preservation. This was also partly related to the ongoing shift out of gold ETFs, as metal accounts offered lower fees, while transactions in the OTC market were less transparent than in ETFs.

By the time it wrote its Update 2 report for 2013, GFMS had concluded that:

GFMS update 2 otc

So an 880 tonne outflow of gold from the large ETFs (which are predominantly based in London), as well as hundreds of tonnes of gold outflows from the Bank of England, that led to 1373 tonnes of gold being exported from the UK to Switzerland in 2013, the lions share of which were transformed into kilobars and then shipped to the Asian markets, somehow, according to GFMS, turned into only a negative 383 tonne implied net investment due to “significant net buying for the year as a whole” in the OTC market. There is no attempt to explain the 1373 tonnes of gold exported from the UK to Switzerland in 2013.

If you classify gold ETF outflows as a distinct supply category of gold, which seems logical to me and which the large Swiss gold refineries also consider it to be, then a GFMS supply-demand model would look like this:

gfms 2013 reformat ETFs

The trouble (for GFMS) then is, that the model doesn’t balance, and they are left with a 496 (or 497 tonne) item on the demand side that they can’t explicitly explain what it refers to.

World Gold Council version of GFMS 2013 data

The World Gold Council (WGC) also publishes gold supply and demand data in its annual and quarterly ‘Gold Demand Trends‘ publication. Until 2015, the WGC used GFMS data as a data source, after which it switched to using gold supply and demand data from the Metals Focus consultancy (see below for discussion of the WGC – Metals Focus switch). The WGC uses a different (and easier to understand) layout format for presenting the gold supply and demand data, but for the 2013 format, it still subscribed to the approach of putting ETF withdrawals in the demand category as a negative number.

In its ‘Gold Demand Trends – Full Year 2014′ report, which has the most complete data for 2013, the WGC states in a footnote that the source is

“Source: GFMS, Thomson Reuters; The London Gold Market Fixing Ltd; World Gold Council. Data in the table are consistent with those published by GFMS, Thomson Reuters in their Gold Survey but adapted to the World Gold Council’s presentation

WGC 2013 table

The above WGC model puts gold ETF outflows (Good Delivery bars) into its own line item, but instead of including it as Supply, the WGC puts this in a negative demand. There is also another line item under demand that the WGC calls ‘OTC investment and stock flows‘, which it defines as “Partly a statistical residual, this data is largely reflective of demand in the opaque over-the-counter (OTC) market, with an additional contribution occasionally from changes to fabrication inventories.

GFMS changes its Supply-Demand Methodology in 2014

When the GFMS 2014 Gold Survey was published in April 2014,  GFMS had surprisingly altered the methodology and formatting of its supply-demand data model to include gold ETF outflows as an explicit line item. GFMS also ditched the implied investment concept, but came up with a physical surplus /deficit plug figure instead. I say surprisingly because GFMS had used its previous supply-demand model for a long number of years. GFMS did not dwell on why this had not been done earlier, choosing instead to highlight the benefits of such a change:

GFMS 2014 methodology

Could it be that GFMS subscribers questioned as to why the huge ETF withdrawals were not explicitly listed in the 2013 GFMS supply-demand model, that forced the change? Perhaps.

The inclusion of ETF gold flows (and gold flows from gold futures exchanges) were explained as follows. The OTC category continued to seem to cause problems to GFMS. See below:


gfms meth 3

The actual re-gigged GFMS supply-demand model, redone for 2013 was as follows. The figures for 2013 are slightly different from the ones that GFMS published during 2013, since the table below was published in April 2014 when GFMS probably had updated data about 2013 compared to the reports it published during 2013:

gfms 2014

The above GFMS revised model can also be reformatted as below, moving ETF and Exchange ‘build’ to the supply side, since they are supply and not demand:

gfms 2013 using its 2014 formatting

How the 99 tonnes of Exchange Inventory supply is calculated is not clear. Net Balance of 277 became 276 due to rounding differences. Even including ETFs and Exchange Inventory, there is no explanation by GFMS of what the Net Balance referred to beyond a vague reference to OTC activity.

This GFMS 2014 Survey report was sponsored by Swiss refiner Valcambi, and Japanese refiner Tanaka, with support from Swiss refiner PAMP, the CME Group, the World Gold Council, German refiner Heraeus, Italian refiner Italpreziosi (Italy), Rand Refinery of South Africa, and Istanbul Gold Refinery. Again my question would be why not ask all of these refiners (especially the Swiss refiners) what their throughput of Good Delivery bars was during 2013.

Instead, GFMS still seemed to struggle with explaining what it calls ‘OTC trade’. It even discussed (with a straight face) the huge London gold market clearing volumes of paper gold in 2013, seemingly trying to use this as some sort of vague connection to physical bar movements:

gfms otc

As to GFMS’ assessment (on page 26) of OTC activity, there is nothing concrete offered by GFMS as to what the OTC investment consists of. It mentions bars being shipped to Switzerland and on to Asia, but why is this activity not captured in physical demand?

However, GFMS does have a section in its 2014 (discussing 2013) titled “Supply from Above-Ground’ Stocks”.

“If we include the sales of ETF holdings, then the visible supply of gold to the market from above-ground stocks was 2,160 tonnes, equivalent to 42% of total demand in 2013. The figure comprises 1,280 tonnes of scrapped fabricated products and 880 tonnes of sales from ETF stockpiles.”

And it also included a table of ‘Visible Supply’ in which it did add ETF withdrawals of 880 tonnes to the ‘SUPPLY’ side for 2013, which created a total of 5,182 tonnes of gold supply for 2013. So this is further proof that the amended LBMA gold refinery figures for 2013 are completely out of sync with reality, since even GFMS now includes this ETF supply.

GFMS Visible Supply 2013

But still, 5182 tonnes of supply does not explain 6600 tonnes of gold refining output for 2013. What about all the gold that was withdrawn from the Bank of England in 2013 and shipped to Switzerland? Does GFMS capture this central bank related flow?I can’t see anywhere in the GFMS model where these type of gold flows are captured.

GFMS claims that for official sector transactions, it uses sources such as the IMF and central bank websites, and also “our own proprietary data on undeclared central bank activity, compiled using information collected through field research“. Then why does it not capture all the gold at the Bank of England that has been lent by central banks to bullion banks which has then been withdrawn from the vaults of the Bank of England and flown to Zurich during 2013?

And even for some central bank purchases that it has learned about, GFMS won’t reveal who the purchasers were due to ‘respect of confidentiality’. What does this say for accuracy of a supply-demand model if the nontransparency of central bank transactions prohibits gold transactions being publicised? See example from GFMS Update 1 report 2013:

“South Korea raised its bullion holdings by 20 tonnes in March. The balance of gross buying in the public domain consisted of small gains in gold reserves in a handful of countries. The overwhelming majority of these purchases were made by Asian countries, including Nepal, Mongolia, Brunei and Indonesia. Apart from the aforementioned buyers, over 40% of gross purchases or some 80 tonnes were accounted for by undeclared transactions, details of which cannot be released in respect of confidentiality. In some cases, gold was added quietly in the local market.”

 By the time it wrote its Update 2 report for 2013, GFMS listed some additional central bank buyers during 2013, and then stated that:

“Apart from the aforementioned buyers, over 60% of gross purchases or some 225 tonnes were accounted for by undeclared transactions, details of which cannot be released in respect of confidentiality. In some cases, gold was added quietly in the local market.”

That’s more than 135 tonnes of central bank purchases during 2013 that were not captured in the GFMS model.


Borrowing Gold in London

In my 7 September article “How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults“, I included a quotation from the Financial Times on 2nd September 2015 which stated:

“The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.”

And I concluded that:

“it begs the question, why do the dealers need to borrow, and who are they borrowing from. And if the gold is being borrowed and sent to Swiss refineries, and then shipped onward to India (and China), then when will the gold lenders get their gold back?”

Scotia Mocatta, a bullion bank which is very active in the Indian and Hong Kong/Chinese gold markets, vindicated this point in its ‘Metals Monthly September 2015‘  (page 3):

“The recent low Gold price has spurred physical buying interest to the extent that lease rates have climbed as metal is borrowed and delivered to refineries to be melted into the required bar sizes (such as kilobars) before being shipped to its final destination.

 So, where in the GFMS and World Gold Council data models is this “metal that is borrowed and delivered to refineries to be melted into the required bar sizes (such as kilobars)” being reflected? It appears that these gold bar movements are not being reflected at all.


World Gold Council switch from GFMS to ‘Metals Focus’

Earlier this year, the World Gold Council (WGC) switched from using GFMS as a data provider of gold supply and demand data. In an announcement, the WGC said:

“Starting in May 2015, we will be publishing gold supply and demand data provided by Metals Focus, a leading precious metals consultancy. These data will feature in Gold Demand Trends First Quarter 2015 onwards. Previously, we sourced gold supply and demand data from GFMS Thomson Reuters. The decision to change data providers was based on rigorous market research and a competitive pitch process. For more information, please see the focus box in Gold Demand Trends First Quarter 2015”

The focus box in Gold Demand Trends First Quarter 2015 states:

When new data sets become available and new methodologies are developed, we review how these might complement and advance our own methods. To that end, in 2014 we conducted a rigorous assessment of the gold market data landscape – a process which involved an in-depth review of a number of leading data providers. Following this review we appointed Metals Focus as the provider of our core demand and supply statistics.

“The World Gold Council is committed to publishing the most accurate gold demand data available. We are confident that the move to Metals Focus supports this aim.”

What the WGC didn’t mention in its press release nor in its Gold demand Trends Q1 2015  report is that in October 2013, the WGC purchased a 50% shareholding in Metals Focus Data Limited via its subsidiary WGC (UK) Ltd. The other 50% is owned by Metals Focus Limited. Surely this 50% shareholding is material information that should have been divulged by the WGC in its ‘focus box’ statement above? With its recent emphasis on costs savings, the WGC may have opted for switching from GFMS to Metals Focus partially because it may save money by using a data provider that it has an ownership interest in.

From the WGC 2014 financial statements:

WGC Metals Focus

WGC (UK) Ltd (Company No. 07867682) is a fully owned subsidiary of the World Gold Council, operating out of the same address as the parent company, 10 Old Bailey, London.

Metals Focus Data Limited is a joint venture for “the collection of data relating to the supply and demand for precious metals and licensing of data to third parties”.

What is Metals Focus Limited?

Metals Focus Ltd (Company No 08316950) was incorporated in December 2012, and was founded by Nikos Kavalis, Charles de Meester and Philip Newman, all of whom have previously worked at GFMS. Kavalis (through Premier Metals Consulting Ltd), de Meester and Newman each own a 28.87% shareholding in Metals Focus according to CompanyCheck. Metals Focus 2013 accounts can be seen here.

Metals Focus Data Limited, the 50-50 joint venture between the World Gold Council and Metals Focus Ltd, whose latest accounts can be seen here, has the following directors: Nikos Kavalis, Philip Newman and Lisa Mitchell of Metals Focus, and Terry Heymann, an MD at the World Gold Council.

Some of the sponsors of Metals Focus and its reports include Swiss refiners Valcambi and PAMP/MKS PAMP, other refiners Asahi Refining,  TCA (Italian precious metals refining), the World Gold Council (obviously), Brady Commodity Software Solutions, the CME Group, and G4S. So Metals Focus could also obtain very direct data from at least these Swiss refineries as to their throughput of Good Delivery gold bars.

Although the World Gold Council has now switched data suppliers to Metals Focus since earlier this year, in its 2015 Q1 Gold Demand Trends, it still uses the same supply-demand presentation format as previously,  with ETFs in 2013 being classified as negative demand and not supply. Interestingly, in the Metals Focus data, the ETF line item for 2013 has now risen to 916 tonnes.

wgc metals focus pres



With 6,600 tonnes of Good delivery refinery gold refining production confirmed by the LBMA to have taken place during 2013 (before the LBMA altered its data), you can see in the above analysis that this is problematic for the models of GFMS, the World Gold Council and possibly the model of Metals Focus too. Since the LBMA is sent refining data by its members, then, if it chose to, the LBMA could generate very accurate data for gold and silver refinery output for all of 2014 and nearly all of 2015.

Almost all other industries are able to publish accurate industry production figures with a minimal lag of maybe 2-3 months that provide an up-to-date snapshot of that industry’s activity. This is also true of economic data such as labour statistics and housing starts. Why then is it so hard for the LBMA to publish full and comprehensive gold refinery output data on a quarterly basis?

If this reporting procedure was put in place, the global gold industry would have far more clarify and insight into the huge flows of kilobar gold that are, on a daily and weekly basis, now being flown from Switzerland into Delhi, Ahmedabad, Chennai, Bangalore, Hyderabad and Kolcata in India, and that are also flowing at a torrential rate through Brinks vaults in Hong Kong and on into China.


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.