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

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

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

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

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

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

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

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

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

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

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

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

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

Riksbank

Using Gold for Foreign Exchange Interventions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Auditing of the Swedish Gold

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

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

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

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

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

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

Questions to the Swedish Riksbank – February 2017

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

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

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

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

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

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

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

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

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

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

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

Official Secrecy about Swedish Gold Reserves

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

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

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

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

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

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

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

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

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

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

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

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

A Proposal to the Oldest Central Bank in the World

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

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

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

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

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

1. Bank of Mexico

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

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

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

 2. Reserve Bank of Australia

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

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

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

3. US Treasury

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

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

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

http://financialservices.house.gov/uploadedfiles/attachment_4_mints_schedule_of_inventory_of_deep_storage_gold_reserves.pdf

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

http://financialservices.house.gov/uploadedfiles/mints_schedule_of_inventory_of_deep_storage_gold_reserves.xls

Deutsche Bundesbank

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

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

Conclusion

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

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

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

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

COMEX and ICE Gold Vault Reports both Overstate Eligible Gold Inventory

Introduction

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

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

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

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

The Background

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

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

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

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

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

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

The Vault Providers

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

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

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

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

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

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

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

The Inventory Reports

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

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

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

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

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

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

 

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comex-1

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COMEX Warehouse Inventory Report – Gold. Click to Enlarge

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

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

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

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ICE Warehouse Inventory Report – Gold. Click to Enlarge

The Rules

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

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

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

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

The Comparisons

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

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

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

Brink’s Example

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

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

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

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

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

MTB Example

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

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

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

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

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

IDS Delaware Example

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

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

 

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

Delaware Depository Example

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

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

 

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

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

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

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

Conclusion

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

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

CME states:

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

ICE states:

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

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

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

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