Tag Archives: Swiss gold exports

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.