I suppose that many members will already know about this, but the figures quoted by MoneyWeek regarding the actual amount of physical gold being moved ( or rather the lack of it ) are shocking, if true.
First, it was the Venezuela’s Hugo Chavez that kicked up a stink. He demanded Venezuela’s gold back from London and the US. That was a few years ago now.
Some astute nations took note. After all, Venezuela’s holdings are the 15th largest in the world – this was no piddling amount.
Then about a year and half ago, Germany was rumoured to be asking for an audit of its gold held in foreign depositories. Supposedly the American custodians said take a hike.
We don’t know if that’s true or not. But what we do know is that shortly afterwards, the Germans asked for much of their gold back. 674 tons, in fact – 374 from Banque de France and 300 from the US Fed in Manhattan.
Now, this certainly wasn’t a piddling amount either. But if the stuff was in the vaults, then what’s the problem?
Well, you can only imagine the Germans response to the announcement that the transfer, of their gold back to them, would take eight years to fulfil.
“What? Eight years? The Venezuelans took delivery within a couple of months. What’s going on here?”
What indeed? Perhaps the Americans placated the German delegation thus: “Now, now, keep calm. Don’t make a fuss. If you rock the boat and everyone gets nervous, this process could take a lot longer! We don’t want anyone else getting concerned.”
A full year after Germany asked for its gold back, a trifling 37 tons had been delivered. That’s way off the 87 tons envisaged… and even that figure was allowing eight full years for delivery. What’s more, a paltry five tons came from the US. The rest was from Paris.
When asked about progress on getting its gold back, the Bundesbank was rather coy.
Don’t worry, they said.
They would, though, wouldn’t they? It would hardly help to have other nations knocking on the Fed’s door asking for theirs back too now, would it?
Makes perfect sense to me. The bottom line is this: if the Americans could have given the Germans their gold back, why haven't they done so? Why act in a way that gets the rumourmill turning like this? There is no conceivable advantage or motivation, so the only explanation I can think of is that the Americans simply do not have that gold. It's gone.
Are you suggesting that there could be a run on the Central Banks? That would require the creation of a Central Central Bank. A UN Bank? Or an IMF or World Bank that actually worked?
UndercoverElephant wrote:Makes perfect sense to me. The bottom line is this: if the Americans could have given the Germans their gold back, why haven't they done so? Why act in a way that gets the rumourmill turning like this? There is no conceivable advantage or motivation, so the only explanation I can think of is that the Americans simply do not have that gold. It's gone.
If the Americans do not have the gold, then they will presumably have to buy enough gold on the open market in order to fulfil their obligations.
This might be expected to lead to increased gold prices due to the extra demand, and also to dollar devaluation as more dollars are printed to purchase the gold.
"Installers and owners of emergency diesels must assume that they will have to run for a week or more"
kenneal - lagger wrote:Are you suggesting that there could be a run on the Central Banks?
No. I don't see how there can be a "run on a central bank". The way this particular bit of the Great Pantomime ends is the day the paper and physical gold markets become completely disconnected. You will simply not be able to buy physical gold at the price dictated by the paper market. This is already the case in many parts of the world. I know somebody in Mexico - an economics professor - who has told me that she cannot buy gold (from a bank) unless somebody else has recently sold some gold to that particular bank.
UndercoverElephant wrote:Makes perfect sense to me. The bottom line is this: if the Americans could have given the Germans their gold back, why haven't they done so? Why act in a way that gets the rumourmill turning like this? There is no conceivable advantage or motivation, so the only explanation I can think of is that the Americans simply do not have that gold. It's gone.
If the Americans do not have the gold, then they will presumably have to buy enough gold on the open market in order to fulfil their obligations.
Except they aren't doing so. And the real problem is that if everybody asks for their gold back, rather than just the Germans, then they won't be able to buy it at all, because the people who hold it can't be forced to sell it.
Ultimately this has to lead to big increases in the price of physical gold, yes. What a bizarre situation we are in though...why should I have to write "physical gold." Like, there's non-physical gold??
One might suspect that some central banks might be holding a lot of "non physical gold" which after all DOES sound a little bit better than "gold that we claimed to hold, but that we no longer/never did have"
"Installers and owners of emergency diesels must assume that they will have to run for a week or more"
adam2 wrote:One might suspect that some central banks might be holding a lot of "non physical gold" which after all DOES sound a little bit better than "gold that we claimed to hold, but that we no longer/never did have"
This is what is euphemistically called "Paper Gold"- you receive a certificate to state that you have in lieu of the real thing. What could possibly go wrong? Well try this for starters.
Paper Gold is traded on bourses and just like other markets this is manipulated to the hilt. I think I posted this very early in the year but it is worth resurrecting: Paul Craig Roberts & David Kranzler: The Hows and Whys of Gold Price Manipulation
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
"Non-Physical Gold", or maybe just NPS, could it be the latest gold-backed currency ? Oh, hang on, it isn't actually backed by gold....any more.
If the published figures are true it looks to me like the US just spent the gold they were supposed to be looking after for other people. Obviously there's nothing that Germany can do about it, except keep quiet and hope that the US will steal someone elses gold to pay them with.
What a strange state of affairs, I can only guess that the Yanks have promised to pay the gold back with the proceeds from their conveniently discovered huge gas and oil reserves - this might go some way to explaining why there are such optimistic reserve figures published.
If I was a US mining expert I would think very hard before arguing against those figures, it could very well be seen as against national security, and we can guess the outcome.
