Germany Repatriates 120 Tonnes of Gold in 2014

"When all the inspections had been concluded, no irregularities came to light with regard to the authenticity, fineness and weight of the bars."

- Bundesbank

Big news from Bundesbank released only minutes ago... they've repatriated 120 tonnes of Gold in 2014 with 85 tonnes coming from New York and 35 tonnes from Paris. Conspiracy theorists eat your heart out!

Bundesbank confirmed the repatriation is proceeding smoothly, that operations are running to schedule and that there were no irregularities with the Gold delivered. Furthermore, 50 tonnes of the Gold from New York was melted down and recast into London Good Delivery standard bars.

As I've covered this topic so extensively in the past this won't be a long post (and is likely to be covered in more detail by Koos Jansen on his blog in a short while).

Since announcing the repatriation skeptics have been coming up with any and every conspiracy theory they can dream of in relation to Germany's Gold and why they decided to shift it so slowly (674 tonnes over 7 years) and why only 5 tonnes were moved over 2013 from New York. Here is my coverage of the topic to date:

Is Germany's Gold Repatriation Causing Lower Prices?

Dave Kranzler Gets It All Wrong On Germany's Gold

Krieger & ZH Wrong On German Gold Repatriation

After Zero Hedge misinterpreted the Bloomberg article (see last link of above 3) on Germany's Gold repatriation, they implied there was a change to the schedule (i.e. that they'd stopped)... a narrative that they've continued propagandising over several articles:

Zero Hedge on 23/06/2014 - "Germany appears to have given up entirely in its attempt to recover gold which simply is not there..."

Zero Hedge on 16/11/2014 - "Germany was pressured to keep its gold in the US after a "diplomatic" line of communication was opened, most likely the result of the Fed making it all too clear clear to the Bundesbank not only who runs the show, but what the assured failure to repatriate Germany's gold would mean for "price stability." Which has, for now at least, ended Germany's gold repatriation demands."

Zero Hedge on 21/11/2014 - "Well, today we know the answer: it wasn't Germany who was secretly withdrawing gold from the NYFed contrary to what it had publicly disclosed. It was the Netherlands."

Zero Hedge on 29/11/2014 - "...it is now abundantly clear that the "logistical complications" excuse used by Germany to halt its own gold repatriation program was nothing but a lie to cover up what, as Deutsche Bank explained earlier this month, was an escalation of "diplomatic difficulties" between the US and Germany, one in which Germany has folded, if only for now."

After it was finally revealed in late 2014 that Netherlands wasn't responsible for the entirety of Gold withdrawals from the FRBNY, they were finally willing to admit there was some small sliver of hope that Germany's Gold repatriation might be ongoing:

Zero Hedge on 30/12/2014 - "The question is who: is it now the turn of Austria to reveal in a few weeks that it too, secretly, withdrew some 40+ tons of gold from "safe keeping" in the US? Or was it Belgium? Or did the Dutch simply decide to haul back some more. Or did Germany finally get over its "logistical complications" which prevented it from transporting more than just a laughable 5 tons in 2013? And most importantly, did Germany finally grow a pair and decide not to let "diplomatic difficulties" stand between it and its gold?"

While I'm a daily reader of Zero Hedge, they are a great aggregator of various content and are ahead of the curve on some news events and finance themes, their Gold narratives leave something to be desired. How will they admit they were wrong about the German Gold repatriation over the last 6 months? Probably with a heavy dose of spin and cynicism that Bundesbank is being truthful about the large and unexpected tonnage repatriated from New York.

Beware of sensationalist Gold market commentary. Looks like Germany's Gold repatriation is alive and well and will likely be completed by 2020 as I expected it would be.

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Reserve Bank of Australia Audits Our Gold Reserves

Gold Bars Stored at the Bank of England

Two years ago the news was publicly broken on this site that 99.9% of Australia's Gold reserves are stored by the Bank of England in the United Kingdom. Attempts by another blogger, interested in the whereabouts of Australia's Gold, had been rejected by the RBA only several months earlier, "The Bank does not publish the location of its gold reserves."

Decisions like this don't happen in a black hole. Something changed the RBA's mind, between August 2012 and December 2012, on making the location of Australia's Gold reserves public.

From my observation, the RBA tends to follow the lead of other Central Banks, so the decision to release information on the location of Australia's Gold may have been a result of Germany's Central Bank (Deutsche Bundesbank) deciding to do so in October 2012 (interview containing the information originally released is no longer published on the site, but available via Web Archive). Only a month later, in November 2012, the Austrian Central Bank released the location of their Gold reserves, revealing that 80% resided in the UK, 3% in Switzerland and 17% in Austria. Cue the RBA feeling comfortable to release the location details of Australia's Gold around 1 month later.

A recent experience of mine with the RBA further highlighted their desire to follow in the footsteps of other Central Banks rather than to think for themselves. An FOI request I made for the Gold bar list was initially rejected, but after lodging an appeal with the OAIC, highlighting that the United States published a list of their Gold bars details (sans the serial number), the RBA decided to follow suit (Reserve Bank of Australia Releases Gold Bar Details).

Earlier this year I spotted a line in the RBA's annual report indicating an audit had been performed (not something I have seen mentioned in previous years):

A question posed by email to the RBA earlier in the year suggested that RBA officials had performed the audit themselves.

I decided to lodge another FOI request.

"I request that a copy of the following documents be provided to me: All documents pertaining to the audit of the RBA's gold holdings performed during the 2013/14 financial year, as was specified in the 'Operations in Financial Markets' section of the Reserve Bank of Australia Annual Report 2014 ("During the year in review, the Bank audited its gold holdings")."

Two months later (decision on the documents was delayed due to consultation with the Bank of England) I received the following list of documents that would be provided (on payment of fees, which were reduced from an original quote due to the small number of documents that could be released):

And today the documents arrived. Here's what we know...

In February 2013, the Assistant Governor (Financial Markets) requested Audit Department include in its audit program a review of the Bank’s gold holdings at the Bank of England (BoE). The Chief Representative in EU approached the BoE to facilitate this review and in late May 2013 initial planning discussions were held with BoE staff with tentative agreement that the review would take place in September 2013.

The audit included:

• An on-site physical verification commencing 23 September 2013, which will take 4-5 days to complete, assuming two RBA auditors are involved given the proposed scope.
• Inspecting a sample of RBA Gold bars (list to be provided in advance), including checking the details of these bars against the Bank’s inventory list and weighing of the bars by BoE staff using their equipment.
• Randomly selecting additional Gold bars from the inventory list and observing these bars being located and retrieved from their vault (plus verifying the details and weighing them).
• Obtain a high level understanding of the BoE gold safe custody service.
• Continuing discussions for a comprehensive safe custody agreement between the RBA and BoE.

As the above document list shows, those relating to final audit results were not provided. I would assume the audit was successful, but no doubt that would be a highly contested opinion in the Gold blogosphere. The following reason was provided for denying access to the report:

Documents 10, 11 and 12 are drafts of the report prepared by the RBA’s Audit Department detailing the findings of the audit and document 13 is the final of that report.

Denial of access to these four documents in terms of s33(a)(iii) is appropriate because release of the information (which relates to procedures for the conduct of the audit with the BoE and the subsequent results) ‘would, or could reasonably be expected to, cause damage to’ the relationship between the RBA and the BoE.  This belief is soundly held by us on the basis that we are aware that the BoE provides safe custody services not only to the RBA, but also to other central banks around the world.  Disclosure of the information in these documents could damage the relationship between the BoE and its other central bank clients, and by extension (as the source of the information), the relationship between the BoE and RBA.  As foreshadowed to you in earlier correspondence, we consulted with the BoE in relation to these documents and they affirmed the views we held regarding the damage that would be done to the relationship between the BoE and RBA if the redacted information were disclosed.

Denial of access to these four documents is also appropriate in terms of s47E(a) (‘disclosure would, or could be reasonably expected to, prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits’ by the Bank) and (b) (‘disclosure would, or could be reasonably expected to, prejudice the attainment of the objects of particular tests, examinations or audits conducted, or to be conducted’, by the Bank).  The documents in question concern the ‘procedures and methods’ within both the RBA and the BoE regarding the conduct of the physical check of a sample of gold bars (for the purpose of conducting the audit).  Disclosure of this information would, of course, reveal those procedures and methods, and by logical extension render them less effective. Also, the ability of the Bank to attain the objects of the audit (which is to reveal whether the Bank’s arrangements are robust and secure) would be prejudiced. These considerations apply to both the audit currently the subject of your FOI request and also any other audits undertaken by the RBA. A key requirement for undertaking a successful audit (of any aspect of the RBA’s work) is that there is as little opportunity as possible for individuals to take steps to predict what an auditor may choose to focus on, and/or how they will conduct the audit. It is self-evident that if such procedures and methods are revealed, then the opportunity to circumvent them is greatly increased.  As s47E is a public interest conditional exemption, I must take into account whether the giving of access is in the general public interest (in terms of s11A(5)).  When deciding whether access is in the public interest, I must take into account the following from s11B(3) and have noted my views in each case:

Section 11B(3) factors favouring access to the document in the public interest include whether access to the document would do any of the following:

(a) promote the objects of this Act (including all the matters set out in sections 3 and 3A); release would be contrary to some sections, particularly sections 2(a) and 3(3)

(b) inform debate on a matter of public importance; the Bank’s gold holdings, while important and of interest to some, are not a matter of public importance generating any level of debate

(c) promote effective oversight of public expenditure; release of the information would not do this

(d) allow a person to access his or her own personal information; the request is not seeking personal information.

Taking into account these factors, and the implications release of the information would have on the Bank’s audit processes, I have decided that it is clearly not in the public interest to disclose the information in these four documents (10, 11, 12 and 13).  Disclosure of these documents would manifestly harm the public interest by way of reducing the ability of the RBA to successfully conduct audits and tests of its operations going forward.

The released documents (mostly a chain of various emails) also suggested the RBA have been invited back for another review in 12 months.

One interesting point from the documents, the Bank of England was emailing clients in June 2013 (those for whom they're providing custodial services) inviting them to audit samples of their Gold:

Click Above Text To Enlarge

However discussions on the RBA audit were already well advanced at that time.

Given that the RBA has followed the lead of other countries to release reserve location details, perform audits and release (some) bar list details, it will be interesting to see whether they go further and follow the lead of the many countries now deciding to repatriate some or all of their Gold reserves...

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Krieger & ZH Wrong On German Gold Repatriation

Update: Since I posted the below Michael Krieger has updated his blog post to confirm the repatriation schedule is unchanged. Zero Hedge also posted a follow up article. Both point to the Bloomberg article as being misleading, which I agree with (particularly the title), but still think that anyone reading the article in it's entirety (and is familiar with the German repatriation story) should have picked up that there was no plans to change the repatriation of 300 tonnes from the NY Fed.

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Today Zero Hedge is headlining an article by Mike Krieger suggesting that Germany will stop repatriating their Gold: Germany Gives Up On Trying To Repatriate Its Gold, Will Leave It In The Fed's "Safe Hands".

Unfortunately this is misinformation and they have both either misunderstood or are purposefully misreporting what the Bloomberg article they reference is actually saying.

They are not the first to get it wrong on the German repatriation story, it seems to be common as I have covered previously:

Is Germany's Gold Repatriation Causing Lower Prices?

Dave Kranzler Gets It All Wrong On Germany's Gold

Here is an excerpt from the Zero Hedge article which includes part of Krieger's piece:

Several months after it was revealed that Germany was able to only recover a miserable 5 tons of its gold in all of 2013 (under 10% of the 84 tons it was scheduled to repatriate), Germany appears to have given up entirely in its attempt to recover gold which simply is not there, and as Michael Krieger reports, citing Bloomberg, has decided to keep "it" (by "it" we don't mean the gold since that clearly has not been at the Fed for decades, but merely the paper promises of ownership: for more see China's gold rehypothecation scandal and how the unwind works) at the NY Fed after all. That is to say, in the "safe hands" of former Goldmanite Bill Dudley.

Via Mike Krieger's Liberty Blitzkrieg blog,

Just last week, I published a post titled, Video of the Day – “End the Fed” Rallies are Exploding Throughout Germany, which subsequently went viral. Interestingly, only a few days later we find out that Germany’s very own criminal political class has decided it will continue to store the nation’s gold in New York rather than bring it back home as had been the intention. It’s quite ironic that just as protests against the fascist Federal Reserve are spreading throughout the land, the political class officially decides to keep Germany’s treasure across the Atlantic, in care of none other than The Fed itself.

Both Zero Hedge and Krieger imply there has been a change to the repatriation schedule, but the truth of the matter is that the Bloomberg article only refers to stopping earlier attempts to bring home all of Germany's Gold:

Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all...

...“Right now, our campaign is on hold,” Peter Boehringer, a Munich-based euro critics who co-founded an initiative to bring home all of Germany’s gold in 2012, said in an interview.

And there has been NO CHANGE to the repatriation schedule of 300 tonnes from New York & 374 from Paris which will ultimately result in 50% of Germany's Gold being stored at home. This is the schedule that was published by Bundesbank last year.

Germany's Gold Repatriation Schedule

It was confirmed in today's article from Bloomberg that there is no intention to change the schedule:

The central bank met the critics halfway. Last year, it began moving the Paris gold to Frankfurt, pointing out that Germany and France now have the same currency, the euro. Enough of the gold in New York and London will be brought home so half the reserves will be in Germany by 2020.

No doubt there will still be plenty of commentators in the precious metals space continuing to twist the story as they see fit, especially so if Bundesbank remains behind schedule when they publish an update later this year or early next, but in my opinion:

- The NY Fed has the physical Gold

- The repatriation will complete on or near schedule by 2020 &

- There is no conspiracy (missing or leased Gold)

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Dave Kranzler Gets It All Wrong On Germany's Gold

Long term readers of this blog or those who follow my comments on other sites are probably aware that I'm skeptical of the conspiracies surrounding Germany's Gold repatriation. I wrote the following post mid last year:

Is Germany's Gold Repatriation Causing Lower Prices?

Since then it's been revealed that only 5 tonnes of Germany's Gold has been delivered and the conspiracies have exploded in number again. When I see misinformation on the Gold blogosphere I will sometimes take time to correct the writer or provide an alternative perspective to their view. A recent occasion was on Koos Jansen's blog where I refuted (in the comments section) some of the conclusions he'd drawn (although on the whole I think his site is well worth reading). This led to an interesting discussion, which may not have changed the mind of any involved in the discussion, but it did provide a range of views for those reading the site.

Another site I've commented on a couple of times is that belonging to Dave Kranzler otherwise known as 'Dave in Denver' who writes at Investment Research Dynamics (previously his blog was 'The Golden Truth'). He's written about German Gold repatriation on previous occasions and clearly has a different view to mine. A post of his a couple of days ago suggested that the German Gold repatriation request from the US Fed had initially been for a higher amount (than 300 tonnes). I questioned this in the comment section, following which he silently edited the post (which you can read here) and proceeded to reply to my comment with profanity and personal insults:

I won't stoop to the use of profanity or insults to get my view across, but will point out that my comment was factual, while Dave's post and follow up comment were riddled with inaccuracies.

The only real claim that I made was that Germany's Gold repatriation request was initially for 150 tonnes and later increased to 300. This FACT was confirmed in an interview with Carl-Ludwig Thiele (Member of the Executive Board of the Deutsche Bundesbank):

"We specified our initial target in October 2012. In January 2013, we then presented a new gold storage plan and specified a new target that is considerably higher than the first. Instead of only 150 tonnes, we are now transferring 300 tonnes of gold from New York to Germany."

Meanwhile Dave claimed that:

1. "They [Germany] initially wanted more than 300 tonnes [from the United States]". As per above this was silently edited from his post, so we shall assume that he changed his mind on this statement? Dave, please do provide the evidence for this claim or otherwise could you explain why you didn't address it's removal in your response to me?

2. Dave claims further that "it should have been nearly effortless to ship 300 tonnes back to Germany via two cargo flights". Now from a logistics perspective that may be so, but you need to take into consideration insurance (for which a Forbes contributor said a maximum 3-5 tonnes per flight would be possible), not to mention that 2013 was a particularly busy year for Gold refiners ("the capacity of smelters are just limited" wrote one German newspaper). So while it may have been technically feasible for Germany to ship the Gold in two cargo flights, it would have incurred unnecessary risk (in that the Gold would not have been insurable), not to mention making it particularly difficult to have the bars recast without a refinery able to safely store and process the Gold in a timely fashion.

3. In the follow up comment to me he suggests that the German Gold stored in the US originated from Germany: "let alone the original bars Germany shipped over here to keep away from the Russians right after WW2". The reality is that Germany's Gold holdings stored in the US have never been in Germany. From Carl-Ludwig Thiele in the interview previously linked:

"It is not a question of “returning”. The gold is being transferred to Germany for the first time. Until 1998, only 2% of our gold, or thereabouts, was stored in Germany. In the first year, we transported five tonnes from New York. This year, we will transfer 30 to 50 tonnes, or perhaps even more, from New York to Frankfurt. And there is still next year to come."

It's no secret that Germany's Gold in the US wasn't all in 'Good Delivery' form, this is the reason the bars are being refined in Europe during their transit to Germany. The United States built up an impressive Gold hoard, more than tripling their reserves between 1930 and 1940, as they hoovered it up from citizens following the 1933 Gold confiscation. It wouldn't be surprising if some of the Gold bars that Germany acquired in the United States over the 1950's and 1960's consisted of some 90% pure bars which were melted from the coin confiscation.

Anyway, the point here was to highlight that you shouldn't believe everything you read about Gold on the internet (I would even encourage you to double check my claims), especially in relation to German Gold repatriation (is this even the right word given the Gold didn't originate physically in Germany?). There is a lot of misinformation, factually inaccurate claims and emotive wording used by commentators in the precious metals space to try and draw readers to their point of view.

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Is Germany's Gold Repatriation Causing Lower Prices?

I continue to see articles that speculate the price decline in Gold this year (and concurrent drop in ETF/Comex holdings) is a direct result of Germany's request for a portion of their Gold reserves back from the United States (as they scramble to secure physical Gold to fulfill the request).

This image in particular caught my eye from a recent TTMYGH report:

The event alongside price activity and ETF holdings sure paints a compelling story. Surely we don't need any facts to support the narrative? Grant Williams says the following in the report:

Wanna know what I think, folks? I think the central banks have been leasing their gold out for decades to the bullion banks and now find themselves in the rather precarious position of needing to reclaim that which they are supposed to own before the shortfall is exposed. I think that creates a big problem for both sides of that little scheme.

He later goes on to say:

Now, call me old-fashioned if you will; call me a conspiracy theorist, a goldbug, a wacko - whatever you like - but if you do, will you please give me an explanation as to why this gold is vanishing, where it is going, and who is taking delivery of it? Because, from where I stand, the evidence points to the beginning of the unraveling of the fractional gold lending market, and THAT spells trouble.

In my opinion he answers the question about where the Gold is going in the text leading up to the question:

I also think that retail investors — particularly here in Asia — are, unfortunately, compounding the banks' problems by using the weakness in the paper markets to acquire as much physical metal (or, as it's known in this part of the world, "wealth") as they can.

Not that we can trace the movement of physical Gold to confirm that the metal flowing out of the Comex, GLD and other ETFs is heading to Asia, but I'd imagine some of it is (Shanghai Gold Exchange delivery vs world mining supply, via Koos Jansen):
 

As for where the rest is going, well it's certainly not 'vanishing' (except into the vaults of those who believe Gold is worth buying at these prices), but there is definitely a lack of transparency in the market which allows commentators to makeup their own narratives.

He provides no real evidence that suggests the price decline and ETF shakeout is the result of central bank leasing activity and in fact once we zoom out on the price / Comex stock chart (courtesy Bullion Vault), it looks quite natural that the inventory should fall with price, just as it increased as the price rose over 2001 to 2011:

To me the charts showing reduction in ETF / Comex holdings look like the capitulation of price speculators in the west after having battled on for the past two years of sideways/lower prices, finally throwing in the towel and selling their holdings (maybe even having been lured into the equities market which has recently appeared 'unstoppable'). The gold appears to be moving from the hands of price speculators in the west to the safes, vaults, necks and wrists of those in the east who understand Gold as wealth (and concerned with buying more at lower prices, rather than selling).

Of course my interpretation of the data can't be proven one way or the other either. I can't prove that the price rout is not a direct result of the bullion banks or central banks trying to shakeout metal from weak hands to cover their obligations after leasing the metal, but I will try and provide some context for my opinion that the repatriation request from Germany is not key to the recent price decline... 

Something that I have voiced in the comments section on various sites, but not yet pointed out on my blog, is that I believe the rate at which they are repatriating the Gold from the US (the point of most speculation) was set by Bundesbank, not the Fed. The rate (circa 50 tonnes per annum over 7 years) is the same recommended by their court the previous year (for testing/examination of their Gold):

The Court had determined the order of the Bundestag that the Bundesbank their gold reserves stored abroad scrutinized. It is disputed whether the years experienced by the Bundesbank practice sufficient to rely only on a written confirmation to the gold bullion by foreign central banks. 

The Court therefore recommends that the Bundesbank to negotiate with the three foreign banks have a right to physical examination of the stocks. With the implementation of this recommendation, the Bundesbank has begun according to the report. They also decided to bring in the next three years of 50 tons each lying at the Fed in New York, gold for Germany in order to undergo a detailed examination here. Spiegel

Presumably this rate of delivery was fixed at 50 tonnes for logistics purposes, this post from Silver Stackers forum member Big A.D. is worth considering (note that the figures include the Gold being repatriated from the US and Paris combined):

Has anyone considered the logistics of actually counting out, transporting, counting in and then testing 674 tonnes of gold? 

Assuming deliveries are evenly spread out, they'll be shifting 1.85 tonnes each and every week for seven years. If the gold is in the form of 400oz LBMA spec bars, each shipment will contain 148 bars. 

At current prices, each weekly shipment will be worth about $100 million in assets which are completely untraceable after being melted down. That is an incredibly tempting target for anyone looking to acquire a large amount of gold without paying for it. It's the kind of target that attracts professionals with military training and experience in special operations. 

Whoever is doing the transporting might well be uncomfortable moving more than $100 million at a time, or rushing delivery to the point where there is a very noticeable stream of armoured cars driving out of the Fed's vaults every day for months at a time. Whoever is insuring the shipments might feel similarly uncomfortable at the prospect of paying out to replace a lost delivery and wants to spread their risk out. The bigger the shipments, the more concentrated the risk. 

Then there is the testing that has to occur at the German end (because checking the gold is all there is half the reason for the exercise to begin with). These are allocated bars (i.e. with serial numbers) and they're Germans so they'll measure it down to the gram. 

Assay and (re)manufacture takes time and effort and a lot of expertise which will probably be contracted out and whoever is doing it will basically be melting down ~150 x 400oz bars each and every week for 7 years, or roughly 30 per working day, or roughly one every 15 minutes. All of them has to be checked, perhaps individually, so that if any tungsten is found - or more likely just some regular, boring impurities - it can be traced bar to an individual bar and that bar's history can be investigated to find out when and where it entered the system and who owes who the difference in weight. 

At current values, the gold in question is worth about $37 billion dollars. We're used to seeing that sort of figure tossed around in discussions about global finance but it's worth remembering that this isn't just fake 1s and 0s money, this is actual, physical real money and there are practical issues in handling it which is why people tend to just leave it sitting in vaults to begin with.

Based on my speculation that it was the Bundesbank and not the Fed that had set the delivery rate, I posed the following questions to Bundesbank via email:

There is a lot of speculation about the slow delivery of Gold from the United States to Germany (300 tonnes being repatriated), are you able to advise whether the rate of transfer (approximately 50 tonnes per year) was requested by Bundesbank or whether the Federal Reserve limited the amount that could be withdrawn each year (i.e. who set the transfer rate)?

Their response (which was really just a cut and paste response from previous communications and press releases):

Thank you for your enquiry.

The Deutsche Bundesbank keeps a part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centres. This has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centres. Moreover, the Bundesbank needs to hold gold at the various trading centres in order to conduct its gold activities. It is common practice for central banks to keep part of their gold reserves abroad.

Besides the Deutsche Bundesbank, other central banks and official agencies place gold in the custody of foreign central banks. According to its own data, the  Federal  Reserve  of  New York holds gold stocks for almost 60 different central banks and official agencies.

The Deutsche  Bundesbank can withdraw gold from its holdings with foreign central banks at any time.The Bundesbank's gold is stored in the form of individually identifiable bars.  Gold stocks are subjected to regular audits. Relevant inventory controls are conducted on site.

The Bundesbank applies the principles of safety, cost efficiency and liquidity to the management of foreign reserves in general, and to that of gold reserves (and, in this context, to the question of custody location in particular). As a rule, the physical transfer of gold reserves to another storage location cannot be ruled out.

Deutsche Bundesbank’s new storage plan for Germany’s gold reserves:

By 2020, the Bundesbank intends to store half of Germany’s gold reserves in its own vaults in Germany. The other half will remain in storage at its partner central banks in New York and London. With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centres abroad within a short space of time.

The following table shows the current and the envisaged future allocation of Germany’s gold reserves across the various storage locations:

To this end, the Bundesbank is planning a phased relocation of 300 tonnes of gold from New York to Frankfurt as well as an additional 374 tonnes from Paris to Frankfurt by 2020.

On safety grounds we cannot publish details about the repatriation.

Unfortunately their response didn't directly answer the question regarding who set the rate of delivery, but I did follow up with another question:

Thank you for the detailed reply, I have a follow up question. As is clear from the below email, Germany's physical gold bars are identifiable and audited, is there any circumstances under which the Federal Reserve could hold Germany's physical gold but lease the same gold bars into the market? Is there any way the bars could otherwise be encumbered by another party?

Which received the following response:

Many thanks for your enquiry.

Your question might refer to a recent internet blog on "missing Fed and German gold" (July 2013).

Please consider that this source is not reliable and that the hedge fund manager statements quoted are not truthful.

The Bundesbank has full control over its gold reserves.

Please find below further information on the Bundesbank's gold reserves:

http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2012/2012_10_22_gold.html

http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2013/2013_01_16_storage_plan_gold_reserve.html

While my questions didn't stem directly from the article to which they referred, I did check up on the article mentioned and appears to be this one from King World News where hedge fund manager William Kaye claims that (leased) central bank gold has been sold into the market and melted down:

Once JP Morgan and Goldman Sachs get the gold they sell it into the market.  So these bullion banks then become net-short gold.  And the Fed says, ‘Well, we still have a contract where in theory we can claim the gold.  So we’re going to report that we still own it in the official documents.’

Kaye concludes with the wildly speculative conclusion that Germany will never receive their Gold back because it no longer exists at the Fed. Yet another story teller taking snippets of information from various sources and adding their own twist. It seems highly unlikely that the Fed or any other central bank would breach the trust of other friendly countries by leasing out their Gold.

So in summary:
- The repatriation rate of 50 tonnes per year is a continuation of arrangement organised in late 2012 (indicating Bundesbank requested this rate, not a limit set by the Fed).
- The logistics of transporting, testing and perhaps recasting the bars will be significant.
- Bundesbank is retaining a large portion (37%) of their Gold reserves with the Fed indicating a strong level of trust.
- Bundesbank says their Gold is allocated with identifiable bars and can be withdrawn at any time.
- Bundesbank refutes the stories of KWN that their metal is leased and not at the Fed.

At the end of the day I have to side with the official story, because other narratives lack the support of more conclusive evidence.

It doesn't take much to get the precious metals rumour mill pumping out propaganda these days, for example the Bank of England recently released an internet and mobile based tour of their Gold vault facility which had text mentioning "over 400,000 gold bars" in the vaults. This ended up being roughly 1300 tonnes short of the audited figure reported earlier in the year, which some concluded meant that it was leased or sold into the market to cause the price decline... 

GoldMoney's Alasdair Macleod says that the Bank of England recently become a prolific supplier of gold – leasing out 1,300 tonnes of the yellow metal in just four months.

In an interview with the Keiser Report on the Russia Today network, the GoldMoney research director told financial pundit Max Keiser what he thinks happened to 100,000 gold bars.

While perusing the BofE's new website application, which allows you to take a virtual tour of the Kingdom's gold vaults, Macleod learned that in June the bank was holding 400,000, 400-ounce gold bars.

As a veteran precious metals adviser, Macleod noticed a discrepancy between this figure and the Bank's year-end accounting from February which reported 505,000 bars in storage. Mining.com

Thankfully there are sites out there looking for such outrageous claims and the above story was thoroughly debunked by Warren at Screwtape Files (a report which is well worth reading in full).

A point I've seen made elsewhere about the German Gold repatriation story is what would have transpired if Germany had decided to pull the 300 tonnes (or even all of their Gold) out of the US in 2 weeks instead of 7 years? No doubt there would have been articles all over the web claiming Germany is making a rush for the exit with their Gold... there will always be sites and commentators ready to peddle sensational stories, it's up to the individual to decide which ones are plausible and which ones aren't. Perhaps the day will come that the "paper gold" market breaks down and all the Gold markets dirty secrets are revealed (I have no doubt there are some), validating some of the stories that circulate on the internet... that would only ever be the icing on the cake as far as I'm concerned, there are already plenty of reasons to own physical Gold without the need to believe tall tales.

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BB.

 

RBA: Australia's Gold held at the Bank of England

I received the following email from a reader today that I thought may be of interest, it's a response from an RBA FOI officer to several questions posed regarding the location of Australia's Gold:

1. Could you please confirm the total 'physical' and 'tangible property' gold holding by the Reserve bank of Australia in kilograms as at financial year end 2011. For clarity, the term physical refers to gold in possession and control of the Australian Government and not a derivative, financial instrument or promissory note.
Answer:  At the end of the 2011 financial year (30 June), the gold holding was 80 tonnes at a valuation at the time of A$3 473 million.

2. Are any foreign countries holding the physical gold on behalf of the Australian Government?
Answer: Yes.

3. If so please provide a breakdown of foreign gold holdings in kilograms identifying the country where this is held.
Answer:  At 30 June 2011, 99.9% of the gold is held in the United Kingdom, at the Bank of England. The other 0.1% is held by the Reserve Bank of Australia. This distribution remains in place presently.

Please note that we have answered your questions as a routine enquiry (on the basis that your request was for answers to questions, rather than seeking documents).  The FOI Act concerns itself with the release of documents, rather than answering questions, so a request must be seeking documents to be valid.  You may be interested in details of the Reserve Bank of Australia’s Official Reserve Assets, which are published each month on the Bank’s website. Additional commentary about Reserves Management is also contained in the Bank’s Annual Report (please see the ‘Operations in Financial Markets’ Chapter).

If you have any further queries regarding this information, we invite you to contact our Media and Public Relations Office in the first instance as generally they will be able to answer questions for you.  Consistent with guidance from the Office of the Australian Information Commissioner contained in a recent charges review report, the Bank is committed to releasing as much information as possible outside the provisions of the Act (via routine release of information and responding to general requests).  If you feel that your needs are not being met outside the provisions of the Act, you are welcome to lodge a formal application seeking documents relevant to your question(s).

The above is interesting, as I have seen past requests for this information denied by the very department the FOI officer suggests (below from 'Tears of the Moon' on ABC Bullion blog):

On the where the 80 Tonnes of gold is stored, Australia or offshore, I received this response from the RBA's Media & Public Relations Office today:

"Thank you for your email.

The Bank does not publish the location of its gold reserves."

Make of that what you will. Personally I didn't think it would have killed them to say "Australia", after all it is a big place, plenty of space to hide 80 tonnes of gold with giving anything away.

With 99.9% of Australia's Gold stored with the Bank of England it makes me wonder where the final .1% is stored (80kg), perhaps the bars are used as paperweights around the RBA office in Sydney...

So why keep the majority of it stored with the Bank of England?

I suspect it may be a throwback to times past when the bank lent out a signficant amount of Gold. Today the RBA only has 1 tonne of Gold on loan, but in the 1990s it was a lot more (FOI Document, December 1996):

"The Bank currently holds about 250 tonnes of gold (about $A3.8 billion at current prices) as part of official reserve assets. Unlike other components of official reserve assets, the management of which was upgraded significantly at the start of the 1990s, the management of gold holdings has been passive apart from participation in the gold loan market. The amount of gold owned by the Bank has not changed since the late 1970s."

"In order to increase returns on gold holdings, the Bank has expanded its gold lending activities in recent years. Currently, about half the Bank's gold is on loan."

Bundesbank recently made similar reasoning for it's Gold being stored predominantly outside of Germany (Bundesbank on Gold reserves):

Why doesn’t the Bundesbank bring the gold back to Germany?

The reasons for storing gold reserves with foreign partner central banks are historical since, at the time, gold at these trading centres was transferred to the Bundesbank. To be more specific: in October 1951 the Bank deutscher Länder, the Bundesbank’s predecessor, purchased its first gold for DM 2.5 million; that was 529 kilograms at the time. By 1956, the gold reserves had risen to DM 6.2 billion, or 1,328 tonnes; upon its foundation in 1957, the Bundesbank took over these reserves. Further gold was added until the 1970s. During that entire period, we had nothing but the best of experiences with our partners in New York, London and Paris. There was never any doubt about the security of Germany’s gold. In future, we wish to continue to keep gold at international gold trading centres so that, when push comes to shove, we can have it available as a reserve asset as soon as possible. Gold stored in your home safe is not immediately available as collateral in case you need foreign currency. Take, for instance, the key role that the US dollar plays as a reserve currency in the global financial system. The gold held with the New York Fed can, in a crisis, be pledged with the Federal Reserve Bank as collateral against US dollar-denominated liquidity. Similar pound sterling liquidity could be obtained by pledging the gold that is held with the Bank of England.

Australia's Gold is only a fraction of it's foreign reserves (less than 10%) compared with Germany (over 70% according to Wikipedia) and with less than 1 tonne being loaned into the market at present (see page 24) it makes me wonder what benefit there is in keeping it with the Bank of England.

What say you Australia, time to bring home our Gold?

BB.

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