Reserve Bank of Australia & The Missing Bar Numbers

Early in 2014 I lodged a Freedom of Information (FOI) Request with the Reserve Bank of Australia (RBA) to release the list of Gold bars that make up Australia's official reserves. After initial rejection, an appeal with The Office of the Australian Information Commissioner resulted in the RBA providing the list (melter/assayer, gross weight, assay and fine weight), but without revealing the serial numbers.

With 99.9% of Australia's Gold reserves being stored with the Bank of England (BoE) it pleased me to see that in 2014 the RBA had performed an audit on Australia's Gold reserves. I wrote another FOI Request to gather more information on the audit as the single line of text in the Annual Report was lacking in detail, "During the year in review, the Bank audited its gold holdings, including that portion held in safe custody at the Bank of England."

The result of the second FOI Request was a small cache of emails including communications with the BoE prior to the audit.

Something I had read, but overlooked the importance of, when the Gold bar list was originally provided was the difference between the BoE's bar number and the refiner bar number (I'd initially assumed that they were one and the same).

"The only information we will withhold from release are the individual bar numbers, as this information remains confidential (in the opinion of both the Bank of England and the Reserve Bank of Australia). The Bank of England (as our custodian) use their own numbering system to uniquely identify each bar and have reaffirmed to us that these numbers should not be disclosed to third parties as the information is confidential." RBA

Though an anonymous comment on my post had picked up on the difference.

"What a joke from BoE and RBA re serial numbers. Each bar has it own number from the refiner, that is what should have been disclosed and could have without any confidentiality breach. The BoE special internal numbers did not have to be disclosed and are useless anyway in terms of ensuring the validity of the bar list.

Is the RBA saying that it and the BoE do not know the refiner bar numbers or have never recorded it? I find that hard to believe and if true is damning on their vault management."

Warren James at Screwtape Files followed up with an article on the emails from the audit. Amongst the humour (audio conversation between the RBA & BoE is a must listen) he highlights that the email communication mentions the BoE number.

"Each bar is marked with a unique BoE number" Maybe that was what BoE & RBA got confused with and why they didn't supply the serial numbers. If that were the case then the mixup would be gross incompetence in the whole matter. Definitely the BoE should not disclose their own internal tracking number since it would reveal detail about how the bank functions.

To clarify there was a difference between the two numbers (and if so to question why the refiner number couldn't be released) I wrote to the RBA again. If the BoE catalogues and tracks their Gold bars using an internal number, then what legitimate reason does the RBA have for withholding the refiner bar number following the original FOI Request? I received a response to my questions last week (questions in bold, RBA response in italics):

Is the unique Bank of England bar number different to the refiner bar number? It is our understanding that the Bank of England bar numbers are different to any markings that are placed on bars by the bar manufacturers. All bar lists relating to the RBA’s gold holdings show only one serial number per bar, the BoE serial number.

If so, why was the refiner bar number withheld from publication (oversight, on purpose or not present on the bar list)? N/A, for the reason detailed in answer to question 1.

If so and the refiner bar number is not used internally by the BoE (as a unique identifier, which their internal bar number acts as), can these be released as an extension of RBAFOI-131418 or would I need to submit a new request?  This question is based on the assumption that there are two unique numbers on each bar, being the Bank of England bar number and a ‘refiner bar number’. As noted above, all documentation provided to the RBA has only one unique serial number per bar, which we understand to be the Bank of England’s own numbering system.

When I discussed the above response with Warren James via email he suggested that it could be seen as the BoE intentionally withholding key information. I disagreed at the time, pointing out that there are benefits to having a unique BoE number such as no chance of duplicating serial numbers (something Warren highlighted occurs with some refiners restarting a number sequence) and providing multiple bar numbers may result in confusion or errors. At my request Warren provided some interesting stats from his bullion bars database indicating that for 248,063 Gold bars, there was only 206,403 unique serial numbers, so it can be estimated that roughly one in five bars could share a serial number with another. In my eyes this highlights the need for a BoE internal number that can be unique to each bar they manage, but Warren wrote further:

"The serial number is specifically named by LBMA as one of the marks required to be London Good Delivery, so I had always counted it as part of the 'standard' - at least it has been since year 2000 (ref. p44 of 'The London Good Delivery List, building a global brand 1750-2010 by Timothy Green').. it's just one of those key bits of metadata which cannot not be casually discounted. 

From a data design perspective ... 

•Even for their own internal systems they would still be capturing every marking on the bar, and for most London Good Delivery bars it will be there. 

•Bar Serial number is definitely stored in their database (or spreadsheet?), because it's a part of the LGD System they would need it on their inter-transfers. 

•In terms of data extraction, it's a trivial matter to include an extra column of data. 

•They weren't just culling redundant information > otherwise it is possible to remove GrossWeight or FineWeight, since Assay can be used to determine one or the other.

The absence of the serial number is deliberate, the only question is why? There shouldn't be an issue if it is actually allocated.

I think the BoE just decided they didn't want the detail out in the wild, because it allows the bars to be traced with high accuracy."

In a comment on Screwtape Files he concludes:

"So the industry standard for LBMA good delivery is Serial+Refiner+Weight+Assay, and the BoE leave out the serial number. Not only that, but the RBA don't question the omission. Without that key bit of differentiating information it isn't possible to track or trace the bars in any meaningful way. This appears to be the intent of BoE.

Definitely they store the information > Serial Number is always present in any other industry 'weight list'. Makes you wonder about the quality of the audit which was conducted - open for abuse since the key information is controlled by Bank Of England."

I think Warren raises some solid points and after giving it further thought I do agree that the refiner bar number should be provided to the RBA (and any other central bank or party that the BoE is custodian for) and don't see why it shouldn't also be available to the public given that it differs to the unique internal number that BoE uses to identify and manage each of the bars they store.

It does cast doubt on the veracity of the RBA's audit of Australia's Gold. Can you think of any other audit scenario where an internal reference number is accepted (by an external auditor) in place of the manufacturers own (which doesn't get checked at all)? One might hope that if they take the opportunity to audit Australia's Gold again (something they were invited to do), that they do so more thoroughly. I think the likelihood of them finding a discrepancy (such as a missing bar) is slim, but a half-baked audit negates the rationale for performing one in the first place.

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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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BoE Tells RBA: Don't Release Gold Bar Details (FOI)

Two months ago I wrote a Freedom of Information (FOI) request to the Reserve Bank of Australia (RBA). Here is the crux of my email:

This is a request under the Freedom of Information Act.

I request that a copy of the following documents [or documents containing the following information] be provided to me: An inventory (bar) list forming the 80 tonnes official Gold reserves (stored with the Bank of England), including details which identify the individual bars by refiner, weight, finesse, serial number and any other identification recorded for audit purposes.

In order to help determine my status to assess fees, you should know that I am a representative of online media and this request is made as part of news gathering and not for a commercial use.

While Gold holdings do fall under the operations of the bank, the position held has remained unchanged and published for well over a decade and I see no risk in providing details of the bars which underpin this position.

The RBA does state they are exempt from the FOI Act in relation to banking and market operations:

The Reserve Bank is exempt from the FOI Act in relation to documents in respect of its banking operations (including individual open market operations and foreign exchange dealings) and in respect of exchange control matters.

I assumed that Gold reserves sit within this exempt area given that it is detailed in the 'Operations in Financial Markets (Reserves Management)' section of the annual reports. However, given that their Gold holdings are public knowledge, as is the RBA's activity in the Gold leasing market, I could think of no logical reason that providing the information would be damaging to the institution or their operations.

The two (primary) responses I received are below.

February 28th (in aid of extending their deadline):

This email is intended to provide you with an update in relation to the processing of your request under the Freedom of Information Act 1982 (the Act).  It is also a formal notice as required under s27 (see below).

In terms of s27, (consultation – business documents) of the Act, the Reserve Bank of Australia is required to consult with a ‘person, organisation or undertaking’ in the event that (they) might reasonably wish to make an exemption contention that the document is exempt from release in terms of s47 (business).  Consistent with the terms of the consultation process provided for in s27, we have determined in writing that consultation is required, and therefore an extension of processing time (by a further 30 days) to enable consultation to take place (s15(6)) is provided for by the Act.

April 1st (today, April Fools?!):

Further to earlier correspondence regarding your FOI request, I wish to advise you that we have received a response from the Bank of England regarding information about the Reserve Bank of Australia’s gold inventory (as held by the Bank of England).

The Bank of England has advised us that it regards the information about the gold holdings that has been exchanged with the RBA to have been exchanged in confidence.  This is consistent with the Reserve Bank of Australia’s own view about our interactions with the Bank of England in relation to the gold holdings (i.e. we also regard our exchanges with the Bank of England to have been made in confidence).

Accordingly, I have decided to deny access to the information sought in terms of section 33(b) of the Freedom of Information Act 1982 (the Act) ‘as information or matter communicated in confidence by or on behalf of a foreign government [or] an authority of a foreign government … to an authority of the Commonwealth’ (being the Reserve Bank of Australia). Further, I have decided to deny access to the information sought also in terms of section 33(a)(iii) of the Act, which pertains to documents affecting international relations of the Commonwealth. I have decided that disclosure of the information sought by you would, or could reasonably be expected to, cause damage to the international relations of the Commonwealth.

So basically the situation is as follows:

99.9% of Australia's Gold reserves, 80 tonnes, are stored with the Bank of England (BoE), news of which first came to light on this site in December 2012.

Petitions to repatriate Australian Gold have garnered public support, but not to a critical level needed for it to become a political issue (you can still sign it here).

Supposedly this Gold belongs to Australia (managed by the RBA), yet when a member of the public requests a list of the Gold bar details (of which revealing would pose no risk that I can think of), the RBA says that they are unable to. Why? Because the BoE (who are merely a custodian of the Gold) said that it needs to be kept a secret.

In the final email, along with the advice that they would withhold the information, I was provided a document which detailed some options should I choose to challenge the decision. Included (amongst various options) are requesting an internal review, review by Administrative Appeals Tribunal, Review by Federal Courts or complaining to the Ombudsman. If anyone has any experience with challenging an FOI decision or ideas on what grounds I could do so then I would welcome your thoughts in the comments below (in a timely fashion as I only have around a month for any challenge). Alternatively you are welcome to email me (address at top right of blog under social media buttons).

Any other opinions or comments on the outcome so far are welcome, as are any thoughts on risks or reasoning the Bank of England may have for keeping the Gold bar details a secret.

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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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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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