While it is generally known to many that the Bank of England has a vested ‘interest’ in the London gold market, the consistently close relationship between the Bank of England and the LBMA tends not to be fully appreciated:
Did the Bank of England stop gold leasing in 2008?
On a day witnessing such tremendous financial market volatility, this seems like the perfect story:
The Austrian Court of Audit expresses great concern about the disproportionate amount of official gold reserves (229.6 tonnes) stored at the Bank Of England (BOE), which will be the Austrians excuse for repatriating, “the gold depository contract with the depository in England contained deficiencies” and, “gold reserves stored abroad, internal auditing measures were lacking”.
They’re putting it blunt for an official source on a topic so sensitive as gold.
India’s central bank said on Wednesday it has sought quotes from banks to swap gold in its own vaults for international-standard gold, aiming to improve the management of its reserves.
The Reserve Bank of India said the operation would “standardise the gold available with RBI in India with respect to international standards” and the gold acquired would be delivered to its overseas custodian, the Bank of England.
By holding gold reserves in London, the RBI would gain flexibility to mobilize them if needed to defend the currency.
It appears the Indian government has finally realized they can’t stop their citizens penchant for gold, so they have decided to dump central bank gold onto the market in exchange for gold of the rehypothecated paper variety .
What is incredible to me is that they are justifying this with a so-called “swap” into phantom gold at the Bank of England.
According to the official 2014 report, the BoE had 755 tonnes less gold in their vaults in February 2014 relative to February 2013.
However, when we look at UK’s net gold trade over this period (March 2013 – February 2014), we can see 1593 tonnes were exported.
GLD’s stock lost 451 tonnes over this period.
This leaves a gap of 392 tonnes (1593 minus 1201), which had to be supplied by additional LBMA or private vaults in London.
First the Bundesbank, now the Austrians?
The National Bank of Austria is demanding a full audit of Austria’s 150 tonnes of gold reserves on deposit in London at the Bank of England- 80% of the nations total gold reserves, after succumbing to pressure from the Austrian public.
In a public statement, Ewald Nowotny, Governor of the National Bank of Austria stated: “I acknowledge the request. Any grocery store is obliged to do inventory once a year. It is the only way of getting rid of these unreasonable allegations”.
BOE Says U.S. “Could Do Today” And U.S Authorities Doing Simulation Exercises.
The U.S. already has in place plans for bail-ins in the event of banks failing. Indeed, the U.S. has conducted simulation exercises with the U.K. in recent weeks and will do so again in 2014.
On October 12, Art Murton, the FDIC official in charge of planning for resolutions, and the Bank of England’s Deputy Governor Paul Tucker, both confirmed that the U.S. system is ready to handle a big-bank collapse.
The Bank of England’s Tucker, who has worked with U.S. regulators on the cross-border hurdles to taking down an international firm said that “U.S. authorities could do it today — and I mean today.”
The figure for custodial gold held at the BOE was reported by the BOE in June to be 4,977 tonnes “at least 400,000 400-ounce bars” taken from tour-note 2 of the new virtual tour of the gold vaults on the BoE’s website. Tour-note 3 gives us the date the information was collated as June this year.
This compares with the figure at February 28 from the BoE’s Annual Report of the equivalent of 505,117 bars. So it appears that at least 100,000 bars have disappeared in about four months.
Is the difference of 100,000 bars a mistake? The wording suggests not. The Bank appears to have thought that if it said in the virtual tour, “over 400,000 bars in custody” it would be sufficiently vague to be without meaning; but it is so much less than the figure in the Annual Report dated only four months earlier that it is unlikely to be a mistake.
We must therefore conclude that they meant what they said, and that some 1,300 tonnes of gold has left the vault since March 1st!
Asked yesterday on Bloomberg TV whether the Fed will start to cut its $85 billion program of monthly quantitative easing, New York Fed president William Dudley said “It really depends on how the economic outlook evolves…It’s too soon to make that determination.”
Even if the US central bank does slow its purchases of government debt and mortgage bonds with newly created money, Dudley said the Fed would only be “adding less stimulus” rather than actually “tightening” monetary policy.
Dudley’s colleague James Bullard, president of the St. Louis Fed, meantime warned Europe yesterday that it needs to start quantitative easing to avoid a long, Japan-style depression. “You should worry about it, and then take policy action to avoid it,” said Bullard. “One way to get stuck would be to be passive in this situation and not take some aggressive action to try to get inflation back.”
“Europe can draw lessons from Japan on the dangers of half measures.” agreed new Bank of England governor Mark Carney.
Outgoing Bank of Canada Governor (& Goldman alum and incoming BOE Governor) Mark Carney just released an epic Freudian slip today during a televised speech in Washington regarding the Western financial system’s co-ordinated move from bailouts to bail-ins as official policy to future bank crises.
It’s one thing when the editor of an obscure financial blog discovers bail-in language written into policy by the Fed, Bank of England, the Bank of Canada, Italy, & New Zealand and it goes viral throughout the alternate financial blogosphere, and it is another thing entirely when the incoming head of the Bank of England himself accidentally lets slip that Western financial policy-makers are working diligently to devise an international “bail-in” regime to prevent big bank failures.
Mark Carney’s DIESELBOOMesq retraction in 3…2…1….
*BREAKING SD ALERT*
Editor note: Bringing this massive story back to the top of the news feed for those who missed it over the holiday weekend.
On Wednesday, SD broke the news that Canada had buried a provision for depositor bail-ins for systemically important banks deep inside its official 2013 budget, and stated that the Cypriot bail-in was not just a one-off event, but is in fact the new collapse template for the entire Western banking system.
We suspected that the same policy change had been made by the US & the UK, but was simply yet to be discovered, buried in the website of a Federal agency.
We suspected correctly…
We are currently in an environment where policy makers are intent on devaluing their currencies in an effort to create growth. Real rates continue to stay negative in most of the developed world. Every marginal dollar of debt that is created is producing lower and lower amounts of growth. In a world overwhelmed by mountains of debt and economic growth which is sub-par at best, precious metals and real assets can act as insurance against the stupidity of policy makers. The evidence pointing towards the suppression of the gold price is becoming increasingly apparent. Don’t be the last person to figure this out! The current sell-off in gold should be viewed not with extreme trepidation but as an unbelievable opportunity to buy the metal at an artificially low value.
Guest Post, by Guillermo Barba
Today we have an exclusive note on this blog: the Mexican Superior Audit of the Federation (“ASF” in Spanish), in its “Report of Supreme Audit Results of the 2011 Public Account” delivered last week to the Chamber of Deputies, gave a stern “recommendation” to the Bank of Mexico (Banxico) to audit the Bank of Mexico’s gold reserves held in London at the Bank of England.
With last week’s announcement by the Bundesbank of the repatriation of 674 tons of German gold from Paris and NY over the next 7 years, we predicted that an avalanche of gold repatriation requests would soon be made to the BOE and the NYFed.
It appears that Switzerland may be next to the game, much to the dismay of the SNB. The Swiss gold initiative, an initiative to Secure the Swiss National Bank’s Gold Reserves, launched in March 2012 by four members of the Swiss parliament, has grown to 90,000 supporters.
Once 100,000 supporters are achieved, the Swiss Parliament must take up the referendum.
The initiative asserts that the Swiss people should have a right to vote on 3 things, none of which will please the banking cartel:
Legendary gold trader Jim Sinclair has sent an email alert to subscribers today regarding last night’s news that Germany will begin repatriating it’s gold held on deposit at the NY Fed back to the Bundesbank, as well as all 374 tons held at the Bank of France.
Sinclair states that history will look back on this salvo fired across US war financing as being the beginning of the end of the US dollar as the reserve currency of choice, and that under normal circumstances, no major central bank would insult another major central bank in the way that the Bundesbank just has.
Sinclair states that the Bundesbank repatriating its gold reserves is the most significant event in the gold market since Charles De Gaulle called the US hand that it would stand by convertibility, and that gold is headed to $2111 in the near future in the wake of the Bundesbank’s actions.
Sinclair’s full MUST READ alert below:
How do you say rehypothecation in Australian?
After months of persistence, our friend Greg from AUSBullion has received written confirmation from the Reserve Bank of Australia that the bank holds all but 80 kg of Australia’s gold reserves at the Bank of England. Out of 80 tons of physical gold, less than 0.1% is held in Australia!
The Central Bank defends London’s storage/rehypothecation of Aussie gold, stating: London is a major global gold trading market and the Bank of England provides a secure and cost-effective storage location for central banks and market participants. The Reserve Bank has processes in place to ensure that the gold reserves are maintained appropriately. It is not considered necessary from management, security or operational perspectives to relocate the gold bars to a facility in Australia.
The Bank of Australia’s admission that nearly all of Australia’s gold reserves are on deposit at the BOE is below:
Last week’s news that the Bank of England had stopped Quantitative Easing early because it was not needed was a load of rubbish. The truth is that it was stopped early because MORE COUNTERFEITING WAS NEEDED, and the BOE figured out a way to directly monetize the debt, while out of public scrutiny.
QE will continue TO INFINITY….AND BEYOND!!! on both sides of the pond.
The MSM story actually compares the practice to Weimar Germany.
As the Telegraph reports:
So now we know why the Bank of England’s Monetary Policy Committee called a halt to more Quantitative Easing this week – it’s because the Chancellor and the Governor of the Bank of England have concocted a backdoor way of doing the same thing.
The Tylers at ZH have discovered a 1968 memo from the BOE archives sent by the Bank of England to the Federal Reserve revealing that the Fed sent at least 172 bad delivery gold bars to London in the late 1960’s for safekeeping for the German Bundesbank as repayment for swaps.
The memo reveals that London assayers discovered that the Fed through Johnson Matthey sent the Deutsche Bundesbank 172 ”bad delivery” gold bars, and the ”out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss”.
The memo also indicates that the Bank of England was willing to keep the discovery private due to the fact that the gold was to be held for the Bundesbank. A declassified report discovered several weeks ago indicates that the Bundesbank subsequently repatriated 2/3rds of this gold in question from 2000-01.