Database confirms Max Keiser Guest statement (updated x 2)

Untitled
The biggest challenge of the BullionBars database is knowing what questions to ask of the data warehouse; at any given time there are a number of research streams in progress - but these do take time to build and mature. The biggest advantage (of having a huge chunk of data there) is the ability to run very quick random checks on anything bar-related. Today, Screwtape Files bolsters support for a particular story. Brought to my attention by Bron Suchecki this morning was a Max Keiser interview where guest Dominic Frisby makes a comment regarding Chinese gold bars (ref 20:30-21:15):

Dominic Frisby, Author/Writer
(edited for clarity) "... I had dinner about a year or two ago with the head of Gold at HSBC and one of the things that he described — and most of the world's gold goes through HSBC, at some stage — looking at the gold in his vault ... despite the fact that China is the biggest producer - he never sees bars, with Chinese stamps on them ..."

THIS OBSERVATION IS SUPPORTED BY THE DATA WE HAVE ON RECORD.

In the database I found ZERO matches for Chinese-manufactured gold bars in the GLD records, and also extended the query to see if other vaults had any. I was mildly surprised to find NONE ... surprising because our current gold sample size includes data from not just HSBC London vault, but also Royal Canadian Mint and Via Mat (London, Hong Kong and Zurich). Worth mentioning that although our database is large, there are still some data sets we have not yet loaded (like the Julius Baer Precious Metals Fund data, for example) so the conclusion is not yet complete. If I do find some Chinese-Manufactured Gold Bars in subsequent data records I will update this post, but since GLD is the grand-daddy of all ETF's I expect the 'zero' result will likely extend to all other result sets. At time of writing, the current size of the WAREHOUSE_GOLD table is 34 million rows (also note our data does not comprehensively account for the entire vault contents - we are only able to reference what is provided in the bar lists we download).

So my test result currently confirms the statement from the interview - namely that the HSBC vault contains no Chinese gold bars. This seems to directly support the idea that China may be keeping the lion's share of gold output from their refineries, and is also consistent with FOFOA's ideas about China and Gold. Interesting - I had never noticed the absence of Chinese gold bars.


Using the same comparison, the Silver stories (like 'central banks stockpiling silver') do not receive such similar support, in fact it is the opposite. Chinese Refiners appear to have a lot of silver refining output and are more than happy to sell it on. Here is a stacked bar chart (sic) which shows the appearance of ETF-held Silver Bars of Chinese-refiner origin, plotted against 'DateFirstRecorded'. This data is an aggregate of all vaults and all funds from the current set of processed bar lists. Please note the date is only indicative of when we first saw that signature, not when the bar was manufactured i.e. the bulk of our records start in 2010, so that year appears to be the biggest.

Some other limit-of-reading errors exist which means the figures are not 100% accurate (feel free to ask in the comments) but it's just to demonstrate that the Chinese have been shipping a lot of silver!  Silver bars minted/refined in China represent around 110 million ounces - approximately 19 % of total Silver bar records, second only to Russia.
[ Updated 27th October 2012 ]

I wanted to add that for GOLD, there is a large amount of gold ETF bars refined in Hong Kong, which may or may not be an obvious destination for the Chinese gold to get refined (I am not an expert on Hong Kong gold refineries, perhaps someone can contribute here). One might argue this is part of china since the handover in 1997. Anyway, here is what the same country breakdown looks like for Gold:


For Hong Kong, the 12% output (approx. 6,337,872 oz) consists of output from 3 main refineries: Johnson Matthey Hong Kong Limited (65% of total), Metalor Technologies (Hong Kong) Limited (34% of total) and Heraeus Ltd Hong Kong (2% of total). The thing to remember is that these guys have been refining for a while ... JMHK was LBMA accredited in 2001 link and Metalor HK have since taken over their operations, so that 12% could potentially represent about 11 years of refining - eventually we hope to catalog the ages of each bar so this picture would get clearer over time, but one of the patterns we notice is that bars tend to stay where they settle - there doesn't seem to be a lot of moving around after the initial refining. Charting 'how far from home' might make an interesting post one day.

As mentioned in the comments, I don't think (the Hong Kong aspect) really affects the main impetus of missing bars, since we know that Chinese refineries can (and do) produce LBMA-standard bars (see Goldbarsworldwide for an example of Zhongyuan Gold Smelter link) but we just don't see any of these bars in GLD. The LBMA has a list of LBMA-accreddited Chinese Refineries link. And again, just a reminder that this snapshot represents the CURRENT data we have. We're continually adding more to the database which allows to refine the picture and gives us more opportunity to connect the dots!

Big hello to Max's readership - also to answer a question from a comment in Max's discussion thread - you can see here that the amount of Russian-produced gold bars is also quite small by comparison - especially in comparison to their silver refining output. Again, I'm not an expert in Russian refineries so I have no idea where their bars go or whether they prefer to send their gold to Europe to get refined, but the data shows me that Russian gold bars only make up around 1% of all ETF-held bars.

[ Appendum 29th October 2012 ]
p.s. We have other articles about the database which looks at interesting things like Silver bars from SLV moving across into Goldmoney and Bullionvault link.

[ Additional Comment - 6th November 2012 ]
This article has been linked to by George Washington blog. I notice some articles are claiming 'for any vaults in the world' ... not correct. Our current sample size (which is stated in the article above) includes only data from GLD, SLV, PSLV, Perth Mint, BullionVault and Goldmoney only. We are adding more data - yet to come is the full set of MSL Securities, Julius Baer and a handful of others. It still remains possible that maybe some Chinese bars are founds later in THOSE vaults, and the likelihood increases the closer the vaults get to China, but we don't have bar lists from any Chinese ETF's!! If anyone knows of any, please let us know! However, generally speaking, GLD is the ETF equivalent of the planet Jupiter - the gravity well is so large it sweeps up all the bits and peices floating around. The presence of zero chinese-refined bars simply suggests those bars are not free to move around. This is in direct contrast to what we see in SLV which operates in the same fashion. Regards, Warren

[ UPDATE 20-Nov-2012 - The hunt for Chinese-refined 400oz gold bars continues, in this article: "Chasing Chinese Bars" - synopsis, we added Julius Baer data and found none again - we also have a closer look at the Hong Kong question and others. ]

52 comments:

Warren James said...

I forgot to mention - my article is only about Dominic's statement as it relates directly to the ETF inventory records we have. It does not necessarily endorse the rest of the opinion expressed in that particular interview.

Jeanne d'Arc said...

Oh, Warren, this is a superb observation: the Chinese are keeping their gold, and flogging their silver with gusto.

If that doesn't put to bed the idea that central banks (and the silverbugs like to consider the Chinese CB as the granddaddy of them all in terms of PM accumulation) are desperately trying to get their hands on silver, I don't know what will.

JdA

duggo said...

This is counter to the latest video of BrotherJohn who believes Silver is in short supply.

The hype surrounding Silver shortage seems to me to be one of the biggest manipulations going.

I've sold all of my Silver and bought Gold.

Warren James said...

@JdA, thanks - I fully agree.

@duggo, agreed. I started the project wanting to find evidence of silver shortages but to date I have not found any ... one might concoct a conspiracy theory that the Russian and Chinese silver bars are molybdenum but that theory has issues on many levels (this is actually the topic of my next database series article so I'll save it till later).

anon said...

I wonder why the lamestream media portrays otherwise...http://www.businessweek.com/news/2012-10-24/china-silver-demand-to-advance-to-record-on-wealth-protection

Lord Sidcup said...

Nice work.

If, as everyone seems to insist, China is hoarding all it's gold, how come I'm able to to buy new Panda Coins?

Duggo,
aren't you a silverbug?

What creedance can be given to all this stuff about Germany's gold having been leased out and vanished?
Geez these bugs love a conspiracy.


Warren James said...

@anon, Slow Loris Larry is our resident expert on above-ground silver estimates, I should have mentioned the scope of my figures cover only the LBMA-style 1,000 oz silver bars from some popular silver funds. The 110 million oz I have accounted for is only a fraction of what is out there.

@Lord Sidcup, thanks. Same sort of concept, the gold absence only refers to LBMA 400 OZ bars held in popular gold vaults. The smaller minted products probably move across borders a lot more but I don't track that kind of data (Nick Laird might have figures for that).

cheers :)

anon said...

Gotcha...Thanks!

duggo said...

@ Lord Sidcup

Not since I sold all of my Silver and bought Gold.

"Reason and facts" are always the best course to follow no matter how strong your previous beliefs.



Marks said...

So what exactly are China gold exports to Hong Kong. This must not be including any LBMA good delivery bars, at least to HSBC or Gold ETF vaults...?

http://www.perthmintbullion.com/Libraries/Website_Downloads/HOW_MUCH_GOLD_DOES_CHINA_HAVE.sflb.ashx

Hong Kong is the channel through which gold moves into China. Sharelynx kindly provided the chart below (link here) which shows import and export volumes of gold with China from Hong Kong’s Census and Statistics Department. I have titled this section “net imports” because as the chart shows, over the past year there has been a dramatic increase in gold exports from China to Hong Kong (the blue bars). Most media reports mistakenly focus on Hong Kong’s exports to China only (example), whereas what matters for this analysis is the net flow of gold into China (the red bars).

Louis Cypher said...

@Marks, I am guessing China is dressing up the storefront in Hong King. They are prepping for the day when they own the Gold markets. They bought the LME.
http://www.telegraph.co.uk/finance/markets/9333414/Hong-Kong-wins-race-to-buy-London-Metal-Exchange.html for big bucks for something that on the surface generates vey little profit.
The LME, which was established in 1877 above a London hat shop, accounts for 80pc of traded volume in global metal futures transactions. Its building on Leadenhall Street in the City financial district is one of the last bastions of open outcry, with futures in metals including copper, aluminium, zinc, lead, tin and nickel still changing hands in so-called ring trading, as well as electronically and over the telephone.
HKEx will part finance the acquisition through a £1.1bn pound bank loan. Any deal would have to be accepted by 75pc of its shareholders including JP Morgan, which could receive £151m and the Bagri family, owners of Metdist, who could be handed £130m.
“This is a transformational milestone for Hong Kong,” Charles Li, chief executive of the HKEx added. “You have the biggest exchange, the biggest market and a lot of inefficiency.”

Louis Cypher said...

More here:
http://www.telegraph.co.uk/finance/comment/damianreece/9335026/Like-a-lamb-London-surrenders-London-Metal-Exchange.html

There is no direct profit of any significance in owning the LME. This is about prestige and power.




milamber said...

sub comments

Is there a way (NOT RSS) to subscribe comments via email w/o having to waste everyone's time by posting a comment, when I have nothing to say (actually no time to delve into things right now), but I want to get comments via email?

Milamber

Louis Cypher said...

@Warren,
Can you tell me if there is a significant accumulation of Chinese Silver in any particular vaults? The conspiracy theorist in me is guessing there is and it's backed by China. The conspiracy theorist in me tells me they still control it.

Or is it simply China is no longer interested in Silver no more than they want to deal with a dual paper currency system?

The Big Setup said...

So..China is selling their silver..to WHO? Someone is buying it. So its a transfer of wealth from one country to..?

/SleepingVillage/ said...

More like a transfer of an industrial metal from a bunch of countries.... to... industrial users in other countries and a pile of bag holders:)

Bags full of silver... overvalued silver.

The Big Setup said...

So, since Silver follows GOLD usually on a 16 to 1 or 52 to 1 now..then that would make a pile of Gold bag holders too..stupid comments on this site

Lord Sidcup said...

Duggo

Re; facts.

I can't see the FreeGold world-view as being based on any historical facts (that I can discern). Reason? perhaps.

FOFOA and VtC tell a fabulous and convincing story. A thrilling tale of oil, intrigue, secret deals and my own personal journey from rags-to-riches. It's unputdownable and I sincerely hope it's true,

King-Turd-GATA et al bleat endlessly about their EXPLOSIVE 'facts' and SHOCK! 'evidence', but nothing could be less convincing to me, but please tell me specifically; what the facts that have led to your epiphany?

The gnomic and hobbit-like writings of FO/A are interesting certainly, but Without Victor the Cleaner and FOFOA I wouldn't have given them much creedence.

Thx

RS

Lord Sidcup said...

Kerry Lutz sounds like he is sitting on the toilet, having a 'difficult' time when he squeezes out his interviews.

The Big Setup said...

Silver Demand In China For Wealth Protection to Climb to Record 7,700 Tons

The Big Setup said...

For the SILVER BAG HOLDERS:

“I’m bullish on silver, so I personally have stockpiled 3 tons of it at home,” Yang Guohui, president at Hunan Yishui Rare & Precious Metals Recycling Co., said in Xiamen on Oct. 17. Yishui is based in Yongxing County, Hunan province, where about 20 percent of China’s silver is from, according to Huang Xiaoming, head of the local precious metals management bureau.

The spread that Chinese investors pay to the overseas prices is $40/kilogram which is due to government tax and transportation costs. In May 2011, this grew to over $200/kilogram on the Shanghai Gold Exchange amid mass speculation.

Chinese solar power may increase demand. The government is growing the number of installations from 2.6 gigawatts in 2011 to 21 gigawatts by 2015.

Metal output from China who is the 3rd leading producer could reach 13,000 tons this year from mining, smelting, refining and recycling, according to Wang Jian, deputy head of the China Nonferrous (1258) Metals Industry Association.

Lord Sidcup said...
This comment has been removed by the author.
/SleepingVillage/ said...

The BS,

We just come from different schools.

I'd hate to see the cost of these 21 gigglywatts if the price of silver was at the "historic" ratio of 16:1 or whatever.

Good thing there's no shortage of this valuable industrial metal, and we have viable recycling methods for recovering the metal we "use".

"3 tons of it at home" Haha! I guess I'd be bullish, too, if I were president of a precious metals recycling facility... or any of the other businesses directly involved with silver.

Pump it up.

The Big Setup said...
This comment has been removed by the author.
The Big Setup said...

I found a "Silver Recovery" company..LOL
HERE

Yes we come from different worlds. I have the facts you babble incoherently..

The Big Setup said...

More facts for the Silver Recovery team expert:
The majority of silver that is used in industry, is applied in very small amounts such as cell phones, computers, TV’s, refrigerators, medical applications, satellites, weapons systems, electrical wiring applications etc. In the majority of cases this silver is never recovered.

Jeanne d'Arc said...

@The Big Setup: OK, it's very rare on Screwtape that we have to do this (thankfully), but could I please ask you to moderate your tone?

Your contrary views are very welcome here, but we do ask for a certain level of politeness and chivalry. You might want to use the exchange between me and Bullion Baron on the Silver Bubble post as a sort of guide.

Let's just keep it friendly - that way everyone gets to air their views, and nobody needs to get frustrated. Otherwise, just button it. ;-)

JdA

The Big Setup said...

@jda oh yes that was a horrifying exchange, absolutely dreadful..monitoring here must be tightened up..guide..lol

/SleepingVillage/ said...

The BS,

Recycling? Who would factor THAT into any sound theory? When the price of silver is at a level where recycling is profitable, it will be recycled. And, yes, I'm talking about "small amounts" as well.

Conversely, If the price is too low, certain mines and recyclers can not operate - so there's a price in there somewhere that the market will sort out, based on supply and demand etc. We are talking about a commodity here, an industrial one.

Makes me wonder if some people think the silver just disappears into the aether. Magically!

I don't care what book, or who says silver is money. Reality, right now on this earth, says otherwise. Can this change? yes it can, but so far it hasn't and there is no credible sign of it happening any time soon.

Will silver ultimately end up at $50 or $150 or $22.50 an ounce? maybe, but I'm pretty sure it will be industry and the market that sorts that one out, not silver "stackers".

I'm sure you've thought of this one simple scenario while gathering your "facts"...

Imagine how expensive the multitude of products that use silver would be if silver was at $150 an ounce. Industry would find replacements where it could. New processes like nano-coated copper? etc? would be deployed to limit the need for large amounts of silver. Demand would go down...

Anyway, that's just a few of many thoughts that we wont get into since you already have all of the facts in yer pocket, and I just babble incoherently:)

Good luck on your journey.

victorthecleaner said...


Warren, very nice result. In particular the comparison gold vs silver.

Just one caveat. Do you know how to 'normalize' the bar findings with respect to the actual refinery capacity?

Perhaps Bron can help here. I vaguely remember that someone (Bron?) said that the Perth Mint refines only very little silver, but a lot of gold, including a good part of the Asian non-Australian gold.

If China ships some gold to the refinery in Australia, but if the silver refining capacity in China is particularly large, this would explain your effect to some degree.

Victor

anon said...

@/SleepingVillage/

". Industry would find replacements where it could. New processes like nano-coated copper? etc? would be deployed to limit the need for large amounts of silver. Demand would go down..."

There's much faith in human ingenuity and perhaps it has to do with my lack of cleverness but at the end of the day, there's much uncertainty and freegold or freewhatever does not solve the underlying cause of the current dilemma the world is in. Looking at the G&S crusades seems a bit childish looking at the bigger picture. At times I feel like i'm back in the playground trying to show the other kids how my action figure is superior.

How does freeanything solve our current dilemma?
http://www.youtube.com/watch?v=G0R09YzyuCI

The Big Setup said...

@sleepingvillage your case would fail in court. SILVER depletes as in "thrown in the dumps" like garbage. Thats where it "goes", never to be seen again. I guess when you reach into your 50's.. and one has read and researched as much as I have... a young kid like yourself has to do a lot of reading to understand how "things" like this work. Start READING.

Jeanne d'Arc said...

@TBS - Last warning. Rather than attacking, goading or patronising, could you please just make your case nicely? Thank you.

Bullion Baron said...

VERY interesting observation Warren, nice work.

I wonder whether the bars might be kept local in order to support their local Gold market as well (e.g. SGE/SHFE).

77 said...

pretty much anybody long anything in the world right now is worried about bernanke losing the job!!

that said, gold for the last 6 years when it made a new high of year and then stalled it had an ave. correction of $120 usd ... that's what we are doing at the moment..

gold seasonal buys are setting up(november normally strong gold month) and articles such as this seem correct:
http://www.mptrader.com/middayminute/10/2012/26/
...silver will follow gold

when the worth zero hedge and pooh pooh turdie blogs came to the forefront posters were so full of f-words and sexual stuff i was gone in a hurry, never to return... gold does attract the doomsday preppers and anarchists, but wouldn't they post happier if they really had all this metal that has gone up wonderfully for almost 11 years straight??

Jeanne d'Arc said...

@77 - for what it's worth, I think both silver and gold are likely to have a bounce soon. But hopefully our resident chart supremo, GM Jenkins, will be on the case this weekend to let us know more.

Very astute point about blog commenters with pent-up aggression. If I had a pound for every person who said on a blog that they'd bought silver at $5 and gold at $300, I'd be well on my way to paying my way out of GM's indentured slavery contract.

I'm also becoming increasingly convinced that many/most of the blog hosts are personally deep in the red due to the PM moves over the last 18 months. It would explain a lot of the exhortations to faith-based investing, and the growing trend to squash any dissent.

JdA

Warren James said...

@Bullion Baron, thanks, yes agreed - many funds and important gold centers are a closed book we don't have access to many potentially useful bits of data. It wouldn't surprise me to find Chinese bars present in Chinese funds, but to my knowledge they don't publish that data in the way that GLD does. With the help of Nick Laird, I think we now have a complete index of everyone who issues a public bar list.

@Victor, thank you. Your caveat raised is a good consideration and there is technically no way to track the metal origins without correlating information from the individual refineries - that would be extremely difficult to obtain because as I understand it the (refining) industry is incredibly competitive. I'll be sure to ask Bron about this next we talk as he will definitely know more on that point - the question becomes how much of that is proprietary mint information ... but it's good to see an overall picture emerging as we scratch away at the details.

One part of the puzzle should be the ZERO result. We know from our database studies that gold bars move around less than their silvery counterparts, but compared against the quantity produced (these Chinese refineries tend to do things in very large batches) one might suppose there would be at least ONE Chinese bar floating around the London markets. It would seem indicative of a tight blanket policy. We are about to broaden the scope of the data samples (particularly as I move the focus towards gold), which may help.

Warren James said...

(catching up on all the comments from overnight)

@Louis, a quick check doesn't reveal much about a concentration of Chinese silver LBMA bars in particular vaults - the bulk of it is in London and directly reflective of the massive size of SLV (I will soon have a better facts table though, which allows a more precise answer to that, if you're interested in exploring that).

@Marks, thanks for that Perth Mint Research link - a great resource - I would always highlight it is important everyone understands there are many moving parts to the Chinese gold industry (and that it can't actually be simplified by saying 'the Chinese are hoarding their gold'). Bron Suchecki and Nick Laird certainly hold the best information for that story, my ETF focused research adds only a tiny additional element.

@milamber - I'll try find a blog setting which allows a non-rss based alerts.

/SleepingVillage/ said...

Jd'A,

The poor (old?) guy apparently has no case:) Aside from a bad case of something. They all dig their own hole, and reveal their true nature when the pressure is applied. Fail.

I actually would've liked to have him or someone shoot down my points with some logic, oh well.

FWIW, over half of my close friends are in their 60's and I have a lot of respect and love for them.

Anon,

I agree with you:)

Warren James said...

@The Big Setup, I want to offer you a panacea but I'm not sure how beyond highlighting you'll never find a more diverse range of views and opinions than at this blog. We have made a huge attempt here to shift our focus to objective, rational research - slowly those results are making me favor gold over silver - but I am still vested in each. The autopsy of the wynter benton myth showed the presence of many old memes and I feel it my duty to trace back the origins of those stories (and test them) lest any other young internet-research-first-folk like myself get led astray by the proliferation of investing falsehoods. Anyway - feel free to get in contact direct if you have more to say - the line is always open to readers and long-time commentators like yourself. Regards, Warren

victorthecleaner said...

Warren,

We know from our database studies that gold bars move around less than their silvery counterparts,

can you remind me where that part was mentioned? Does the silver move around more by dollar price, by weight, or both? Can you put a figure on it: The average ounce of gold changes owner once per x years, or something like that?

Another nice observation (if indeed true): gold lies very still while silver is quite busy.

Victor

Warren James said...

@Victor, I haven't currently devised a metric for that - our to-date evidence is there are zero 'vault jumpers' between GLD and other funds, which was unexpected given the volume of LBMA gold bars in London and the number of vaults.

By comparison, silver vault jumpers show up regularly, although geography always appears to be a limiting factor.

All of this is forcing me into more detailed gold study - for example I have just now ascertained the percentages for refinery origin. I just noticed (and may update the post) that Hong Kong has a lot of output (12% of our total ETF records), and it may be possible that some gold from China is going there to get refined, but I don't think that affects the main crux of the story here, since 4 of the major Chinese refineries have 'gold' in their name. Not all of the Chinese refineries in my list are LBMA Gold Accredited either, which may also affect some of the results.

For anyone interested, the same breakdown for GOLD bars is approx:

Canada 32%
United States 21%
Hong Kong 12%
South Africa 12%
Australia 6%
Switzerland 5%
United Kingdom 3%
Global 2%
Germany 2%
Philippines 1%
Uzbekistan 1%
Russia 1%
... rest below 1% ....

That's interesting as well, since I noticed someone on the Kaiser thread asked about Russia. It would seem the same level of disproportion is present (LBMA bar-wise) since Russia's silver bar share matches china - but perhaps all that means is they prefer to send it to Europe.

duggo said...

@ Jeanne d'Arc

"I'm also becoming increasingly convinced that many/most of the blog hosts are personally deep in the red due to the PM moves over the last 18 months. It would explain a lot of the exhortations to faith-based investing, and the growing trend to squash any dissent".

As an ex-Silver holder I too have become aware of the belligerent stance of all sites that have Silver in their name. Most of them are also selling Silver so any information coming from them is extremely biased.

Motley Fool said...

Interesting post, thanks Warren.

I like it when I can benefit from others' OCD. ;)

and thanks VtC for linking. :)

Marks said...

Anyone care to estimate how much gold is leased and how much remains at central banks, using a rational and logical methodology...

Let's start off with Turk's 2000 ton comments: "in 1997 over 2,000 tons of gold moved out of Great Britain.” Turk added, “Now since Great Britain is not a gold miner, we know that gold had to come out of the Bank of England (where they store other countries gold), and it probably went into Zurich (Switzerland) for what’s called ‘leasing’ but I use the word ‘lending,’ or lending into the market.”

Let's then compare to this recent article on Swiss Refiners:
http://www.swissinfo.ch/eng/business/Switzerland:_the_world_s_gold_hub.html?cid=33706126

"The refineries are mainly service providers. “As a rule these foundries get the gold from their customers [e.g. Central Banks] and refine it to the standard grade of purity. The customer then decides whether to take the gold back or sell it on the market or to the refinery,” explains Panizzutti."

Turk has good documentation on the 2,000 tons being exported from England in 1997. But what we do not know is how much of those 2,000 tons were imported back to England...? And possibly sold by Bank of England via their 1999 to 2002 auction sales of 400 tons... And what happened to the other 1,600 tons?

And the 400 tons actually sold was about 50% of Bank of England's total gold reserves as of May 1999. So who was the owner of the rest of those 2000 tons transferred from England to Swiss refiners in 1997. (Am not certain how much gold BoE owned as of 1997. Washington agreement came into effect in 2009 limiting gold sales to 400 tonnes per year).

The BoE currently holds 4,600 tons of gold per 2011 estimate I saw for both BoE and other central banks.

Here is interesting article on BoE gold vault:
http://www.dailymail.co.uk/news/article-1079518/The-Big-Picture-This-vast-vault-gold-Bank-England-weather-credit-crunch.html

So can anyone make a logical, rational estimate based on the above of how much gold may have been leased, sold into the market, and now listed as a gold receivable. (FWIW, believe Turk and Veneroso are a bit high at 15,000 tons, but appears to me that 5,000 tons seems likely).

Also, does anyone disagree that there is double counting by Central Banks for leased gold and/or that such leased gold is not material?

Sorry for the long post, but sure would like to see this issue intelligently debated.

S Roche said...

Warren,

Am I right that you are tracking only 400oz gold bars?

Am I also right in thinking that the preferred gold bar in Chinese trade is the 1kg bar? (I think Bron pointed this out and then this is significant because London Trader tells me that gold from London is being refined into 1kg bars...never to return).

Thirdly...are you aware that (largely) gold jewellery exports from Pakistan have risen from $42m to $922m in the last 5 years?

Sorry about that last one, I had searched for Chinese gold exports and read the entire article http://dawn.com/2012/09/17/innovative-designs-push-up-jewellery-exports/ (thinking aha!) before realising that it was the Urdu edition... and just wanted to share the pain.

Warren James said...

Hi S Roche,

Yes - the database only looks at 400 oz LBMA-compliant bars (That is part of the limit-of-reading error in this analysis), and this info is only available because the various ETF's are obliged to prove their holdings. Based on what we've seen with geography, I would guess that a Chinese located ETF required to hold LBMA-compliant bars would possibly house a few, but we don't have such data.

re: 1kg bar preferred, I don't know. Given the refining costs associated I'm not sure why the Chinese could prefer to have it melted down to that size but perhaps they have their reasons. Apologies as this is an issue I probably won't research further - I plan to just park myself in the LBMA accredited bars space.

Bars from global refineries show up in all sorts of exotic locations, so it seems strange that there is not a single one that can be identified. I hope actually to find a few in the Julius Baer and rest of the MSL Securities data. We are going to build up a catalog of bar serial number sequences as well, so it may be possible to identify some in the ZKB fund which is also quite large (but has no refiner name data).

Regards,

victorthecleaner said...

S Roche,

the financial institutions all trade 400oz LGD bars. The only exception is COMEX with their funny 100oz size.

1kg bars are very popular in Europe and in Asia if you want to take them OTC out of the banking system and take care of them yourself. The reason is quite obvious. A 1kg bar is the size of a mobile phone, and I can carry two of them in my pockets. Although it is noticeable, people will probably think I have several smartphones. Try thins with a 400oz bar.

The 'London Trader' is a fraud. Gold has always flown from the mines through the banks and then some of it to the jewellery manufacturers, mints, and other users. You don't need a fake insider to tell you that.

Marks,

the amount of Central Bank gold on lease is most likely very small or even zero as of today.

The European CBs had quite a sum on loan before the Euro was started in 1999. Most of this was eventually sold under the Washington Agreement. Right now, the Bundesbank has nothing on loan (they just reported this), and the maximum they ever had on loan was about 10% of their holdings, i.e. about 300 tonnes, between 1997 and the early 2000s.

As for the Europeans, it is very instructive to read the Washington Agreement:

http://www.ecb.int/press/pr/date/1999/html/pr990926.en.html

The Europeans view gold as the primary international reserve (not the dollar), and they won't lease or sell any significant amounts after the introduction of the Euro.

At some point in 2000 (if I remember correctly, might be off by one year), the U.S. also decided not to lease or sell any of their gold. This was clearly stated by Summers and Greenspan at that time. This makes a lot of sense, too, simply because once the Europeans sit tight and don't sell or lease, the U.S. cannot keep the gold price low any longer. You can see this nicely from the gold/dollar chart. Gold has been increasing since the introduction of the Euro.

Turk definitely lies as far as the German gold is concerned, and so why would you believe anything else he says? Sprott probably pays him money for emitting this nonsense. It's very sad actually.

The 2000 tonnes in 1997 is probably the correct figure. This was when the Chinese had figured out that the paper gold market had been expanded to give OPEC countries access to cheap gold. The Chinese must have withdrawn quite a bit, and some oil people might have freaked out and taken their gold out of London, too. I hadn't seen the figure of 2000 tonnes, but it does fit the picture.

The story promoted by Turk and friends suffers from getting the major players wrong. The U.S. have long promoted the dollar as an international reserve, closely supported by U.S., Canada, Australia. The rest of the world has always been pissed off by the inflation coming out of the U.S., but as all international trade, especially oil, was in dollars, there was little they could do about it.

The Europeans finally introduced the Euro in order to become independent of the dollar system. They view gold as the major reserve.

So when Turk and friends claim all central banks want to debase their paper money and fight gold, they get is bass ackwards.

Victor

freegoldfuturist said...

Jeanne d'Arc said:
"I'm also becoming increasingly convinced that many/most of the blog hosts are personally deep in the red due to the PM moves over the last 18 months."

I look at when the blog host started posting, and the price of the PM they promote when they started posting. If the blog host knew what they were talking about, why didn't they start posting about silver before it took off from the teens? (or sooner?) For the ones who rely on adsense for revenue: there were not enough eyeballs to make it worth their while until the price took off and there was a big enough viewership to make it worth their while. Maybe some of the adsense whores don't even own PMs, they just tailor their content to appease the hordes of angry PM owners that are underwater.

Jeanne d'Arc said...

@freegoldfuturist: Good point, well made.

One reason this site refuses to carry any ads (or donate buttons or anything like that). That way we hope to avoid any accusations of being in it 'for the money'. That said, one swivel-eyed blog host who shall remain nameless did once use our lack of ads as 'proof' that we must be in the pay of JPM, as they were clearly making up the shortfall we'd have otherwise got from Google.

You couldn't make it up...

freegoldfuturist said...

I noticed the lack of ads or donate buttons Jeanne!

"journalism, detective-ing, think tanks and James Bond-yness"

So... are you guys writing a book on the great silver move of 2011? Is some wealthy client (or even govt agency) seeking your services in getting to the bottom of the silver market? I am not being accusatory or judgemental, this blog has the most comprehensive, detailed and accurate info and analysis I have found on silver rumors to date. Which of course doesn't make it automatically 100% correct (I am not saying I have found any mistakes either.)

I started my youtube channel as journey of knowledge - I can't believe it took me so long to find this blog.

Bron Suchecki said...

Having met Warren last week I don't see anyone bankrolling them. Just hobbists.