-- Posted Monday, 21 January 2013 | Share this article | Source: GoldSeek.com
Today’s AM fix was USD 1,688.00, EUR 1,269.08, and GBP 1063.58 per ounce.
Friday’s AM fix was USD 1,690.00, EUR 1,265.82, and GBP 1,060.49 per ounce.
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Gold inched up on Monday on concerns about currency debasement and even looser monetary policies to be announced from the Bank of Japan.
BOJ is examining an open-ended pledge to buy assets until a 2% inflation target is near which is pushing the yen to a 2 ½ year low. Gold bullion on the TOCOM soared to match a multiyear record of 4,911 yen a gram before giving up gains.
Physical gold demand is also ramping up in Asia with the upcoming Lunar New Year festivities just around the corner on February 10th.
This week’s economic highlights include Existing Home Sales on Tuesday, the FHFA Housing Price Index on Wednesday, Initial Jobless Claims and Leading Economic Indicators on Thursday, and New Home Sales on Friday. Next week investors will closely watch to the U.S. Federal Reserve's policy meetings on the 29th and 30th.
XAU/GBP Daily, 2010-2013 – (Bloomberg)
Sweden’s central bank hasn’t carried out any physical checks of its gold reserves deposited with central banks abroad and relies on the respective authorities to do so, Dagens Industri reported, citing the Riksbank.
Central banks internationally, from Ireland to Germany and now in Sweden, are being forced to answer legitimate questions about their gold reserves by concerned citizens.
Swedish gold reserves are 126 metric tonnes and are valued at almost 45 billion Swedish krone.The Riksbank confirmed that the majority of Swedish gold reserves are located abroad.
XAU/EUR Daily, 2010-2013 – (Bloomberg)
Another respected hedge fund, the Pacific Group, has decided to convert one third of its hedge-fund assets into physical gold.
The Pacific Group Ltd., which manages over a $100 million worth of assets, believes that gold will continue to rise as governments print more money to pay off debt, according to Bloomberg.
Thus, continues the trend of some of the smartest money in the world diversifying some of their holdings into physical gold.
Respected hedge fund managers and investors such as George Soros, John Paulson, Bill Gross, David Einhorn and Kyle Bass have diversified into gold - the latter two opting for the safety of allocated physical gold bars.
The Hong Kong-based asset manager plans to take delivery of $35 million worth of gold bars that can be traded on the London Bullion Market Association and other international markets, William Kaye, its founder and chief investment officer, said in a telephone interview on January 18.
It has secured vault space at Hong Kong International Airport to store the gold, he said.
Investors disillusioned with government money printing to service “insurmountable” public debt may seek alternatives to fiat currencies, Kaye said.
Fiat currencies have no tangible backing, such as gold or silver, except governments’ good faith and can become worthless due to hyperinflation or loss of public faith.
Central banks have so far been able to manipulate interest rates to allow governments to service their debt at low costs, averting market seizures, Kaye said. Still, the next big rally in precious-metal prices may be 18 months to two years away, triggered by a “financial catastrophe,” he added.
Ownership of gold through financial instruments based on it, such as Comex futures contracts, now represents more than 100 times the physical gold that exists above ground worldwide, Kaye said, citing the Pacific Group’s own analysis.
“Gold, the way we look at it, is anywhere from being undervalued to being seriously undervalued,” Kaye said. “We’re in the early stages, in our judgment, of what would likely be the world’s largest short squeeze in any instrument.”
The likelihood of a massive short squeeze has been predicted for some years by GATA, the Gold Anti Trust Action Committee and by financial journalist, Max Keiser and many others, including GoldCore.
The idea appears to be becoming accepted in the wider investment world.
“All you actually need for a major upward revaluation of gold is for a small fraction of people to physically reclaim from major central banks or other depositories that are holding your gold and using it for their purposes,” he added.
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Sweden's central bank keeps most of its gold abroad without audit
Submitted by cpowell on Mon, 2013-01-21 22:32. Section: Daily Dispatches
2:24p Monday, January 21, 2013
Dear Friend of GATA and Gold:
GoldCore's Mark O'Byrne reports today that Sweden's central bank, the Riksbank, has acknowledged that most of its gold reserves are vaulted at central banks abroad and that the bank undertakes no physical audit of them, instead relying on those other central banks to assure proper custody.
This credulity in a world full of secret central bank gold swaps and leases prompts GATA to wonder if the Riksbank might be interested in purchasing a bridge in Brooklyn -- the one over which some of Germany's much-depleted gold reserves may be driven on the way to transport planes at Kennedy Airport for a flight to Frankfurt.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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Alasdair MacLeod has got it correct on the German repatriation of gold;
(courtesy Alasdair MacLeod)
Gold reserve mysteries
2013-JAN-20
 Last Wednesday the Bundesbank released a statement to the effect that 300 tonnes of Germany’s gold will be moved from New York and 374 tonnes from Paris. This should be a simple operation: rail or trucks from Paris, and a few military planeloads (or ships) from America – as soon as they have somewhere to store it.
Instead they plan to do it over the next seven years, which is a postponement. This tends to confirm suspicions that the gold does not actually exist. As a side issue, along with the Bundesbank statement is a PDF download with slide number 14 entitled “Storage at the Federal Reserve Bank New York”. It looks like a photomontage rather than real gold, and the come-on is to believe it’s the Bundesbank’s. This gives the game away: the whole exercise is a public relations stunt.
Why hold any gold in New York nowadays? The Soviets are no longer menacing the Fulda Gap. Yes, New York is obviously still a critical trading venue, but not for physical gold – the Bundesbank apparently withdrew 940 tonnes from the Bank of England in 2000, where the physical market is actually located.
The reason this matters is that independent deductive analysis has concluded that the central banks have been supplying the market with physical bullion in order to suppress the price, all of which is either officially denied or goes unanswered. The origin of price suppression actually go back to the 1990s, and was exposed by Frank Veneroso in a paper published in 1998, confirmed by detective work from our own James Turk, and triply confirmed by the evasive responses on this issue given by central banks and the IMF to the Gold Anti-Trust Action Committee (GATA). The public are unaware of this issue because the mainstream media, with the occasional exception, refuses to investigate the subject.
But here is something that joins up a few more dots. We know that Gordon Brown sold half of Britain’s gold at the bottom of the market from 1999-2002. We commonly assume that he was just incompetent. What is not commonly appreciated is that he learned his economics from Ed Balls, the current Shadow Chancellor. As his economics advisor, Balls was the puppet-master and Chancellor Brown the puppet. Ed Balls was also a close friend of Larry Summers, who was US Deputy Secretary of the Treasury from 1995 and then Secretary of the Treasury from 1999 to 2001 – the time of Britain’s gold sales. As Treasury secretary Summers was head of the Exchange Stabilization Fund, the US government’s mechanism for supplying bullion to the markets. In the light of these deeply Keynesian relationships from the mid-1990s, it is unlikely that Brown acted in isolation. More than likely Washington was also supplying the market through swaps and leases that were never recorded as changes of ownership.
The net result is that there is not enough physical gold left in the vault to deliver to Germany, which is why they are stalling for time. What was presented to us last Wednesday was just a desperate attempt to stop the whole issue becoming more public.
Jan Skoyles on her take as to why Germany is repatriating their gold:
(courtesy Jan Skoyles/GATA)
Jan Skoyles: Why is Germany repatriating their gold?
Submitted by cpowell on Sun, 2013-01-20 17:55. Section: Daily Dispatches
9:51a PT Sunday, January 20, 2013
Dear Friend of GATA and Gold:
Analyzing the Deutsche Bundesbank's plan to repatriate some of Germany's gold reserves, The Real Asset Co.'s Jan Skoyles notes GATA's extraction from the Federal Reserve of an acknowledgment that it has secret gold swap arrangements with foreign banks. Skoyles' commentary is headlined "Why Is Germany Repatriating Their Gold?" and it's posted at The Real Asset Co.'s Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Why are central banks buying more gold than at any time in 50 years?
By: Peter Cooper, Arabian Money
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-- Posted Monday, 21 January 2013 | Share this article | Source: GoldSeek.com
Gold bugs can hardly have missed the GFMS Gold Survey for 2012 that reported global central banks bought more gold in 2012 than at any time in the past 50 years, a net 536 tonnes of the yellow metal. The global money printers clearly know the value of the one money that they cannot create from thin air.
This is being hailed as a step by step move to a new Gold Standard. Before the global financial crisis of 2008 these same banks had an agreement to gradually sell-off their gold reserves. That has been reversed in the wake of the crisis and the money printing that has followed.
New gold buyers
The main buyers of gold are the rising powers of the East, including Central Asia and Russia, as well as Latin America. China has declared its intention to double gold consumption to 1,000 tonnes a year over the next three years while energy-rich Russia wants to exchange black for yellow gold. India is raising taxes on gold to dampen gold imports that are damaging its balance of payments.
Asia and the commodity producers holds two-thirds of the world’s $11 trillion in foreign reserves and its central bankers know very well that the US dollar rests on a pyramid of debt with a central bank that would dearly love to pass on all its problems to the rest of the world by devaluation.
Central banks are the guardians of the national economy unless they fall into bad hands. They are also usually pulled in many directions and try to find a balance that is the security they have as their mandate.
Gold Standard?
Buying gold is indeed the opposite side to the coin of printing money and dealing with the tidal wave of paper money now piled up in central bank balance sheets. Revaluing gold will be the way to keep balance sheets in balance as the inflation of paper money is exposed and raises general price levels. |
That is why central banks want more of the yellow stuff now at current prices. It’s an instinctive flight to preserve value at a time of devaluing paper currencies, and it will play a vital role in preserving financial systems as the whole fiat money system comes unstuck in the bond crises and defaults that usually follow excessive indebtedness.
How long will that take? It’s anybody’s guess. But the normal pattern is for the weakest links to break first. Greece has already gone. Who is next? There is a long queue. Cyprus as too small to be a concern?
The real danger cases are Japan and the UK, huge economies with massive debts and independent currencies. The US is still further down the line.
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Impact of Germany’s Gold Repatriation
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-- Posted Monday, 21 January 2013 | Share this article | Source: GoldSeek.com
© Jan 17, 2013 by Keith Weiner
Bill Gross of PIMCO tweeted:
“Report claims Germany moving gold from NY/Paris back to Frankfurt. Central banks don’t trust each other?”
In this article, I consider some popular reactions to the news and then present my own analysis and some ideas about what I think could happen.
I am sure distrust for the US government, or more likely, responding to the German voter’s distrust is among their concerns. But, I doubt that this is the primary motivation. The Bundesbank is not acting as if they are in any hurry, planning to have the gold moved over a period of 8 years (yes, I know, it all “fits”, the delay is because the Fed hasn’t got the gold, etc.) A lot can and will happen in 8 years (including the end of the current monetary system). The distrust theory has to answer: why would Germany leave 1,200 tonnes of gold in New York and 447 tonnes in London?
As a side note, if distrust grows to the point where a major government cannot trust another major government with $2.4B worth of gold, then there are some negative consequences. The gold market will not be the greatest of them, as the world experiences a collapse in trade, borders are closed to the movement of (peaceful) people, goods, and money, and the world in general moves towards world war and the possibility of a new dark age.
Some have declared that German’s gold withdrawal is a “game changer”. The game will change sooner or later, and gold will be used again as money. In this sense, German’s move is not a game-changer at all. They are just moving metal from one central bank vault to another. They are doing nothing to change the paper game into a gold game. They are not helping gold to circulate.
In any case, I don’t think this is what most pundits mean when they say, “game changer”. I think they mean the price will rise sharply. This follows from the belief that the Federal Reserve has already sold this gold, perhaps multiple times over. If this were true, then it would be obvious why Germany would want its gold back, while it is still possible to get it back. This would force the Fed to buy it back. This would cause the price to rise.
The data does not fit this theory.
Alternatively, the Fed could have sold the gold in the physical market (albeit only once). This gives us an easily testable hypothesis. If the Fed had sold Germany’s gold and now it must buy about 1.2M ounces a year, this should show up in the gold basis. The Fed would become the marginal buyer of physical gold. This should cause the basis to fall sharply, or perhaps even go negative.
This is a graph of the gold basis (for the December contract). There has been a gently falling trend since the start of the data series in July, from about 0.7% annualized to around 0.55%.
It is hard to guess how much impact would occur as a result of a new 1.2M ounces of annual demand at the margin. This would be about 5000 ounces a day, every business day relentlessly for 8 years (assuming it is disbursed evenly, which is doubtful). I think there would be an impact in the basis. We shall have to wait, and watch the basis to see.
I think the Fed does have the gold, or at least title to gold leases. If the gold is out on lease, then the Fed would have to wait for the leases to mature. The leased gold might even be in the Fed’s vaults. It has to be stored somewhere, and to a financial institution the Fed’s vault is as good as anywhere.
I plan to write more about gold lending and leasing. In short, no one today borrows gold to directly finance anything. The world runs on dollars. A gold lease today is basically a swap. One party provides gold. The other party provides dollars. And at the end, the gold and dollars are returned to their original owners; plus one party has to pay dollars to the other. Typically the party who owns the gold pays net interest (it’s like a dollar loan to the gold owner, secured by the latter’s gold as collateral).
Of course the Fed has no need to borrow dollars, so if it leases gold it must be for another reason. I can think of two. First, the Fed might want to remove liquidity from the banking system (though not in the post-2008 world!). Second, the Fed might accommodate the case of a bank with a profitable gold arbitrage opportunity. There are several potential candidates, but one that comes to mind is temporary gold backwardation (http://keithweiner.posterous.com/temporary-backwardation-the-path-forward-from). In this case, the Fed leases gold to a bank. The bank sells the gold in the spot market, and simultaneously buys a future. The bank ends with the same gold bar and pockets a spread. It returns the gold to the Fed and even gets a little interest on the dollars it lent against the Fed’s gold collateral.
While this might have been occurring intermittently since December 2008, there is not much of a backwardation today in the February contract (around 0.1% annualized). And in any case, a lease for this purpose would be a short-term lease as there has not been any backwardation in long-dated futures, only the expiring month (less than 60 days).
Moving 300 tonnes of gold from New York to Frankfurt will be a non-event in the gold market in itself. However, there could be a large and unpredictable change if the gold-buying public sees this as a reason to increase their distrust of the system and runs to their nearest coin shop to load up.
Let’s not forget that the Bundesbank is also a central bank, invested in the regime of irredeemable currency. Like the Fed, it is built on faith in Keynesianism, along with some Monetarism and Mercantilism. Is there any reason to assume that they would not do the same things that the Fed is doing, when they feel the same pressures? The gold is going out of the frying pan and … into another frying pan.
What if the Fed is currently leasing out all 300 tonnes and the Bundesbank plans not to lease? This would remove some gold currently circulating in the market. Will this cause the price to rise? Certainly.
I suspect the reason for repatriating the gold has more to do with a shift in German politics than any sudden concern about the intentions of the Fed, any sudden questions about the faith and credit of a central bank, or any desire to re-monetize gold in Germany. Readers from Germany are encouraged to write me if they disagree.
Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.
And from silver doctors ......
JANUARY 21, 2013 BY THE DOC
 *Updated- shortage spreading to Silver Maples, SDBullion experiencing unprecedented demand for silver bullion
On Thursday, we alerted SD readers to the fact that the US Mint had sold out of Silver Eagles, selling over 6 million ounces over the first 9 days of sales in 2013, and was shutting down sales and production of Silver Eagles through at least 1/28, and would ration sales of eagles upon resumption of sales.
With a rapidly growing presence in the retail gold and silver market via SDBullion, we have had a unique perspective of the escalating physical silver shortage, and would like to give our readers an inside glimpse of the time-line of events evidencing a growing shortage of physical silver.
Full time-line of the developing silver shortage from a wholesale perspective is below:[Read more...]
The Fund has announced it will withdraw all of its physical gold assets from JP Morgan warehouses in London.
The game of musical chairs known as bullion banking allocated (rehypothecated) gold storage appears to be rapidly coming to an end.
Russia announced Saturday the addition of another 600,000 ounces to its gold reserves in December, bringing the total gold officially added to Russian reserves in 2012 to 3.2 million ounces!
Somehow we doubt a single ounce is being stored at the NY Fed, the BOE, or JP Morgan. [Read more...]
http://www.silverdoctors.com/repatriation-avalanche-gaining-momentum-azerbaijan-to-withdraw-all-gold-from-jp-morgan-vaults/
REPATRIATION AVALANCHE GAINING MOMENTUM: AZERBAIJAN TO WITHDRAW ALL GOLD FROM JP MORGAN VAULTS
JANUARY 21, 2013 BY THE DOC
 The State Oil Fund of Azerbaijan has withdrawn the first ton of its physical gold from JP Morgan vaults, and placed it in their own Central Bank vaults in Baku.
The Fund has announced it will withdraw all of its physical gold assets from JP Morgan warehouses in London.
The game of musical chairs known as bullion banking allocated (rehypothecated) gold storage appears to be rapidly coming to an end.
As abc.az reports, the first ton of physical gold has already been transferred out of JP Morgan vaults via Brinks:
Baku, Fineko/abc.az. The State Oil Fund of Azerbaijan (SOFAZ) has placed today the first ton of physical gold in the safety vaults of the Central Bank in Baku, purchased at the London Stock Exchange of Precious Metals (LBMA) within the SOFAZ investment policy.
According to the Fund, today British company Brink’s Global Services delivered from London to Baku and placed 1 ton (32,150 ounces) of gold owned by SOFAZ in the CBA vaults.
The Oil Fund has been acquiring physical gold since February 2012 in batches of 10,000 ounces a week. By early 2013 SOFAZ brought its gold assets up to 14,934 kg (480,146 ounces).
Initially London-based warehousing units of JP Morgan were selected for storage, but now all the gold will be gradually transferred to storage in Azerbaijan. Prior to the completion of construction of a new residence of SOFAZ this gold will be stored in the CBA vaults, and then will be transferred to the Fund’s own store in its residence at Heydar Aliyev Avenue in Baku.
SOFAZ investment policy allows it to keep in gold up to 5% of assets.
The size of the gold withdrawal from the cartel bullion banking system is not the important thing in Azerbaijan’s announcement- rather the increasing liklihood that our bankster friends will soon be facing repatriation requests from every last rehypothecated gold bar owner.
and.........
http://www.blacklistednews.com/The_Real_Reasons_that_Germany_Is_Demanding_that_the_U.S._Return_Its_Gold/23747/0/0/0/Y/M.html
Source: Washington's BlogWhy Is Germany Demanding 300 Tons of Gold from the U.S. and 374 Tons from France?
The German’s are demanding that the U.S. return all of the 374 tons of gold held by the Bank of France, and 300 tons of the 1500 tons of bullion held by the New York Federal Reserve.
Some say that Germany is only demanding repatriation of its gold due to internal political pressures, and that no other countries will do so.
But Pimco co-CEO El Erian says:
In the first instance, it could translate into pressures on other countries to also repatriate part of their gold holdings. After all, if you can safely store your gold at home — a big if for some countries — no government would wish to be seen as one of the last to outsource all of this activity to foreign central banks.
As we noted last November:
Romania has demanded for many years that Russia return its gold.
Last year, Venezuela demanded the return of 90 tons of gold from the Bank of England.
***
As Zero Hedge notes (quoting Bloomberg):
Ecuador’s government wants the nation’s banks to repatriate about one third of their foreign holdings to support national growth, the head of the country’s tax agency said.
Carlos Carrasco, director of the tax agency known as the SRI, said today that Ecuador’s lenders could repatriate about $1.7 billion and still fulfill obligations to international clients. Carrasco spoke at a congressional hearing in Quito on a government proposal to raise taxes on banks to finance cash subsidies to the South American nation’s poor.
Four members of the Swiss Parliament want Switzerland to reclaim its gold.
Some people in the Netherlands want their gold back as well.
(Forbes notes that Iran and Libya have recently repatriated their gold as well).
The Telegraph’s lead economics writer – Ambrose Evans Pritchard – argues that the German repatriation demand shows that we’re switching to a de facto gold standard:
Central banks around the world bought more bullion last year in terms of tonnage than at any time in almost half a century.
They added a net 536 tonnes in 2012 as they diversified fresh reserves away from the four fiat suspects: dollar, euro, sterling, and yen.
The Washington Accord, where Britain, Spain, Holland, South Africa, Switzerland, and others sold a chunk of their gold each year, already seems another era – the Gordon Brown era, you might call it.
That was the illusionary period when investors thought the euro would take its place as the twin pillar of a new G2 condominium alongside the dollar. That hope has faded. Central bank holdings of euro bonds have fallen back to 26pc, where they were almost a decade ago.
Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed.
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My guess is that any new Gold Standard will be sui generis, and better for it. Let gold will take its place as a third reserve currency, one that cannot be devalued, and one that holds the others to account, but not so dominant that it hitches our collective destinies to the inflationary ups (yes, gold was highly inflationary after the Conquista) and the deflationary downs of global mine supply.
***
A third reserve currency is just what America needs. As Prof Micheal Pettis from Beijing University has argued, holding the world’s reserve currency is an “exorbitant burden” that the US could do without.
The Triffin Dilemma – advanced by the Belgian economist Robert Triffin in the 1960s – suggests that the holder of the paramount currency faces an inherent contradiction. It must run a structural trade deficit over time to keep the system afloat, but this will undermine its own economy. The system self-destructs.
A partial Gold Standard – created by the global market, and beholden to nobody – is the best of all worlds. It offers a store of value (though no yield). It acts a balancing force. It is not dominant enough to smother the system.
Let us have three world currencies, a tripod with a golden leg. It might even be stable.
How Much Gold Is There?
It’s not confidence-inspiring that CNBC’s senior editor John Carney argues that it doesn’t matter whether or not the U.S. has the physical gold it claims to hold.
In fact, many allege that the gold is gone:
Cheviot Asset Management’s Ned Naylor-Leyland says that the Fed and Bank of England will never return gold to its foreign owners.
Jim Willie says that the gold is gone.
***
Others allege that the gold has not been sold outright, but has been leased or encumbered, so that the U.S. does not own it outright.
$10 billion dollar fund manager Eric Sprott writes – in an article entitled “Do Western Central Banks Have Any Gold Left???“:
If the Western central banks are indeed leasing out their physical reserves, they would not actually have to disclose the specific amounts of gold that leave their respective vaults. According to a document on the European Central Bank’s (ECB) website regarding the statistical treatment of the Eurosystem’s International Reserves, current reporting guidelines do not require central banks to differentiate between gold owned outright versus gold lent out or swapped with another party. The document states that, “reversible transactions in gold do not have any effect on the level of monetary gold regardless of the type of transaction (i.e. gold swaps, repos, deposits or loans), in line with the recommendations contained in the IMF guidelines.”6 (Emphasis theirs). Under current reporting guidelines, therefore, central banks are permitted to continue carrying the entry of physical gold on their balance sheet even if they’ve swapped it or lent it out entirely. You can see this in the way Western central banks refer to their gold reserves.
Indeed, it is now well-documented that the Fed has leased out a large chunk of its gold reserves, and that big banks borrow gold from central banks and then to multiple parties.
As such, it might not entirely surprising that the Fed needs 7 years to give Germany back its 300 tons of gold … even though the Fed claims to hold 6,720 tons at the New York Federal Reserve Bank alone: Even Pimco co-CEO Bill Gross says:
When the Fed now writes $85 billion of checks to buy Treasuries and mortgages every month, they really have nothing in the “bank” to back them.Supposedly they own a few billion dollars of “gold certificates” that represent a fairy-tale claim on Ft. Knox’s secret stash, but there’s essentially nothing there but trust.. When a primary dealer such as J.P. Morgan or Bank of America sells its Treasuries to the Fed, it gets a “credit” in its account with the Fed, known as “reserves.” It can spend those reserves for something else, but then another bank gets a credit for its reserves and so on and so on. The Fed has told its member banks “Trust me, we will always honor your reserves,” and so the banks do, and corporations and ordinary citizens trust the banks, and “the beat goes on,” as Sonny and Cher sang. $54 trillion of credit in the U.S. financial system based upon trusting a central bank with nothing in the vault to back it up. Amazing!
And given that gold-plated tungsten has turned up all over the world, and that a top German gold expert found fake gold bars imprinted with official U.S. markings, Germans may have lost confidence in the trustworthiness of the Fed. See this, this, this and this.
This may especially be true since the Fed refused to allow Germans to inspect their own goldstored at the Fed.
Currency War?
The gold repatriation is – without doubt- related to currency.
As Forbes notes:
Officials at the Bundesbank … acknowledged the move is “preemptive” in case a “currency crisis” hits the European Monetary Union.
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“No, we have no intention to sell gold,” a Bundesbank spokesman said on the phone Wednesday, “[the relocation] is in case of a currency crisis.”
Reggie Middleton thinks that Germany’s demand for its gold is part of a currency war.
Jim Rickards has previously said that the Fed had plans to grab Germany gold:
Jim Rickards has outlined possible plans by the Federal Reserve to commandeer Germany’s and all foreign depositors of sovereign gold at the New York Federal Reserve in the event of a dollar and monetary crisis leading to intensified “currency wars” and the ‘nuclear option’ of a drastic upward revision of the price of gold and a return to a quasi gold standard is contemplated by embattled central banks to prevent debt deflation.
Is that one reason that Germany is demanding its gold back now?
China is quietly becoming a gold superpower, and China has long been rumored to beconverting the Yuan to a gold-backed currency.
The Telegraph’s James Delingpole points out:
Back in the mid-1920s, the head of the German Central Bank, Herr Hjalmar Schacht, went to New York to see Germany’s gold. However the NY Fed officials were unable to find the palette of Germany’s gold bullion. The Chairman of the Federal Reserve, Benjamin Strong was mortified, but to put him at ease Herr Schacht turned to him and said ‘Never mind, I believe you when you when you say the gold is there. Even if it weren’t you are good for its replacement.’ (H/T The Real Asset Company)
But that was then and this is now. In the eyes of the Germans – and who can blame them? – America has lost its mojo to such a degree that it can no longer be trusted honour its debts, even in the unlikely event that it were financially capable of doing so. Which is why, following in the footsteps of Venezuela’s Hugo Chavez (who may be an idiot but is definitely no fool), Germany is repatriatriating its gold from the US federal reserve. It will now be stored in Frankfurt.
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[Things] may look calm on the surface, but this latest move by the Bundesbank gives us a pretty good indication that beneath the surface that serene-seeming swan is paddling for dear life.
If you want a full analysis I recommend this excellent summary by Jan Skoyles.The scary part is this bit:
Every few months there is a discussion regarding what China are planning on doing with the gold they both mine and import every year, with many believing they are hoarding the metal as an insurance against the billions of US Treasury bonds, notes and bills they hold. Many believe they will issue some kind of gold-backed currency in the short-term and dump its one trillion dollars’ worth of US Treasury securities. Whilst, at the moment the US seem to take their monopoly currency for granted, should the Chinese or anyone else behave in such a manner, the US will need to respond – most likely with gold, which on its own it does not have enough of.
Anyone who thinks this isn’t going to happen eventually should read Peter Schiff’s parable How An Economy Grows And Why It Crashes. If something can’t go on forever, it won’t.
In other words, Rickards and Skoyles appear to argue that Germany may be repatriating gold in the first round of musical chairs in which China is preparing to roll out a gold-backed Yuan. Under this theory, the rest of the world’s currencies will sink unless their nations’ can scramble to get their hands on enough gold to lend credibility to their paper.
Postscript: Michael Rivero thinks that the war in Mali is connected:
Mali is one of the world’s largest gold producers. Together with neighboring Ghana they account for 7-8% of world gold output. That makes them a rich prize for nations desperate for real physical gold. So, even as Germany started demanding their gold back from the Bank of France and the New York Federal Reserve, France (aided by the US) decided to invade Mali to fight “Islamists” working for “Al Qaeda.” Of course, “Islamists” has become the catch-all label for people that need to be killed to get them out of the way of the path to riches, and the people being bombed by France (aided by the US) are not “Al Qaeda” but Tawariqs, who have been fighting for their independence for 150 years, long before the CIA created “Al Qaeda”. Left to themselves, the Tawariqs could sell gold to whoever they want for whatever they want, and right now China can outbid the US and France.
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