By PM Fund Manager Dave Kranzler, Investment Research Dynamics:
Clearly, if the U.S. were “safekeeping” Germany’s gold in a segregated custodial account, it should have been nearly effortless to ship 300 tonnes back to Germany via two cargo flights. After all, Venezuela received 160 tonnes of gold in about 4 months from several different Central Bank vault locations.
As it turns out, GATA.org found a Reuters article yesterday which surreptitiously reported the fact that Central Banks keep a portion of their gold outside of their own vaults and in the custody of investment bank vaults. This enables the investment bank to “serve central banking customers with large bullion reserves to manage.” Here’s the article link: Central Bank gold trading operations. The GATA link also contains a link to a policy paper from the Central Bank of France which describes Central Bank gold trading policies.
While those of us who follow the precious metals market professionally know that Central Banks actively dump their bullion on the market for the purposes of managing the price. But the Reuters article stunningly acknowledges that a significant portion of Central Bank custodial gold is being held outside of Central Bank custody.
As the example of the U.S. default to Germany demonstrates, any entity that keeps its gold in a western Central Bank for “safekeeping” is at great risk of never having it returned.