Gold Is Rallying Because Western Central Bank Vaults Are Running Out Of Physical Gold

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kingworldnews.com

With continued uncertainty around the globe, today the man who has become legendary for his predictions on QE, historic moves in currencies, told King World News that gold is rallying because Western central bank vaults are running out of physical gold.

Where Is The Gold? 

Egon von Greyerz:  “We have recently had some significant news about the gold market that makes the situation even less clear. The central banks and the BIS in Basel go to great lengths to tell the world absolutely nothing about their gold dealings. All transactions are carried out covertly and no central bank ever has an official audit of their gold holdings. The last US audit was during Eisenhower’s days in the 1950’s. Ron Paul has been pushing for an audit but to no avail. Will Trump instigate an audit? Well, he might have the intention but when he finds out that a major part of the US 8,100 tonnes of gold is not there, it will all go quiet. There have been pressures for audits in France and Germany in later years but this has had no effect. No country wants to reveal that the gold isn’t there…

Egon von Greyerz continues:  “Germany has recently pretended that they are totally open about their gold dealings, but what have they actually told the world? In 2013 Germany announced a plan to repatriate 674 tonnes of gold from the US and France. The first year they only received 37 tonnes back and were told that they would have the rest in 2020. We have now been told that the program has been accelerated. By the end of 2017, out of the 3,381 tonnes that Germany owns, over 50% or 1,713 tonnes will be in Germany, with 1,236 tonnes still in New York, and 432 tonnes in London. 

You may wonder why it needs to take 4 years to repatriate 674 tonnes of gold? Listening to interviews with the chiefs of Deutsche Bundesbank, they explained what a major logistical exercise it has been. According to the Bundesbank, they have had major problems with transport, insurance, security, etc. If we take Switzerland as an example, we both receive and export over 2,000 tonnes of gold annually. And that excludes major transfers between banks and private vaults. The same happens in countries like the UK, China, India, and the US. So around the world, many 1,000s of tonnes of gold are shipped annually without any logistical problem. You may wonder then why the normally very efficient Germans have had problems shipping 674 tonnes over 5 years? 

The Original German Gold Held At The Fed Was Already Gone

The reason is that the gold wasn’t available because it had been leased or maybe even sold. This is confirmed by comments that the bars received in return were not the same as the original ones. 

But the big question now is, if the remaining 1,668 tonnes that are supposed to be stored in the US and France actually exist? If they do, why not bring them back to Germany? Originally the reason for holding gold outside of Germany was the Cold War. Currently there is no Cold War so that is not a valid reason. We know why the gold originally was held in New York and London because that is where the majority of the gold trading takes place. But major central banks like the Bundesbank don’t need to move the gold if they lease it. Anyone trading with these Central Banks believes they are creditworthy. Our view is different.  

Central banks hold toxic debt that will never be repaid and therefore they are not safe. 

WARNING: Do Not Store Your Gold In Banks
 
So why is the gold not in Germany? Initially it was used for leasing and trading. In the past when gold was leased it was kept within the London or New York bank pools and just shuffled between the banks. But now it is very different because the buyers are mainly China, India, and Russia, and these countries are not interested in paper trading. They want the physical bars delivered. The effect of this is that when a central bank leases the gold to a bullion bank, the bank then sells the gold to China, and China will of course take delivery. So all the central bank now has is an IOU from the trading bank. When the central bank asks for its gold back, it won’t be there and the trading bank will need to borrow gold from someone else like a client. So the bullion banks will hypothecate the same gold many times. That is why investors must never store gold in a bank. 

Central banks don’t just lease their gold to the market. They also sell gold covertly. Total central bank gold holdings are supposedly 33,000 tonnes. Of that total, Western central banks supposedly hold around 23,000 tonnes of gold, including the IMF holdings. But no one knows how much of that gold actually remains in the West. 

Look at Germany, which by the end of 2017 officially will have 50% of its gold. That still means that 1,668 tonnes is held abroad. If that has been leased and then sold to China, those 1,668 tonnes are permanently gone from the Western central bank vaults. But they are still counted as Western central bank gold on a ledger. And if this gold has been covertly sold by the Bundesbank, it is also permanently gone, of course. 

Western Central Banks Vaults Running Out Of Physical Gold
 
If we look at the purchases of the ‘Silk Road’ countries (India, Turkey, Russia and China), we see that since 2009 these countries have purchased nearly a jaw-dropping 20,000 tonnes of gold. That is just under 3,000 tonnes annually, which is more than world mine production during those years. So just 4 countries have absorbed annual mine production in the last 7 years. In addition, there has been substantial buying by other countries and by investors, which means that a major part of the supply of gold has covertly come from Western central bank activities and therefore Western central bank vaults. We have already seen the price of gold rallying in 2017, and this is most likely taking place because Western central bank vaults are simply running out of physical gold.”