Feb 012016

The release of Federal Reserve Bank of New York’s December gold stocks report provides and opportunity to analyse the progress of this current phase of withdrawals from its custodial stocks. I say “phase” because in recent times there have been periods of concentrated withdrawal activity in between periods of little or no activity, as the chart below from Nick Laird at Sharelynx shows.


It is interesting that these phase seem to correspond with economic turmoil – dot.com crash 2000/1, global financial crisis 2007/8, and today?

Note that during 2000 and 2001 the FRBNY was able to consistently ship out 40 tonnes a month. That works out at 2 tonnes a day over 20 business days a month. Commercial vaults designed for high throughput can do more than that but if you look at this National Geographic documentary on the Federal Reserve you can see it is not suited to high volumes. As I explained in this post, “those who think Germany could put 300 tonnes in a big plane or warship and move it in one or a few days have been watching too many Die Hard movies”. In any case, Germany’s 300 tonnes could therefore have been realistically  repatriated in one year.

During 2014 and 2015 we know that Germany repatriated just under 190 tonnes and the Netherlands around 123 tonnes. Given the reported net withdrawals from the FRBNY (back calculated as they only report balance in millions of dollars @ $42.22, I calculate the following delivery schedule.


All figures represent withdrawals, except the one highlighted in yellow, which is a deposit. Note that every figure in this table is a multiple of either a 4.420 tonne or 5.157 tonne “lot”, eg 41.991 = (4.420 x 6 + 5.157 x 3). I have tried a number of possibilities but the above is the only realistic one I can find that fits the reported facts in the lot multiples. Out of this comes two observations:

  1. Another central bank(s) have been withdrawing metal from the FRBNY but not disclosing it, close to 40 tonnes to-date.
  2. Someone deposited 41.991 tonnes just as the Netherlands was about to withdraw 123 tonnes.

As the FRBNY is reporting physical custodial stocks, the only explanation for the deposit is either another central bank deposited physical, or the FRBNY moved some of its (ie America’s) gold reserves into the account of another central bank, which could be the result of:

  1. A new FRBNY lease/swap TO a central bank
  2. FRBNY repaying gold leased/swapped FROM a central bank in the past

Given how tight-lipped central bankers generally are, we are unlikely to know who the mystery (and coincidental) gold depositor was.

Jan 152016

Three years ago tomorrow (16 January 2013), Deutsche Bundesbank announced that they would be repatriating 300 tonnes of gold from New York and 374 tonnes from Paris by 2020, which was a revision of their October 2012 promise they would transfer 150 tonnes from New York by 2015. So how have they progressed and are they meeting their schedule?

In January last year I did an analysis of the state of the German repatriation.  At that time Deutsche Bundesbank said they had “transferred 120 tonnes of gold to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York”, which, when added to the 32t and 5t (respectively) transferred in 2013 means they had transferred 157 tonnes in total by December 2014.

Based on data accumulated each month from the US Federal Reserve by Nick Laird of Sharelynx, the Fed’s custodial gold holdings have reduced by 125 tonnes from January to November 2015. I am fairly confident that all of these are German repatriations as there hasn’t been any announcements of other central banks withdrawing metal from the Federal Reserve’s vaults in New York. In addition, the amounts delivered each month are similar to those that occurred in 2014, as the chart below shows.


To-date, Germany looks to have returned 215 tonnes, which is well over their initial promise of 150 tonnes. In this chart I forecast that based on the monthly rate of 2015 withdrawals, Germany should have repatriated all of their planned 300 tonnes by September 2016, putting them over three years ahead of the “by 2020” target.

It seems what Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank, said in this interview with Handelsblatt in February 2014 was true: “the Americans have never stonewalled or hindered us in any way. On the contrary, their cooperation has been most constructive in every respect”.

By the end of this year Germany would have around 1,237 tonnes in New York, which would be 37% of their total gold reserves. But why stop there? If the US Federal Reserve and Germany have demonstrated that they can move around 130 tonnes a year, then continuing on at that rate for the remaining 3 years and 3 months would result in another 422 tonnes back on German soil with 814 tonnes left in New York (24%), surely enough, along with 400 or so tonnes in London, “so that, when push comes to shove, we can have it available as a reserve asset as soon as possible” (Carl-Ludwig Thiele in October 2012)?

As to the Paris repatriations, we don’t have any independent indication of what they have delivered during 2015. With a 374 tonne target, and only 67 tonnes confirmed returned as at December 2014, Germany will have to move at least 61.5 tonnes a year from 2015 through to 2019 to meet the target. Anything less than that will raise questions, particularly considering that it would have to be easier to ship gold from Paris to Frankfurt than from New York.

Based on the dates of the previous repatriation updates, here and here, we should have our answer some time next week.

Oct 092015

On Wednesday Deutsche Bundesbank published “a list detailing its holdings of gold bars in custodian storage in Frankfurt am Main, London, Paris and New York”. While I welcome this move towards transparency and accountability on what is an important (and often controversial) public asset, it was disappointing that the Bundesbank did not think it necessary to produce a bar list that conformed to the usual standards that apply in the bullion market, which is to supply refinery, bar number, gross and fine weight, purity, and year of manufacture (where available).

The Bundesbank confirmed in an email to Ronan Manly that it has those details but said they were “not relevant for storage or accounting purposes”. They note that “whereas bar and melt numbers are issued by the gold refiner, inventory numbers are assigned by the custodian in whose vaults the gold is stored. Inventory numbers are either stamped or affixed to the bar using a label.” and identify different standards of disclosure between the four custodians of the bars:

  • Bank of England and the Banque de France: use internally assigned inventory numbers but are not willing to allow their customers to publish these
  • Bundesbank: uses internally assigned inventory numbers and has no problem publishing them
  • Federal Reserve Bank of New York: supplies the actual bar/melt number has not problem with customers publishing them

The Bank of England’s use of internally assigned inventory numbers (and only supplying that number, rather than the actual number stamped on the bar, to their custodian customers) was confirmed by Freedom of Information requests from blogger Bullion Baron in respect of Australia’s gold reserves.

I can understand that given the potential for duplicated bar numbers between refineries (and some refineries had a practise of restarting numbering each year) in any bar inventory control system it would be easier to design the database with its own unique identification key rather than rely on the combination of refiner/number/weight/purity/year as the unique key. However, this does not mean a custodian needs to stick a label on each bar as bars can be located and identified by their vault location (ie shelf or pallet number) and unique bars markings if needed. The Perth Mint manages to keep track of its physical stocks and client Allocated without needing sticky labels, so it is possible.

While internally assigned inventory numbers might suffice for “storage or accounting purposes” I would have thought it obvious that they do not suffice for independent audit purposes. I doubt any auditor would accept a sticky label on a bar for the simple fact that a custodian could stick different numbered labels on the same bar each time different customers come around to audit. This is why all of the exchange traded funds that publish bar lists provide full bar list details and do not list any internally assigned inventory numbers. This is clearly the industry standard and odd why the Bundesbank could not have just supplied the additional information that they have in their spreadsheets.

On to the geeky stuff of looking at the bar list itself. It would have been helpful if the Bundesbank supplied the bar list in spreadsheet form, rather than pdf, but thankfully the bar list guru, Warren James (who has a massive database of the major ETF bar lists) was able to convert the Bundesbank pdf into a 13mb spreadsheet, which you can download if you so desire.

A review of the pdf list shows that it has not been sorted by internally assigned inventory number and that some other sorting has been applied, most likely pallet or some other location identifier, or possibly by refiner, given the grouping we see in some of the Federal Reserve bar numbers.

One of the first things I noticed when doing a simple sort by weight check is bar number 11202, which supposedly weighs 23.810 ounces (see extract from bar list below from page 2258):


There are eight other circa 200oz bars (which are odd in themselves) so I would guess this is a keying error and should be 238.100 ounces. A 23 ounce bar seems highly unlikely but maybe in the olden days if the US Mint was doing a melt and had an amount of gold left over that wasn’t near 400oz they just poured whatever remained. Or maybe it is some sort of Easter Egg that the FRB NY put in to see if the Bundesbank was actually reviewing their bar list. Might be worth a call to the FRB NY to get them to check this bar and confirm its actual weight.

The US has previously released it bar lists (see here) and it gives us something to compare to, particularly since some of Germany’s gold is held with the FRB NY. In contrast to the US’ gold, almost all of Germany’s gold is within the LBMA London Good Delivery specification weight of 350-430oz. Note that German holds a total of 270,316 bars versus the US’ 699,515 bars.

Weight Germany US
<350oz 0% 37%
LBMA Standard 350oz-430oz 99% 54%
430oz-452oz 1% 9%
Total 100.0% 100.0%

In terms of purity, all of Germany’s gold meets the minimum London Good Delivery specification of 99.50% or higher.

Purity Germany US
<99.50% 0% 83%
99.50% to 99.89% 85% 3%
99.90% to 99.98% 11% 10%
99.99%+ 3% 4%
Total 100% 100%

The large number of US sub-purity bars reflects coin melt from the 1930s confiscation. What is interesting is the 3 to 4% which are 99.99% or higher, including the existence of some rare 99.999% (five nines), as you can see from this extract from the bar list (these bars being held at the FRB NY):

The out of the 9,273 99.99%+ purity bars the Bundesbank holds 3,002 (totalling 1,197,116.298 ounces) are in the Bank of England and 3351 (1,326,074.084 ounces) are held by the Bundesbank itself. The reason I point this out is that when Asian demand is high, 99.99%+ purity 400oz bars can attract a premium up to $0.50 an ounce as refiners only need to melt and recast them into kilobars, which gives a lot quicker turnaround than refining dore up to 99.99%.

With over 2.5 million ounces of 99.99% bars easily shipped to Swiss refiners, the Bundesbank could earn over $1 million dollars by swapping them for 99.50% purity bars the next time Chinese demand surges (less freight costs). There might be some work getting all the 99.99% bars together but at least the bars in the picture below (from Koos Jansen’s post on the Bundesbank bar list) are nicely grouped together:

You can match the sticky label internally generated numbers above to the bar list below to see they are all 99.99%buba3

Just out of interest, the US holds 24,946 99.99%+ bars, which at $0.50 premium could be worth $5 million on a swap. Seems such a waste having these high purity bars just sitting in central banks vaults when the Chinese would love to have them.