Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Stock Review : Markets : News Wire : Quotes : Radio : Silver : Stocks - Main 
  
 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver End Mixed While Stocks Surge Higher
By: Chris Mullen, Gold-Seeker.com

John Williams: A Downhill Run for the Dollar in 2015
By: The Gold Report

How Inflation Changes Retirement Benefit Choices
By: Daniel R Amerman, CFA, MBA, BSBA

For Traders and Asset Managers, Puerto Rico’s Tax Incentives Are a No-Brainer
By: Nick Giambruno

Crashing oil may result in "perestroika"?
By: Bill Holter

No Downside Set-Up Yet for Metals
By: Avi Gilburt

Connecting the Dots: Dumb & Dumber: Relax Mortgage Rules, Financial Crisis 2.0
By: Tony Sagami

Thoughts from the Frontline: Oil, Employment, & Growth
By: John Mauldin

Gold & Silver Market Morning
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch

Russian Currency Crisis and Defaults Could Create Contagion in West
By: GoldCore

 
Search

GoldSeek Web

 
BIS gold report hints at repatriation by central banks

By: Robert Lambourne


-- Posted Tuesday, 4 December 2012 | | Disqus

I have been checking on the changes that have taken place to the gold banking business carried out by the Bank for International Settlements since March 2009 and the bank's use of gold derivatives (essentially all are gold swaps), which have grown from zero as of March 31, 2009. All the data in the table below is sourced from BIS annual reports and from the bank's 2012 interim report published in early November. Here is a link to it:

http://www.bis.org/banking/safinstats120930.pdf

In March 2009 the BIS held gold sight accounts -- unallocated gold -- with a number of major central banks, presumably those based in traditional gold-trading markets. Apart from the bank's own gold, the source of the gold sight accounts arose from gold that was deposited in sight accounts with the BIS with all or most of it deposited with the BIS by other central banks. Historically and especially during World War II central banks used the BIS to act as an intermediary in the gold market to protect against their gold sight accounts being confiscated or blocked by the bank holding the gold deposit. So, as an example, during World War II the German central bank held gold in a BIS sight account that was in turn deposited by the BIS in London, and consequently this gold was not confiscated or blocked by the United Kingdom government in the war.

Since March 2009 there has been a marked change in the source of the gold deposited by the BIS with central banks in gold sight accounts. It has fallen from 1,197.45 tonnes as of March 31, 2009, to 509.43 tonnes as of September 30, 2012. By March 2010 the BIS had sourced 346 tonnes of gold in the form of gold swaps -- something that had not been done for many years previously or at least not disclosed.

Yet in an article published in the Financial Times on July 29, 2010, Jaime Caruana, head of the BIS, said the swaps were "regular commercial activities" for the bank. As can be seen from the table below, gold derivatives, essentially all being gold swaps, have become a regular source of gold for the BIS to deposit in gold sight accounts since this interview was given.

The decline in the amount of gold deposited with the BIS in gold sight accounts by central banks accords with the often-claimed desire of many gold owners either to take physical possession of their gold or at least to move it into an allocated form of gold account such as a BIS gold-earmarked account, which is excluded from the BIS's own balance sheet.

Also, by their nature the gold swaps entered by the BIS provide the counterparty with a higher level of comfort. The counterparties for the BIS gold swap can presumably account for the gold as an owned asset, since the explanation of the gold swap in the BIS annual reports is very specific and says, "The Bank has an obligation to return the gold at the end of the contract." (So it would appear to meet the definition of allocated gold.)

Hence, if the BIS could not get returned to it all the gold it has deposited in sight accounts as of September 30, 2012, then it would run the risk of having to obtain up to 393 tonnes of gold on the open market to return to the gold swap counterparties. This risk is not specifically considered in the BIS's own commentary on the risks it faces.

In isolation this change in the mix of the sources of the BIS gold used in its gold banking business cannot be said to prove anything. But the reduction in the amount of gold deposited with the BIS in sight accounts is consistent with a desire by owners to exert greater control over their gold. Further, one could reasonably speculate whether gold swaps (and their increased proportion as a source of gold for the BIS gold banking business) have been used by the BIS to supply gold to avoid a default by a central bank when being asked to return the unallocated gold held in a sight account deposited with the BIS as the BIS has faced a reduction in that source of unallocated gold itself.

Whatever the truth may be, the changes in the table below are consistent with there being a tight physical market for gold where certain central banks are taking action to get a firmer grip on their metal.

* * *

Gold banking business of the Bank for International Settlements March 31, 2009, to 30th September 2012. Excludes BIS-owned gold.
.
.
Totals in millions of Special Drawing Rights.

................................. 3/2009 ..... 3/2010 ...... 3/2011 ....... 3/2012 ....... 9/2012

Third-party gold
deposited by BIS
in gold sight
accounts
................. 23,039.1 ... 40,219.9 ... 33,177.8 .... 31,881.7 ... 33,565.6

Gold deposited
in BIS gold sight
accounts
................. 23,039.1 ... 32,057 ..... 21,264.3 .... 19,617.6 ... 18,948.3

Gold
derivatives
................. 0 ........... 8,162.9 ..... 11,913.5 .... 12,264.1 ... 14,617.3

Total gold
deposited in gold
sight accounts
and derivatives
....... 23,039.1 ... 40,219.9 .. 33,177.8 ... 31,881.7 ... 33,565.6
.
.
Tonnes

Third-party
gold deposited
by BIS in gold
sight accounts
......... 1,197.45 ...... 1,704.8 ..... 1,139 ........... 923 ....... 902.43

Gold deposited
in BIS gold sight
accounts
.................. 1,197.45 ...... 1,358.8 ......... 730 ........... 568 ....... 509.43

Gold derivatives ........... 0 ................ 346 ............ 409 .......... 355 ........ 393

Total third-party
gold deposited by
BIS in gold sight
accounts and gold
derivatives
............... 1,197.45 ...... 1,704.8 ...... 1,139 ....... 923 ...... 902.43

Gold earmarked accounts
........................................ 212 ............. 212 .......... 297 ........ 323 ........ N/A

Robert Lambourne is a British businessman and consultant to GATA.

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

 


-- Posted Tuesday, 4 December 2012 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2014


© GoldSeek.com, Gold Seek LLC


GoldSeek.com Supports Kiva.org

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.
OilSeek.com