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Bank Of England Custodian Gold Drops 351t


 -- Published: Thursday, 18 June 2015 | Print  | Disqus 

By Koos Jansen

https://www.bullionstar.com/

The Bank Of England (BOE) has recently released its annual report in which it’s disclosed the gold held in custody for a range of customers was 5,134 metric tonnes on February 28, 2015, down 351 tonnes (6 %) form the previous year. 

The data on gold in custody at the BOE is disclosed in billions of Great British Pounds. The annual report states the BOE’s custodian gold was worth £130 billion on February 28, 2015. Because the data is disclosed in round numbers the derived tonnage is an estimate.

BOE custodian gold

Exhibit 1.

The BOE isn’t a member of the LBMA, but members of the LBMA hold gold in custody accounts with the BOE – next to foreign central banks and international financial institutions.

Let’s throw in some more numbers that are publicly available to get a bette handle on gold stored in London and to see if we can figure out how much gold is left in the LBMA system ‘loco London':

Since January 2015 the LBMA website claims the total LBMA system holds 7,500 tonnes (in London) of which three quarters is stored at the BOE vaults. We’ll use 5,625 tonnes as an estimate for gold held at the BOE in custody for LBMA members on February 28, 2015.

From the Internet Archive it can be seen the same website claimed in April 2014 the LBMA system was holding 9,000 tonnes of which two thirds was stored at the BOE. We’ll use 6,000 tonnes as an estimate for gold held at the BOE in custody for the LBMA system on February 28, 2014.

Gold from the GLD ETF is also stored in the LBMA system, at an HSBC vault located within the M25 London Orbital Ringway (typically LBMA vaults are within M25 to limit transportation and security costs), but this is all outside the BOE vaults.

The BOE could be a subcustodian for HSBC, as can be read in the GLD prospectus:

Gold bars may be held by one or more subcustodians appointed by the Custodian [HSBC], or employed by the subcustodians appointed by the Custodian, until it is transported to the Custodian’s London vault premises [the HSBC vault].

However, it’s likely in February there was nil GLD gold held by a subcustodian. From the prospectus:

As at March 31, 2015, the Custodian [HSBC] held 23,702,920 ounces of gold on behalf of the Trust [GLD] in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $28,135,365,641 (cost — $29,341,051,196) based on the LBMA Gold Price PM on March 31, 2015. Subcustodians held nil ounces of gold in their vaults on behalf of the Trust. 

GLD was holding 771 tonnes on February 28, 2015, and 804 tonnes on February, 28, 2014.

Next is an overview of the estimates we just talked about:

LBMA system estimates Feb 2015

Exhibit 2.

  • ‘tonnes at BOE’ is the data from the BOE annual reports
  • ‘LBMA’ is the data from the LBMA website
  • ‘LBMA gold at BOE’ is derived from the data from the LBMA website
  • ‘LBMA gold outside BOE’ is ‘LBMA’ minus ‘LBMA gold at BOE’
  • ‘LBMA gold outside BOE minus GLD’ is exactly what is says it is

What can be seen is that ‘tonnes at the BOE’ and ‘LBMA gold at BOE’ roughly corresponds. This implies that ‘LBMA gold at the BOE’ includes foreign central bank gold, or put differently; foreign central bank gold at the BOE is counted as gold in the LBMA system.

From a PDF by the BOE (exhibit 3) we learn in total 400,000 bars are stored, which translates into roughly 5,000 tonnes. More confirmation ‘LBMA gold at the BOE’ includes foreign central bank gold. The BOE claims it holds 5,000 tonnes in total for LBMA members and foreign central banks (exhibit 3), the LBMA claims it holds roughly 5,000 tonnes at the BOE. This is the same gold.

Screen Shot 2015-06-18 at 12.50.33 AM

Exhibit 3.

Because the BOE states it holds 400,000 bars in total they can not store roughly 5,625 tonnes for LBMA members in addition to foreign central bank reserves. In total the BOE holds 400,000 bars in custody for LBMA members and foreign central banks.

It’s hard to say how much gold foreign central banks store at the BOE, but according to my estimates it is at least 2,000 tonnes – based on data from the central bank of the Netherlands (123t), Austria (230t), Germany (441t), Australia (80t), Switzerland (208t), Sweden (61t), Finland (25t), Belgium (±200t) and India (±250t) in addition to the IMF (±450t).

Let us assume foreign central banks store 3,000 tonnes at the BOE. This means the floating supply of London Good Delivery bars at the BOE is:

5,134 (annual report) – 3,000 (foreign central banks) = 2,134 tonnes

‘LBMA gold outside BOE minus GLD’ (exhibit 2) = 1,104 tonnes

Summed up, there is an estimated 3,238 tonnes of floating supply in the LBMA system in London. This excludes GLD and gold stored by foreign central banks at the BOE.

LBMA estimates Feb 2015

Exhibit 4.

This post will be continued.

There is a lot more gold in London outside the LBMA system in private vaults. Hopefully some day I can make an estimate. 

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com


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 -- Published: Thursday, 18 June 2015 | E-Mail  | Print  | Source: GoldSeek.com

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