Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Report Raises Questions About Central Bank Gold Holdings

Commodities / Gold and Silver 2012 Nov 07, 2012 - 02:48 AM GMT

By: John_Browne

Commodities

For years I have cautioned that changes in the ownership of gold held in the vaults of key central banks around the globe may not have been accurately reported. A report issued last month in Germany has once again brought these issues to the fore. In today's environment of rampant money creation and questioning of central bank activities, such uncertainty is bound to spark the curiosity of an increasing number of investors.


Since the depths of the 2008 financial crisis, central banks around the world have increased their gold holdings. As of January of this year, the International Monetary Fund estimated that official reserves had hit a six year high. Most of this growth has come from emerging and developing nations who are estimated to have swollen their gold reserves 25% by weight since 2008. Just a few years ago, India purchased 200 tonnes on offer by the IMF.

This increase may surprise those who have been led to believe that central banks do not traditionally accumulate gold during recessions. The fact that they are doing so could carry an important message for private investors.

The United States, which has gold holdings of some 8,133.5 tonnes as of 2010 (currently valued at some $420 billion), is still by far the largest holder of gold. Perhaps with deep memories of the social scars of its Weimar Republic, Germany is the world's second largest, with some 3,396 tonnes. Oddly, Germany keeps its horde largely abroad with an estimated 66 percent at the New York Federal Reserve and 21 percent at the Bank of England. The gold was moved out of Germany during the Cold War in the 1950s due to concerns of a potential Russian invasion of West Germany.

In late October, Ambrose Evans-Pritchard reported in the UK's Daily Telegraph that the German Court of Auditors told legislators in a redacted report that the German gold held abroad had 'never been verified physically' and ordered the Bundesbank to secure access to the storage sites. The report included the surprise revelation that Germany had slashed the amount of gold held at the Bank of England by two thirds back in 2000 and 2001. At that time, active gold selling by the UK government had apparently made the Germans nervous. Further, Evans-Pritchard reported that the Court called for the repatriation of 150 tonnes of German gold over the next three years to test its weight and quality. The report added fuel to the political movement within Germany to bring back all of its gold reserves. From my perspective, the report also sheds light on three fascinating issues.

First, Germany has increased its gold holdings significantly between 2000 and 2009, more than doubling the percentage of its foreign exchange reserves held in gold. According to 2010 figures of the World Gold Council, Germany's gold reserve now constitutes nearly 74 percent of its foreign exchange reserves. This increase came despite rising storage costs and the massively reduced threat of Russian invasion. What caused Germany to accumulate so much gold? This question should not be lost on investors.

Second, the report details a level of central bank cooperation and trust that staggers the imagination. Allied governments appear to have "trusted" one another with the stewardship of hundreds of billions of dollars worth of unallocated, and in some cases uninventoried, gold bars. This policy borders on financial negligence.

Third, some central banks, such as the Fed, publish the total amount of gold held in their inventories. However, they provide no details as to its ownership. It is well known that some countries keep considerable portions of their bullion reserves with the U.S. Fed and with the Bank of England. But the details are lacking.

From 1999 to 2009 central banks drafted and executed three Central Bank Gold Agreements that have the stated intention of coordinating the sale of gold on a global basis. Many private investors see these agreements as simply an attempt to "demonetize" gold by creating strategic price volatility, and thereby investment uncertainty. The massive trading required to achieve these desired price movements must have resulted in relative changes to central bank holdings. But as banks do not reveal the owners of their gold deposits, the data is unavailable to prove this.

In the coming years, we expect general interest in gold as a store of value to increase while confidence in fiat currencies declines. If this trend is energized by increasing uneasiness over the safety, security, and ownership of the gold held by the world's central banks, much greater volatility could result. If the general breakdown of trust in fiat money is increased suddenly by a sovereign debt crisis like we have seen in Southern Europe, the next action could be a move by central banks to lay more formal claims to their deposits held abroad. Such an eventuality could finally drag the shadowy central bank gold market into the light of day.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in