Mysterious 380 tonne gold swap = secret bailout?!

It takes a lot to spook the solid old gold market. But when it emerged last week that one or more banks had lent 380 tonnes of gold to the Bank of International Settlements in return for foreign currencies, there was widespread surprise and confusion.

The news that a mystery bank has just pawned the family jewels gave traders a jolt – nervous about the sudden transfer of almost 20pc of the world's annual gold production and the possibility of a sell-off.

...Concerns hinged on whether the BIS could potentially sell on this vast cache of bullion in the event of a default, flooding the market with liquidity. It appears to have raised $14bn for whoever's been doing the swapping – small fry on the currency markets, but serious liquidity in the gold market...

...Meanwhile, economists and gold market-watchers were determined to hunt down which bank is short of cash – curious about who is using their stash of precious metal for what looks suspiciously like a secret bailout. At first it looked like the BIS was swapping gold with a troubled central bank. After all, the institution is the central bankers' bank and its purpose to conduct transactions with national monetary authorities.

Central banks in the troubled southern zone of Europe were considered the most likely perpetrators. According to the World Gold Council, central banks in Greece, Spain and Portugal held 112.2, 281.6 and 382.5 tons of gold respectively in June – leading analysts to point fingers at Portugal, or a combination of the three...

...[Edel Tully, an analyst from UBS] then listed the only other potential monetary authorities with enough gold as the US, China, Switzerland, Japan, Russia, India and Taiwan – and the International Monetary Fund. This led to musings that the counterparty was the IMF, making sense because the lender of last resort is historically prone to cash shortages and has been quietly selling off gold in the first half of the year...

...However, the day after original reports about the swaps, BIS emailed a statement saying that the swaps had not been conducted with monetary authorities but purely with commercial banks.

This did nothing to quell the sense of mystery surrounding the deal or deals. It is almost inconceivable that a single commercial bank could have accumulated so much gold alone. And cynics have suggested that the whole affair still looks like a secretive European bailout that a single country wants to keep quiet.

In this case, one or more of the so-called bullion banks – which act as wholesale market-makers and include Goldman Sachs, Deutsche Bank, JP Morgan, HSBC, Barclays, UBS, Societe Generale, Mitsui and the Bank of Nova Scotia – would have agreed to act on behalf of a monetary authority.

This would add an extra layer of anonymity...

Source

Could this be indicative of a behind-the-scenes last ditch attempt to save one of the PIGS (Portugal, Ireland, Greece or Spain)? Not clear just yet, but it is a likely explanation bearing in mind all the factors outlined above.

I know this sounds bizarre, but did you notice that Greece was said to hold precicely 382.5 tons*? Coincidence? Or could they actually be that desperate?

If so, they'd certainly want to hide it.

On the one hand no-one wants to see the doomsday scenario come to fruition. At the same time if Greece, and perhaps the others, are not allowed to default they could conceivably drag down first the Euro, then the entire system.

Whatever is going on behind the scenes here, the evidence suggests the more mundane explanations don't cut it. (See full article for full explanation.)

One thing's for sure: there are some major jitters in the market due to this mysterious movement of gold.




(*Incidentally, no explanation given of why 'tons' used here, but 'tonnes' used in the headline. They may well be synonymous here.)

Very interesting. I wonder if it is connected to the Queen's visit to New York last week in any wy. I have had a strong feeling there was more to her trip than a peace rally.

I believe the article refers to Portugal as holding the 382.5 tonnes of gold. Depending on the definition of "respectively", of course.

reply to post by Icarus Rising


Well spotted. Apologies. Scratch the suggestion the gold all originated in Greece. Greece's entire holding was 112.2!

Just emphasizes the size of this movement.

Your speculation regarding the queen represents original thought. I don't believe the UK is in such dire straights, though, with the government implementing 25-40% cuts in spending in order to take the bull by the horns.

Yeah but why is the bank-country hiding their identity? Because they want to pretend they have 380 tonnes of gold, that they don't. If so it would probably be so investors continued to have faith in their currency-economy.
In which this case the mystery pawner could be a massively market damaging "celebrity" news scandal, of the finachial world. It would be big because of the amount of money people-investors will loose is many times bigger than the value of the gold assets being pawned. And that because of the fear-uncertainity factor, that investors always get with companies-nations that haven't been upfront with them.

reply to post by Liberal1984


I see where you are going with this. However, as I understand it the gold has to physically exist:

...when it emerged last week that one or more banks had lent 380 tonnes of gold to the Bank of International Settlements in return for foreign currencies, there was widespread surprise and confusion...

The question is still: who on earth is behind this? Someone's in trouble, someone significant, as you say. But is it an institution or a nation?

Mind-boggling we should have to ask such questions, is it not?



[edit on 12/7/10 by pause4thought]

Thanks for posting OP.

Very intriguing, yet not wholly surprising if you have been keeping up with the precious metals market shenanigans lately.

Good to see it isn't from a blog either, and is from a better source than some of the stories.

I have documented some more info over on this thread:

Gold Rush 21 (Documentary)

I will link to your thread here, over at that one.

Much more information to this story than appears on the surface...

reply to post by beebs


That's an extremely informative thread you linked to. Much appreciated; I will definitely be going through it.

As you say, this news is from a serious source. (Hence the way the article looks at various possible explanations.)

If anyone has any links to other articles on this news it might help us to dig out what's going on behind the scenes. (It never ceases to amaze me how some posts on here join the dots in ways rarely seen in the MSM.)

Great find OP.

I think a big piece of the puzzle is the fact that there are probably several orders of magnitude more "paper gold" than physical gold. Not to mention the way derivatives distort the market, etc. Some very strange tectonic rumblings.

The following is a bitterly funny little jab at some of the hijinks playing out in the precious metals markets

...[In] Ed Steer's Gold & Silver Daily...he noticed in the Comptroller of the Currency's "Q1/2010 Report on Bank Trading and Derivatives Activities" that "the bottom-line numbers show that two US banks ... JPMorgan and HSBC, USA hold between 97% and 99% of all the gold and silver derivatives held by all US banks." Yow!

This is a result of naked short selling. Normally, to short something, you would have to borrow it from somebody, and then sell that. Now, to short gold or silver is as simple as getting somebody to pay money for a piece of paper that says it represents gold or silver. Easy! There is nothing behind it!

Of course, there are the slimy apologists who insist that while it is true, the shorts can simply buy back the paper gold or silver with cash, so everybody is happy.

It was this ridiculous comment that was the start of the now-infamous Mogambo Food Supply Program (MFSP) where I sold pieces of paper that promised "One complete, five-course, home-cooked steak dinner", and I only charged them one dollar! I took the dollar and invested the money in no-risk Treasuries.

Of course, business boomed, and any time anyone wanted to "cash in" their paper dinners, I would pay them with another piece of paper promising a complete, five-course, home-cooked steak dinner. Or, when they got tired of that scam, I would offer to pay them back their original dollar, while I keep the interest their money generated.

Of course, this Fabulous Mogambo Plan (FMP) was soon shut down, and my defense was that this is essentially the same scam that is going on - right now! - in the gold and silver futures markets!

This is not, of course, about how I am a soulless, greedy vulture who wants to make a lot of money in a hurry without actually working and using the actual workings of the futures markets and the stock markets and the bond markets as my business model, but about how JPMorgan and HSBC hold almost all the derivatives of gold and silver and, even worse, how this may actually be understating it....

More at source:
www.atimes.com...

reply to post by silent thunder

I think a big piece of the puzzle is the fact that there are probably several orders of magnitude more "paper gold" than physical gold. Not to mention the way derivatives distort the market, etc. Some very strange tectonic rumblings.

Indeed.

From a post by Adrian Douglas from GATA(who is quoted in the Telegraph article):

By Adrian Douglas
Sunday, July 11, 2010

For 11 years the Gold Anti-Trust Action Committee has been amassing evidence that the prices of gold and silver are suppressed. The mechanisms by which this is achieved are complex and multi-faceted. Attempting to convince industry insiders and investors that such an intricate price suppression scheme is not only active but has been active for more than 15 years meets a lot of resistance.

In this article I am taking a different approach; I am going to find some common ground between what GATA says and what its critics say. I am going to define some facts about the gold market that are practically undisputed and show that those facts lead unequivocally to a conclusion that the gold price is suppressed. Given that these conclusions are based upon facts on which everyone agrees, then everyone should agree that the gold market is suppressed.

What everyone can agree upon is that through unallocated bullion accounts, gold certificates, and pooled accounts the bullion banks and gold brokers are operating a "fractional reserve" operation. This means that dealers who undertake to sell and store bullion for their customers on an "unallocated" basis can sell a lot more bullion than they actually have. Many investors will buy and sell their bullion without ever seeing it. This allows the dealers to keep in their vaults only enough bullion to meet the demands of the small percentage of investors who demand physical delivery.

... Dispatch continues below ...

More at the source:
Adrian Douglas: Price suppression follows inevitably from fractional-reserve gold banking

----

@pause4thought

That's an extremely informative thread you linked to. Much appreciated; I will definitely be going through it.

Thanks. I have been updating it on and off for a while now.

I thought it would garner much more attention here on ATS than it has...

But I guess sometimes the REAL conspiracies aren't as sensational to the reader.

reply to post by silent thunder


Thanks for giving the wider picture. (I'm aware of the scam, but it needs repeating!)


I've done a little digging & it turns out this nasty can of worms is really nasty:

Here's why IMF gold swaps amount to organized looting of sovereign wealth

The article has come out of the '380 tonnes' revelation. It's an absolute MUST READ.


Extract:

...Just as Gordon Brown sold England's gold at artificially low prices to bail out the bullion banks in NY and the City, so the IMF and its constituent members are selling the public stores of gold, largely from a few developed western nations, to support what essentially appears to be a crony capitalist banking fraud involving the secretive sale of public assets at artificial prices with the gains pocketed by a few state-sponsored banks...

...The new Washington Agreement, which started at the end of last September, allowed signatories to engage in gold derivative transactions for the first time in a decade. Very convenient.
Although none of the major bullion banks (actual or potential CB counterparties) will want to discuss this, the high probability is that much of this gold was actually sold into the market...

...As we have most recently seen with the bloated CDS and CDO credit markets, long standing control frauds can cause quite a splash when they inevitably collapse. We need to bear this in mind when the governments start making their excuses, once again, for taking the 'necessary actions' to support the banks for the good of the people, from whom they have once again stolen billions to provide a fat living for their friends and themselves...

Well silver is holding up OK and i'm sure that before the war is over they will do all they can to crash the paper price to try and pick up physical silver at rock bottom price but i can see it coming and will be mopping up any spare physical silver i can buy myself.

Silver to banks is the kiss of death, they hate it.

Just speculating here...(i couldnt resist the pun...) but is there any possibility that Gold itself is poised for a huge devaluation?
Seriously...perhaps theres a cheaper way to produce technically pure gold by adding a few electrons and protons through some new process?
Now the person who could do that, would be in a position to do some pre disclosure fooling around...
The more likely scenario is that the Illumes will devalue gold to scant what its worth now, buy all they can from panicked hoarders and investors, at those panic prices, then raise it back to astronomical and be the surveyors of all they possess....

reply to post by pause4thought

Your speculation regarding the queen represents original thought.

You are too kind. That's just a nice way of pointing out I am in way over my head here. I think the Queen would have a vested interest in not having the whole house of cards come tumbling down on her watch. The charade needs to hold up for a bit longer, and I think her trip was an attempt to patch things up and bolster confidence in the markets. They did rebound nicely after her trip and finished up the most for a week in the last year. Nothing like an infusion of hard currency to start a rally.

So, I am driving up US87 going to San Antonio on Wednesday of last week. As I drive along, I pass all sorts of small, West Texas towns. One of these is Sterling City, "Home of the Eagles". Just outside Sterling City is a smallish house on the side of the road. Obviously an abode of modest means, out in front is a full sheet of plywood, painted with a sign. It is white, and in bold red letters it says, "Vote for REAL change. NO INCUMBENTS" in two lines of hand painted text.

This person, whom I did not take the time to meet as I was trying to get the family from point A to point B, will in my mind represent the solution. This is a patriot who sees the real problem. That we have allowed a "ruling class" to develop in the free, Western nations. America is as bad as any. This ruling class is raping us, taking everything we produce, everything we have worked for.

Is America, or any other Western Nation, smart enough to do anything about it? That has yet to be seen. I don't have much faith in the people here. I am still seeing the same old, tired, stupid bipartisan bickering. They still don't get it.

Idiots.

reply to post by pause4thought


Tonne was used over Ton because Ton is the Imperial Ton, 2,000 lbs, while Tonne is the Metric Tonne, and is about 2,205 lbs.

Tonne being larger, which makes the transfer even larger if we use the American Imperial method.

1lb = 16oz.
10z = $1196
2,205 = 35,208 oz
35,208oz = $42,194,880
X 383tonnes = $16,160,639,040

So a bank, or a group of banks, maybe even a central bank, liquidated their Gold holdings for a mere $16.2 Billion Dollars.

I say "mere" because in this crisis, $16B isn't really an extraordinary amount of money is it? .. When Citigroup had a back stop of 400+billion dollars, or AIG receiving over 100B ... what bank was desperate enough to liquidate Gold holdings for such a small amount of money?

Not only that, but perhaps my calculations show that Gold is under-valued.. that might not be much money, relatively speaking, but it IS a lot of Gold.. given the sheer volume of money injected into the system, you'd expect Gold to be more on-par with the influx of cash.

reply to post by Rockpuck

So a bank, or a group of banks, maybe even a central bank, liquidated their Gold holdings for a mere $16.2 Billion Dollars.

I say "mere" because in this crisis, $16B isn't really an extraordinary amount of money is it? .. When Citigroup had a back stop of 400+billion dollars, or AIG receiving over 100B ... what bank was desperate enough to liquidate Gold holdings for such a small amount of money?

While I agree... the distinction MUST be made between FIAT currencies... and PHYSICAL gold investments.

Citigroup and AIG were FIAT.

This is actual, PHYSICAL gold that was moved.

Much more worth, IMO.

One problem is...who really knows how much physcial gold there is? We can be sure there is much less physical gold than paper gold...but exactly how much?

Central banks, financial institutions, mining companies, and governments around the world can stare right into the camera and lie:

"Yes, we have such-and-such amount of gold bullion in our vaults. Don't believe us? Well, we will appoint an independent comission to investigate the matter thoroughly. The comission will be made up of solid, respectable members...say, people selected from the boards of all the major banks. And even a Senator or two. Heck, we'll toss in somebody like the Dalai Lama or Bill Cosby if you are so concerned about integrity. Of course, the comission members will need to be paid several million each, and the comission will take such-and-such number of months to reahc stage I.1.(a) of the investigation..." [fast-forward two years] "Harumph. The commission has determined that all reported statistics of physical holdings are correct, and that all paper gold-realted instruments are fairly valued. For those of you skeptical about the actual amount of physical gold, please see this grainy, dimly-lit, dubiously-pixeled video shot by expert professionals clearly demonstrating that all these yellow blobs are, well, a heck-of-a-lot-of gold. Case closed."

reply to post by silent thunder




A thorough undertaking you have described, if there ever was one!

Good thing there are people like GATA that will be able to tell from the actual market numbers that there is manipulation... when getting into the vaults themselves to examine the reserves would probably play out something like you have described.

reply to post by pause4thought


I am pretty sure the gold drop a couple weeks ago was James Simons from Renaissance Technologies unloading gold because his fund had terrible performance and was hit with massive withdrawals.

I am sure that had immediate ripples through the industry as when he makes a move (and especially after it is known) things go crazy.

I can't source this but if you search online for Bloomberg Business Week Magazine you will most likely find it as I just read in the actual magazine. It specifically outlined what most likely happened when investors started to pull massive amounts of money out of his fund and the effects that would lead to in recourse (selling large amounts of gold).

At least something rational to think about unless Bloomberg is in on some disinformation scheme which could possibly be plausible, but not likely.

reply to post by beebs


The two are relative. While "Fiat" (Which simply means ordered, and or, commanded currencies. If Gold were the Standard Currency, it would thus be a Fiat, though I believe you are referencing "Money Pegged to Nothing" in which would be false, the Dollar is pegged for the most part to GDP, as well as number in circulation to dilute the whole)

Gold is considered the safest investment simply because of it being relative to the currency, if Inflation spirals out of control, the price of Gold will in theory always be worth the relative same amount as per buying power. 200ounces of Gold can buy a house. Inflation sets in and the 200k dollar house is now 350k dollars, Gold should be priced as such that the same amount of Gold would still buy a house.

Also, you should know, that while Gold is more or less effected by Supply and Demand, it's ultimate pricing is based on an agreement of the Worlds largest producers and buyers.. Gold can and is regulated and fixed, just like any other currency.

And it's as you say "Much more Worth" ... Worth in what? Worth in Dollars? If you claim a Dollar has no worth, then relating it to Gold is ignorant. And besides, worth is determined by how much one can get in exchange for said object. If you don't think Dollars have value, by all means, I can u2u you my address to mail me your Dollars.

My relating to Citigroup is that Gold has not kept up with the relative inflation of the currency. Now there are many reasons why this could be, but they are all speculative, I'll share my preferred theory:

That no matter how much money we are dumping into the banks, the actual increase in Dollars is insubstantial, which would imo tell us that there is something seriously wrong with the Financial system as a whole. If Gold is relative to the Currency, and the Currency is being produced at extraordinary levels, we must assume that all this money is being used to "plug a hole" so to speak.. that the banks are not gaining anything from the money, that it's replenishing or stopping a massive, out of balance, completely discombobulated reserve ratio.. This would also imo explain to us why banks have not been loaning out the money, and why the Stock Market as a whole has not gone past pre-depression levels .. I think Gold can tell us a lot about the problems in the financial sector just by observing how little Gold has been effected.