Where the gold is going is certainly no secret. Whilst the West has not
got a clue of the strategic significance of physical gold, the East’s
accumulation of the yellow metal continues unabated.
Since 2008 just China and India have accumulated 26,000 tonnes of gold.
That is a remarkable figure and virtually the total mine production for that
period. There are many other Eastern countries which also continue to buy
major quantities of gold such as Russia, Turkey, Iran and Thailand.
CHINA AND INDIA HAVE BOUGHT 26,000 TONNES SINCE 2008
For decades most Western central banks have been reducing their holdings
either by official selling, leasing or covertly disposing of their gold. The
top 20 central bank holders of gold have officially a total of 29,000 tonnes.
But it is doubtful that they even hold as much as 50% of that in physical
form in their possession.
REAL PHYSICAL GOLD RESERVES WELL BELOW THESE OFFICAL FIGURES
NO CENTRAL BANK PUBLISHES A PHYSICAL GOLD AUDIT
The US for example haven’t had a physical full audit since Eisenhower’s
time in the 1950s. Therefore it is impossible to ascertain what the true
holding is. But it would be surprising if the US actually has half of the
8,100 in an unencumbered physical form. If they haven’t sold it covertly,
they have most likely leased a major percentage to the market through the
bullion banks. That gold no longer stays in London and New York but is bought
by China and India and shipped to these countries via Switzerland. The
bullion banks then issue an IOU to the central banks which is only backed by
paper since the physical will never return from Asia.
CENTRAL BANK GOLD COMING OUT OF LONDON AND NEW YORK
Last month Switzerland imported 92 tonnes of gold from the UK. We know of
course that the UK is not a gold producing country. So these are 400 oz bars
from UK bullion banks that are bought by Swiss refiners to break down into 1
kg bars and ship to China and India. The majority of the 33 tonnes that came
from the US in September is also 400 oz bars from US bullion banks. Most of
this UK and US gold is likely to come from central banks.
As regards the IMF 2,800 tonnes, a major part of that is probably double
counted with the US and other central bank gold. Germany has repatriated some
of their 3,400 tonnes of gold but 50% it is still held abroad with 1,250
tonnes in New York and 440 tonnes in London. Most of the German gold
officially held in London and New York has most likely found its way to China
and India too.
So not only does the Comex not even hold 1/100th of physical to back its
paper gold but the bullion banks are in the same boat. And this is a boat
full of worthless paper gold that will soon sink as the market discovers that
there is a massive shortage of physical gold. At that point, it will be
impossible to get a market price for gold as it will go “No Offer” which
means that there is no gold offered at any price due to no availability of
physical gold.
In a recent
audio interview with Eric King of King World News, I cover some of the
problems in the gold market as well as Chinese major appetite for the yellow
metal.
Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45
Matterhorn Asset Management’s global client base strategically stores an
important part of their wealth in Switzerland in physical gold and silver
outside the banking system. Matterhorn Asset Management is pleased to deliver
a unique and exceptional service to our highly esteemed wealth preservation
clientele in over 55 countries.
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