It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

[NCR85]

the biggest news of the day comes from the official Buba announcement that, in its official capacity as a prudent central bank, it - as first of many - is looking to repatriate some 300 tons of gold from the New York Fed. That, however, is not today's news - that was Monday's news.What is news is that courtesy of the supplied calendar of events in the Buba statement, it will take the Fed some seven years to procure Germany's 300 tons of gold. This is the same Fed that, in its own words, holds some "216 million troy ounces of gold" or some 6720 tons, in its vault 80 feet below ground level.
Putting the above in perspective, the amount of gold that Germany will have to wait 7 years for is shown in red. The amount of gold the Fed supposedly holds, is shown in yellow with a shade of tungsten. Why it will take the Fed 7 years to part with an amount of gold that is less than 5% of its total holdings is anyone's guess...
unless of course, the bulk of the gold in the column on the right has been rehypothecated numerous times to serve as collateral for countless counterparties, and it is no longer clear just who own what to anyone.

* * *
We can only wonder how many centuries it will take the New York Fed to deliver all the gold held by third parties in its vault, once the demand notices start rushing in...

The way I understand it, if you have to wait an X number of years to get a certain asset you own on paper, you don't really own the asset. You own a mere IOU to it. So isn't this basically a default on the foreign gold ownership return obligation and an admission that all that gold that foreigners had deposited at Fort Knox was never "there" in the most basic sense of the word?

[BadJuju]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

I don't think we should look to ZeroHedge much for fair and balanced coverage. They are drawing a lot of conclusions with limited evidence to support their accusations.

[NCR85]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

I look to them for inspiration and suggestions as to what to look into, not for reliable info. Whether their "news" is to be trusted should be decided on a case by case basis.

I think they can be trusted to read a simple calendar in this case. Is there anything wrong with what they're claiming in this particular newsbite?

[BadJuju]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

I look to them for inspiration and suggestions as to what to look into, not for reliable info. Whether their "news" is to be trusted should be decided on a case by case basis.

I think they can be trusted to read a simple calendar in this case. Is there anything wrong with what they're claiming in this particular newsbite?

They are making an inference that the US has determined the rate at which Germany will receive their gold without any evidence to substantiate it. Now I am not certain if they are also following the same schedule for the reserves in Paris, so I cannot say anything on that front; however, none of this is unprecedented. They have repatriated substantial amounts of gold from UK since the 90s. Now this does ring some bells for me as well and I am sure this has at least some relation to the current troubles the world faces, but I think people are too quick to make conclusions.

[lomaxzoltor]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

Consider also that you don't simply pack up 600,000 lbs of gold and ship it off to Frankfurt. You need to authenticate each bar, assay a random sample from each lot, have a secure location ready, and so on. Granted, this could probably be done much faster than 7 years, but the Bundesbank has some other serious problems to deal with right now. The US political house might be a mess, but I highly doubt the NY Fed doesn't have Germany's gold in their vaults. NY and London and are also the de-facto gold exchanges and so it doesn't make sense to keep gold elsewhere that you intend to possibly use for trading purposes in the future.

I think the bigger message from the recent series of announcements from Germany and others is that they're discussing gold at all again.

I like zerohedge too, but their goal is be sensational and generate traffic and especially ad clicks. While they bring to light a lot of interesting stuff that gets missed elsewhere, they also tend to take that news add a little paranoia spin, some tinfoil and a bit of conspiracy theory and "re"-present it.

[unlucky]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

There's an article in today's FT (behind paywall, sorry) suggesting that the gold will be brought back on planes, with just 3-5 tons per plane so it can be insured. The article cites anonymous "gold traders". If true, that's up to 100 plane loads to get this stuff shipped. 7 years still seems a long time though!

[FrankL]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

Consider also that you don't simply pack up 600,000 lbs of gold and ship it off to Frankfurt. You need to authenticate each bar, assay a random sample from each lot, have a secure location ready, and so on. Granted, this could probably be done much faster than 7 years, but the Bundesbank has some other serious problems to deal with right now. The US political house might be a mess, but I highly doubt the NY Fed doesn't have Germany's gold in their vaults. NY and London and are also the de-facto gold exchanges and so it doesn't make sense to keep gold elsewhere that you intend to possibly use for trading purposes in the future.

I think the bigger message from the recent series of announcements from Germany and others is that they're discussing gold at all again.

I like zerohedge too, but their goal is be sensational and generate traffic and especially ad clicks. While they bring to light a lot of interesting stuff that gets missed elsewhere, they also tend to take that news add a little paranoia spin, some tinfoil and a bit of conspiracy theory and "re"-present it.

How quickly and how much gold did Venezuela repatriate from NY?

The pace of this repatriation sounds like a gentlemen's agreement to me. I'm not saying the gold is not there, but I also find the lack of transparency (e.g. possible re-hypothetication of bars) to be rather worrying. Another reason for the slow repatriation might be to not upset the US (as a sudden and full repatriation might damage the image of the NY fed as a safe storage of CB gold, and other countries might follow suit).

P.S. to unlucky: if you know the name of the FT article, then it is accessible through google.com (FT allows access with a google referral)

[globaleconomicollaps]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

The way I understand it, if you have to wait an X number of years to get a certain asset you own on paper, you don't really own the asset. You own a mere IOU to it. So isn't this basically a default on the foreign gold ownership return obligation and an admission that all that gold that foreigners had deposited at Fort Knox was never "there" in the most basic sense of the word?[/FONT][/COLOR]

I think everybody is missing the point. The gold was put there because we had a gold standard. If you have a gold standard, you have to have your gold ready to trade. If the gold is back home in Germany, that means we will not have a gold standard any time soon. In effect, this means that Germany expects:
A) that the Euro will stay together indefinitely.
B) that the international monetary system will remain in it's current form ( or at least that there will be no gold standard ) forever.

By leaving most of their gold in New York they are hedging that bet. If the gold starts coming home by the truck load, then you can be certain that they think the IMS has stabilized to the point that gold will never be a significant part of it.

[jpatter666]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

I think everybody is missing the point. The gold was put there because we had a gold standard. If you have a gold standard, you have to have your gold ready to trade. If the gold is back home in Germany, that means we will not have a gold standard any time soon. In effect, this means that Germany expects:
A) that the Euro will stay together indefinitely.
B) that the international monetary system will remain in it's current form ( or at least that there will be no gold standard ) forever.

By leaving most of their gold in New York they are hedging that bet. If the gold starts coming home by the truck load, then you can be certain that they think the IMS has stabilized to the point that gold will never be a significant part of it.

Or perhaps that Germany sees a potential return to the D-Mark and wants a substantial amount of gold at home for theoretical "backing" -- just like the US.

[don]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

I think everybody is missing the point. The gold was put there because we had a gold standard. If you have a gold standard, you have to have your gold ready to trade. If the gold is back home in Germany, that means we will not have a gold standard any time soon. In effect, this means that Germany expects:
A) that the Euro will stay together indefinitely.
B) that the international monetary system will remain in it's current form ( or at least that there will be no gold standard ) forever.

By leaving most of their gold in New York they are hedging that bet. If the gold starts coming home by the truck load, then you can be certain that they think the IMS has stabilized to the point that gold will never be a significant part of it.

+1 to expect a voluntary abandonment of fiat currency is delusional


all gold authenticators will be in business suits . . .

Nearly half of Germany’s gold reserves are held in a vault at the Federal Reserve Bank of New York — billions of dollars worth of postwar geopolitical history squirreled away for safe keeping below the streets of Lower Manhattan. Now the German central bank wants to make a big withdrawal — 300 tons in all.
On Wednesday, the Bundesbank said that it would begin moving some of the reserves, the second-largest stock in the world after that of the United States. The goal is to house more than 50 percent of German gold in Bundesbank vaults in Frankfurt by 2020, up from a little less than a third today, the bank said.

During the cold war, West Germany followed a policy of storing its gold as far west as possible in case of a Soviet invasion. While that worry is gone, there is still an argument for keeping some gold in financial centers like New York and London. It remains the one currency that is accepted everywhere. In the event of a currency crisis, the gold could be quickly deployed in financial markets to help restore confidence.

The New York Fed stores the German gold without cost on the theory that the presence of foreign gold supports the dollar’s status as the global reserve currency. A spokesman for the New York Fed declined to comment.

wouldn't the contrary also be true . . .(not mentioned)

The new policy will include the complete withdrawal of 374 tons of German gold stored at the Banque de France in Paris, about 11 percent of the total. Bundesbank officials were quick to note that the decision was not a reflection of French trustworthiness. Rather, because France and Germany now share the euro, there is no need for reserves as insurance against currency crises.

“The gold in Paris is in the best of hands,” Mr. Thiele said on Wednesday. “We are thankful to the Bank of France for storing it.”

news of the planned transfer caused some clucking in financial circles after news leaked out on Tuesday. “Central banks don’t trust each other?” William H. Gross, a founder and managing director of the investment firm Pimco, asked on Twitter.

Mr. Thiele denied there was any mistrust. “We have no doubts about the integrity of other central banks,” he said. “We’re not aware of any irregularities.”

After World War II, vanquished Germany had no gold reserves. The Nazis had used most of it to finance the war, and much of what was left vanished mysteriously in the postwar chaos.

to the victors goes the gold . . . (old barbarian saying)

as its economy recovered and Germany became the export powerhouse it is today, the country accepted gold as well as dollars from the central banks of its trading partners to cover the financial imbalance created by German trade surpluses.

German reserves peaked in 1968 at about 4,000 tons, several years before the collapse of the so-called Bretton Woods system of fixed international exchange rates, which was underpinned by gold reserves.
The end of Bretton Woods in 1973 eliminated some, though not all, of gold’s importance as a universal currency. The total has fallen to about 3,400 tons after Germany transferred some of its treasure to international institutions in which it participates, including the European Central Bank and the International Monetary Fund.

Mr. Thiele acknowledged that Germans could get emotional about their gold . . . Mr. Thiele said that he and other Bundesbank officials personally visited the German gold abroad and that he was satisfied that it was all there.

http://www.nytimes.com/2013/01/17/bu...=business&_r=0

[don]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

there is still an argument for keeping some gold in financial centers like New York and London. It remains the one currency that is accepted everywhere. In the event of a currency crisis, the gold could be quickly deployed in financial markets to help restore confidence.

+1

[FrankL]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

How quickly and how much gold did Venezuela repatriate from NY?

The pace of this repatriation sounds like a gentlemen's agreement to me. I'm not saying the gold is not there, but I also find the lack of transparency (e.g. possible re-hypothetication of bars) to be rather worrying. Another reason for the slow repatriation might be to not upset the US (as a sudden and full repatriation might damage the image of the NY fed as a safe storage of CB gold, and other countries might follow suit).

P.S. to unlucky: if you know the name of the FT article, then it is accessible through google.com (FT allows access with a google referral)

To reply to my own question, data sourced from this bloomberg news bulletin:

“In two months, we’ve brought 160 tons of gold valued at around $9 billion back to Venezuela,” Merentes said on state television from the Caracas airport

That's a lot faster than 300 tons over 7 years!

[don]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

The Venezuelans have a different club membership.

[coolhand]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

Jim Sinclair is reporting he is hearing the repatriation of gold by Germany from the US in particular is a warning to the US to stop body blocking gold, b/c gold is the means for Europe to get out of their economic woes...he doesn't explicitly say this, but the implication is "give us 300 tons over the next 7 years. This is your warning. If you don't let gold off the mat, we will soon be asking for the other 1600 or so tons you store for us over the course of 7 days."

[BadJuju]

Re: It Will Take The Fed Seven Years To Deliver 300 Tons Of German Gold

It is all speculation.