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LBMA claims record amount of gold in London’s vaults

16 days ago

By Ronan Manly – January 4, 2020
This week the LBMA in London claims that a record 8,228 tonnes of gold is held in the London vaults, vaults which include those at the Bank of England and the commercial vaults of such bullion banks as JP Morgan and HSBC.
But beyond the headline figure, how much of this gold is available to underpin the gargantuan daily trading volumes of the London gold market? Very little as it turns out.
Instead of cheer-leading and calling up the Guinness Book of Records, should not the Market be sounding alarm bells that in terms of the giant London casino, there is practically no gold to back up mammoth outstanding unallocated gold claims? Continue reading…
Given that LBMA monthly London vaulted gold holdings data is published on a 3-month lagged basis and was (with

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Quantum leap for banks as ABN AMRO questions gold price discovery

December 13, 2019

By Ronan Manly
Earlier this week, an interesting article appeared on the website of the major Dutch bank ABN Amro, written by the bank’s currency and precious metals strategist, Georgette Boele.
The article, titled “A world with two gold prices?“, questions how, if gold is a safe haven asset, its price has not continued to reflect the ongoing crisis and stress in financial markets.
Boele then seeks an explanation of this puzzle in terms of a framework which consists of both safe haven gold demand and speculative gold demand, one of which reflects the purchase of physical gold (safe haven demand), and the other which speculates on the gold price via paper and synthetic gold products (speculative demand) which are not physically backed by gold.
This leads her to the observation that safe

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Behind enemy lines – Military use of gold coins as emergency money

December 2, 2019

By Ronan Manly
Gold is and always has been universal money that can be used anywhere and is accepted everywhere. This is especially true behind enemy lines.
Recently, while researching for the article “The Power of gold in time of Crisis” (which covered examples of gold being the ultimate asset in times of crisis and emergency, such as Venezuela, Argentina, and Zimbabwe), I came across some fascinating accounts of gold (especially gold coins) being used by elite military units as emergency money in war and conflict situations behind enemy lines.
As this was slightly different to the economic necessity of harnessing gold when economies collapse, I thought it best to ring-fence this in a separate post since military personnel operating behind enemy lines usually choose to be in danger as

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Polish central bank airlifts 8000 gold bars (100 tonnes) from London to Warsaw

November 29, 2019

In early July, BullionStar covered the notable news from Poland’s central bank, that it had boosted its monetary gold reserves to 228.6 tonnes by buying 125.7 tonnes over the 2018-2019 period, with a staggering 100 tonnes of this total purchased at the Bank of England in London during the first half of 2019.
Not only that, but as part of its announcement, the central bank, National Bank of Poland (NBP), also stated that following its new gold accumulation, it was planning to repatriate (or bring back) about 100 tonnes of this gold from London to the NBP Treasury in Warsaw. This was also, according to the NBP, after Polish central bank employees had inspected the Polish gold and its storage arrangements at the Bank of England in June of this year. See “Poland joins Hungary with Huge Gold

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Life under a gold standard

November 27, 2019

Consumer prices react differently under a gold standard and a fiat standard due to the relative flexibility of each system. Gibon’s paradox helps explain.
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Chinese central bank gold buying – On a need to know basis

November 11, 2019

By Ronan Manly at https://www.bullionstar.com/blogs/ronan-manly/chinese-central-bank-gold-buying-on-a-need-to-know-basis/
After announcing monthly gold purchases for ten straight months between December 2018 and September 2019, the Chinese central bank, the People’s Bank of China (PBoC), has now paused buying for its strategic gold reserves.
At least that’s according to October figures from the State Administration of Foreign Exchange (SAFE), China’s currency management agent, which each month announces the value of China’s foreign exchange and gold holdings for the previous month-end.
Given the pause or halt last month in China’s gold accumulation, the strategic gold reserves of the People’s Republic of China (PRC) now remain unchanged at 1948 tonnes for October. But for ten months

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The Power of Gold in Times of Crisis

November 5, 2019

By Ronan Manly (original posted at https://www.bullionstar.com/blogs/ronan-manly/the-power-of-gold-in-times-of-crisis/)
While physical gold is a well-known safe haven asset which investors flock to in times of market turbulence as a way of protecting their wealth, gold is also the ultimate asset to own and possess in times of crisis and emergency. These crisis situations can range from episodes in which fiat currencies collapse, to times in which gold buys safe passage across international borders, and even to periods in which only gold can bail out and rescue an entire nation. Sometimes gold even ensures self-survival and can literally be the difference between life and death.
History is replete with examples of gold being the ultimate asset in times of crisis and desperation, where time

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Why are gold and bonds rising together?

October 27, 2019

The price of gold tends to rise when inflation becomes a threat. Inflation hurts bond prices. So why have gold and bonds been appreciating this year?
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Does anyone use the IMF’s SDR? – JP Koning – BullionStar

October 6, 2019

Last week I poked some fun at the International Monetary Fund’s special drawing rights. I claimed that no on uses them. I wouldn’t be the first to make this accusation. The International Monetary Fund (IMF) itself once described the role that special drawing rights (SDRs) play as “insignificant”.

No one uses the IMF’s SDR as a unit-of-account.
One exception. If you lose your life at sea, the ship owner’s liability is limited to 3.02 million SDRs. So says International Maritime Organization: https://t.co/a4aRSGymip pic.twitter.com/S3uxRdN308
— John Paul Koning (@jp_koning) September 25, 2019

In response, people tweeted out some interesting uses of SDRs that I wasn’t previously aware of. In this post I’ll do a run-down of the surprising places that SDRs make an appearance.
Let’s start from

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LBMA Removes JP Morgan’s Michael Nowak from the LBMA Board – Ronan Manly

September 20, 2019

Just when you think it couldn’t get any more embarrassing for JP Morgan’s precious metals business and its embattled head, Michael Nowak, today it just did, as the powerful London Bullion Market Association (LBMA) moved to oust Nowak, who has become too toxic, from the LBMA’s board of directors.
According to the Financial Times, 20 September 2019:
“The London Bullion Market Association has removed Michael Nowak, JPMorgan’s head of precious metals trading, from its board after he was indicted by the US Department of Justice for a “massive, multiyear scheme” to manipulate the precious metals markets. 
“In light of the ongoing investigation by the Department of Justice, the LBMA, under the terms of its Articles of Association, has removed Mr Nowak from its board,” the LBMA said.
The DoJ

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LBMA Board Member & JP Morgan Managing Director Charged with Rigging Precious Metals

September 17, 2019

Michael Nowak, JP Morgan Chase managing director and Board member of the London Bullion Market Association (LBMA) has just been charged by the US Department of Justice (DoJ) with manipulating the prices of precious metals-futures contracts over an 8 year period.
Nowak sits on the LBMA Board along with LBMA chairman Paul Fisher, LBMA CEO Ruth Crowell, and LBMA General Counsel Sakhila Mirza.
How does “widespread spoofing, market manipulation and fraud”, that the DoJ alleges was undertakne by Nowak, sit with the LBMA’s claim that the LBMA Global Precious Metals Code “promotes a fair effective and transparent market” for its members, including JP Morgan, “to uphold high standards of business conduct”? Continue reading…
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Hyperbitcoinization

September 8, 2019

According to the hyperbitcoinization hypothesis, the world will be overcome by bitcoin. How has the hypothesis fared so far?
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Chinese gold imports – Better data, lower inflows, unanswered questions

September 2, 2019

By Ronan Manly at https://www.bullionstar.com/blogs/ronan-manly/chinese-gold-imports-better-data-lower-inflows-unanswered-questions/
While gold imports into China fell noticeably between May and July 2019, the reasons for the lower gold inflows may be more complex than the official line.
In mid-August Reuters published a story titled “China curbs gold imports as trade war heats up” claiming that the Chinese authorities had been ”severely restricting gold imports since May” by reducing the monthly gold import quotas that are handed out to a group of Chinese and foreign banks by China’s central bank, the People’s bank of China (PBoC). The background to gold import quotas can be read here in BullionStar’s article “Chinese Cross-Border Trade Rules of Gold“.
Speaking on condition of anonymity

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More on the puzzle of negative interest rates – copy

August 26, 2019

Interest rates on many bonds have plunged into negative territory. But why on earth would anyone be willing to save $1000 only to get $999 in the future? Saving up for a rainy day has always gone hand in hand with a positive interest rate, not a negative one.
In my last post I showed how negative real return on saving could emerge. I invoked a certain type of a economy – a dystopic island where castaways like Robinson Crusoe live. The island’s few meagre opportunities to invest have dried up. Technological advancement has halted. To prepare for his retirement Robinson Crusoe stores coconuts, but the constant assault from rodents and insects meant that he’d end up with less resources than he started with.
Crusoe and other castaways his age can also prepare for old age by lending resources

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The not-so-crazy world of negative interest rates – JP Koning

August 6, 2019

A few years ago when I was working at a bank, I asked the bond trader who worked next to me what he thought about the newish phenomenon of negative interest rates. “Rate are only negative cause they’re messing around in our markets!” he whispered indignantly. By “they” he meant central bankers.
Was the bond trader right? Are negative interest rates an artificial phenomenon that central bank technocrats have foisted on the world? Or can interest rates naturally turn negative, of their own accord? (In this post I’ll be referring to real interest rates here, not nominal rates. If you have a bond that yields 0.5% per year, but inflation is 1%, then the real, or inflation-adjusted rate, is -0.5%).
This is an increasingly relevant question. As Deutsche Bank’s Torsten Slok recently illustrated,

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The History of the World is a History of Gold – BullionStar

August 1, 2019

The history of gold is nearly as long as the history of human civilisation. Gold has been inextricably linked to human civilisations since at least 6000 BC. There is absolutely no way of looking at the history of the world without encountering the history of gold.
Most importantly, gold has been used as money in countless civilisations for thousands of years, facilitating trade and economic growth and acting as a store of value for accumulated wealth. Indeed, gold has been the ultimate form of money for thousands of years precisely because it is a trusted form of money which retains its purchasing power over time.
Because it can be found in its naturally occurring state, gold was one of the first metals known to man, and early civilizations prized gold for its unique and precious

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Gold the Ultimate Asset as Fed Joins Race to the Bottom in Global Rates

July 31, 2019

The US Federal Reserve’s Federal Open Market Committee (FOMC) today announced a 0.25% cut in the influential US federal funds rate from a target range of 2.25% – 2.50% to a target range of  2.00% – 2.25%, a move which was closely watched and widely signaled, but which was the first such fed funds rate cut in over 10 years.
As an official interest rate which affects all other US interest rates including bank-to-bank overnight loans, the US Federal Reserve uses changes in its fed funds rate to manipulate US economic growth, but its impact is even more far-reaching, influencing as it does the relative strength of the US dollar versus other currencies, and the interest rate decisions of the world’s other major central banks.
Confirmation of the cut – officially called a policy action – came at

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