They initially succeded, but by 1965 the gold pool was consistently bleeding gold. On Friday March 8th, 1968 London sold 100 tons of gold, more than 20 times the normal daily turnover. The following week, several planeloads of gold had to be airlifted from the US to London to meet demand. On Wednesday London sold 175 ton and by Thursday demand exceeded 225 tons. The Queen declared Friday 15th march a "bank holiday" and the London Gold Pool ceased to operate. Gold prices started to go up unchecked and US reserves depletion accelerated. In 1971 the US president Richard Nixon declared that foreign central banks would no longer be able to redeem their US Dollar holdings for gold. In the 12 years from 1968 to the peak of the bull market in 1980, the price of gold went from $35.20 to over $800.
Could we be heading towards a repeat of that situation? I think so.
The Swiss central bunk just finished selling half their gold reserve. Switzerland was the biggest gold seller from 2000-2005. They will now sell no more.
http://www.iie.com/publications/papers/hildebrand0505.pdf
QUOTE
In June 1999, the Governing Board of the SNB decided that half of its then gold reserves of 2,590 tons were no longer required for monetary purposes and that it would inform the market and the public accordingly. This decision contributed to the process that eventually led to the first central bank agreement on gold sales. This so-called Washington Agreement provided the framework for the subsequent gold sales of the Swiss National Bank, the European Central Bank (ECB), and 13 European national central banks. Under this agreement, the SNB’s realized sales of 1,170 tons, which represented the bulk of the total sales of 2,000 tons for all participating central banks. The SNB completed its gold selling program on March 30, 2005, after selling a residual 130 tons under the second central bank agreement on gold sales. After completion of the gold sales and the distribution of the proceeds from the sales to the Swiss government and the 26 cantons, the SNB’s balance sheet will consist of approximately CHF90 billion. With the remaining 1,290 tons of gold reserves, the SNB retains roughly 20 percent of its assets in gold. By international comparison, the SNB continues to hold a very significant stock of gold.
Compare the major central bank gold holdings (in Tonnes) as at June 2005 vs Mar 2000 (in parentheses)
1. United States 8,133 (8,139)
2. Germany 3,433 (3,468)
3. Inernational Monetary Fund 3,217 (3,217)
4. France 2,945 (3,024)
5. Italy 2,452 (2,452)
6. Switzerland 1,290 (2,590)
7. Japan 765 (754)
8. Netherlands 722 (912)
9. European Central Bank 720 (747)
10. China 600 (395)
11. Spain 523 (523)
12. Portugal 442 (607)
13. Taiwan 423 (434)
14. Russia 387 (414)
15. India 358 (358)
16. Venezuela 358 (304)
17. United Kingdom 311 (615)
18. Austria 307 (407)
19. Lebanon 287 (287)
20. Belgium 258 (258)
However, there are serious doubts about most large holdings, a large percentage of which might actually have been lent to put a lid on the gold price.
There is an excellent article by James Turk at http://www.fgmr.com/moreproof.htm
QUOTE
More Proof
First published on April 21, 2003
One of the statistics complied by the International Monetary Fund is the quantity of gold owned by the world's central banks. That weight is reported to be 32,291 tonnes of gold. Most people accept this number at face value and without questioning its accuracy. However, central banks actually own less gold.
In reality central banks own 32,291 tonnes of gold AND gold receivables. This distinction is important. From both a legal and an accounting point of view, gold in the vault is clearly very different from gold owed to you. The reason is that gold in the vault is much less risky than someone's promise to pay you gold.
This distinction between these two unlike assets is one of the most basic principles of accounting, namely, that cash is different from a receivable. For this reason, cash and accounts receivable appear as two different line items on balance sheets prepared according to generally accepted accounting principles. But some central banks do not report their gold assets using these sound and well-established accounting standards.
For example, the Bundesbank discloses in its 2002 annual report that it has €36,208 million of "Gold and gold receivables". It further sustains the fiction that these two different assets are one asset by stating in the footnotes to its financial statements: "At the end of 2002 the Bank's holdings of fine gold amounted to 111 million ounces." The Bundesbank does not, however, state anywhere in its annual report what portion of its gold is stored in vaults and what portion has been removed from the vault and placed at risk by being loaned.
Another central bank with a large gold asset is the Banca d'Italia. According to its 2001 annual report, which is the latest report available: "Monetary gold reserves were 48.1 trillion lire (EUR 24.8 billion, or $21.9 billion)." One would think from this statement that this "gold reserve" is sitting safely in secure vaults, as a reserve. But this central bank too has been withdrawing gold from the vault and placing it at risk. Its balance sheet also records "Gold and gold receivables", and like the Bundesbank, it fails to disclose how much of its gold has been loaned.
In contrast to these reports by the German and Italian central banks, the annual report of the Banque de France shows that none of its gold has been loaned. There is no gold receivable reported by it, so none of its gold has been placed at risk by being loaned.
There is also a third category of reporting. The Swiss National Bank, for example, uses generally accepted accounting principles to prepare its financial statements. Not only does it disclose that 254.7 tonnes of its 1,661.9 tonnes have been loaned, it provides information to assess the level of risk. For example, 158.7 tonnes were loaned on an unsecured basis.
Another central bank that discloses its gold lending is Banco de Portugal. According to its latest annual report, it has removed from the vault and placed at risk 434.1 tonnes of its 606.7 tonnes, or 71.6%, which is relatively much greater than the percentage of gold placed at risk by the Swiss National Bank, which is 15.3%.
Accordingly, there is no question that some central bank gold has been removed from vaults and loaned into the market. But because the level of reporting by the central banks is inadequate, it has been impossible to precisely determine the exact weight of gold removed from central bank vaults. This unknown weight of gold has become one of the most contentious issues within the gold industry. And the debate that has arisen as a result is well warranted.
If gold is removed from a vault and sold into the market, this dishoarding obviously will have an impact on gold's rate of exchange to the dollar and other currencies. This result from dishoarding is a basic principle of economics, but with a twist. An adaptation is necessary in a post-Gold Standard world to account for the fact that national currencies are no longer directly tied to gold.
Economic models prove that the extension of credit debases a currency, which is a principle that is true for any money, whether dollars, euros or gold. However, because goods and services are today priced in terms of national currencies - all of which are fiat and are only exchangeable for but not redeemable into gold - the impact of credit extensions in gold is different than the impact of credit extensions in national currencies.
When credit is pumped up using a national currency, it's a process that usually results in inflation; the prices of goods and services rise. The new extensions of credit increase the supply of the national currency, and if this growth in supply is greater than the demand for the currency (which has always been the case since the abandonment of the last remnants of the Gold Standard in 1971), the currency loses purchasing power. In other words, it is debased, and that debasement is reflected by rising prices. Each unit of currency purchases less and less. However, goods and services are no longer priced in terms of gold, so gold credit extensions have a different result on gold's purchasing power.
If gold credit extensions are greater than the demand for gold, it is debased, and like national currencies, it's purchasing power declines. But because goods and services are priced in national currencies, gold's debasement is manifested by a decrease in its exchange rate, or to put it in the terms commonly used, the 'gold price' falls. In other words, gold when debased in this way purchases less national-currency-denominated goods and services. Thus, it is clear from this analysis that it is important to know how much central bank gold has been loaned, so that these credit extensions can be analyzed to assess their impact on gold's rate of exchange - the so-called 'gold price' - compared to the many national currencies.
In recent years several efforts have been made to overcome the inadequate reporting of central banks in order to determine the weight of gold dishoarded from their vaults. Many people continue to accept the results prepared by Gold Fields Mineral Services, which have generally stated that around 5,000 tonnes have been removed from central bank vaults. However, I dismiss this number because GFMS surveys do not capture the weight of gold borrowed by commercial banks to fund their national currency assets, and my assessment is that this weight of gold represents the largest portion of gold loaned out by central banks.
Consequently, I have relied upon the work completed by Frank Veneroso and Reg Howe. Both of them have used a different methodology to reach basically the same conclusion, namely, that some 15,000 tonnes of gold have been removed from central bank vaults through lending and other forms of credit extension, such as swaps.
Frank Veneroso determined this number from a supply-and-demand perspective using various historical analyses, levels of economic activity and other statistics. His most recent report, Gold Derivatives, Gold Lending,Official Management Of The Gold Price And The Current State of the Gold Market, has been posted by GATA at http://www.gata.org/Veneroso1202.html
Reg Howe has concluded that the weight was 15,000 tonnes by analyzing the derivative activity of banks that is reported by the Bank for International Settlements. See the article posted on his website, Gold Derivatives: Moving towards Checkmate http://www.goldensextant.com/commentary23.html#anchor19855
....
In conclusion, I have established yet a third methodology to make obvious the weight of gold that has been dishoarded from central bank vaults. By using HM Customs reports to determine the weight of gold passing through the UK's borders and adding to that total the dishoarding from the Federal Reserve Bank of New York, along with similar activity assumed for Switzerland and the other lesser gold centers, we can deduce that some 15,000 tonnes of gold have been removed from central bank vaults.
Consequently, "gold receivables" equal 46% of the 32,291 tonnes of gold reported by central banks. So only 17,291 tonnes of physical metal is left in central bank vaults.
In 1945, 68% of the world's gold was in central bank vaults, and the total quantity of money, i.e., national currency in circulation, was about $300 billion. Today the total quantity of national currency is about $30 trillion, a one hundred-fold increase in 57 years compounded at an 8.4% annual growth rate. And central banks hold in their vaults some 17,291 tonnes of gold, which is just 40% of the weight they held in 1945 and only 11.9% of today's aboveground gold stock.
Clearly, these numbers show that today's monetary system is out-of-whack, that the money-substitutes produced by central banks have become too excessive and therefore overvalued against money itself, i.e., gold. The central banks and the fiat national currency they produce are therefore vulnerable. After decades of abusive policies undermining the purchasing power of those national currencies, the central banks are running out of gold, their most valuable and powerful asset.
Consequently, history will repeat. Gold will again soar just as it did after the last manipulation scheme failed in 1971.
First published on April 21, 2003
One of the statistics complied by the International Monetary Fund is the quantity of gold owned by the world's central banks. That weight is reported to be 32,291 tonnes of gold. Most people accept this number at face value and without questioning its accuracy. However, central banks actually own less gold.
In reality central banks own 32,291 tonnes of gold AND gold receivables. This distinction is important. From both a legal and an accounting point of view, gold in the vault is clearly very different from gold owed to you. The reason is that gold in the vault is much less risky than someone's promise to pay you gold.
This distinction between these two unlike assets is one of the most basic principles of accounting, namely, that cash is different from a receivable. For this reason, cash and accounts receivable appear as two different line items on balance sheets prepared according to generally accepted accounting principles. But some central banks do not report their gold assets using these sound and well-established accounting standards.
For example, the Bundesbank discloses in its 2002 annual report that it has €36,208 million of "Gold and gold receivables". It further sustains the fiction that these two different assets are one asset by stating in the footnotes to its financial statements: "At the end of 2002 the Bank's holdings of fine gold amounted to 111 million ounces." The Bundesbank does not, however, state anywhere in its annual report what portion of its gold is stored in vaults and what portion has been removed from the vault and placed at risk by being loaned.
Another central bank with a large gold asset is the Banca d'Italia. According to its 2001 annual report, which is the latest report available: "Monetary gold reserves were 48.1 trillion lire (EUR 24.8 billion, or $21.9 billion)." One would think from this statement that this "gold reserve" is sitting safely in secure vaults, as a reserve. But this central bank too has been withdrawing gold from the vault and placing it at risk. Its balance sheet also records "Gold and gold receivables", and like the Bundesbank, it fails to disclose how much of its gold has been loaned.
In contrast to these reports by the German and Italian central banks, the annual report of the Banque de France shows that none of its gold has been loaned. There is no gold receivable reported by it, so none of its gold has been placed at risk by being loaned.
There is also a third category of reporting. The Swiss National Bank, for example, uses generally accepted accounting principles to prepare its financial statements. Not only does it disclose that 254.7 tonnes of its 1,661.9 tonnes have been loaned, it provides information to assess the level of risk. For example, 158.7 tonnes were loaned on an unsecured basis.
Another central bank that discloses its gold lending is Banco de Portugal. According to its latest annual report, it has removed from the vault and placed at risk 434.1 tonnes of its 606.7 tonnes, or 71.6%, which is relatively much greater than the percentage of gold placed at risk by the Swiss National Bank, which is 15.3%.
Accordingly, there is no question that some central bank gold has been removed from vaults and loaned into the market. But because the level of reporting by the central banks is inadequate, it has been impossible to precisely determine the exact weight of gold removed from central bank vaults. This unknown weight of gold has become one of the most contentious issues within the gold industry. And the debate that has arisen as a result is well warranted.
If gold is removed from a vault and sold into the market, this dishoarding obviously will have an impact on gold's rate of exchange to the dollar and other currencies. This result from dishoarding is a basic principle of economics, but with a twist. An adaptation is necessary in a post-Gold Standard world to account for the fact that national currencies are no longer directly tied to gold.
Economic models prove that the extension of credit debases a currency, which is a principle that is true for any money, whether dollars, euros or gold. However, because goods and services are today priced in terms of national currencies - all of which are fiat and are only exchangeable for but not redeemable into gold - the impact of credit extensions in gold is different than the impact of credit extensions in national currencies.
When credit is pumped up using a national currency, it's a process that usually results in inflation; the prices of goods and services rise. The new extensions of credit increase the supply of the national currency, and if this growth in supply is greater than the demand for the currency (which has always been the case since the abandonment of the last remnants of the Gold Standard in 1971), the currency loses purchasing power. In other words, it is debased, and that debasement is reflected by rising prices. Each unit of currency purchases less and less. However, goods and services are no longer priced in terms of gold, so gold credit extensions have a different result on gold's purchasing power.
If gold credit extensions are greater than the demand for gold, it is debased, and like national currencies, it's purchasing power declines. But because goods and services are priced in national currencies, gold's debasement is manifested by a decrease in its exchange rate, or to put it in the terms commonly used, the 'gold price' falls. In other words, gold when debased in this way purchases less national-currency-denominated goods and services. Thus, it is clear from this analysis that it is important to know how much central bank gold has been loaned, so that these credit extensions can be analyzed to assess their impact on gold's rate of exchange - the so-called 'gold price' - compared to the many national currencies.
In recent years several efforts have been made to overcome the inadequate reporting of central banks in order to determine the weight of gold dishoarded from their vaults. Many people continue to accept the results prepared by Gold Fields Mineral Services, which have generally stated that around 5,000 tonnes have been removed from central bank vaults. However, I dismiss this number because GFMS surveys do not capture the weight of gold borrowed by commercial banks to fund their national currency assets, and my assessment is that this weight of gold represents the largest portion of gold loaned out by central banks.
Consequently, I have relied upon the work completed by Frank Veneroso and Reg Howe. Both of them have used a different methodology to reach basically the same conclusion, namely, that some 15,000 tonnes of gold have been removed from central bank vaults through lending and other forms of credit extension, such as swaps.
Frank Veneroso determined this number from a supply-and-demand perspective using various historical analyses, levels of economic activity and other statistics. His most recent report, Gold Derivatives, Gold Lending,Official Management Of The Gold Price And The Current State of the Gold Market, has been posted by GATA at http://www.gata.org/Veneroso1202.html
Reg Howe has concluded that the weight was 15,000 tonnes by analyzing the derivative activity of banks that is reported by the Bank for International Settlements. See the article posted on his website, Gold Derivatives: Moving towards Checkmate http://www.goldensextant.com/commentary23.html#anchor19855
....
In conclusion, I have established yet a third methodology to make obvious the weight of gold that has been dishoarded from central bank vaults. By using HM Customs reports to determine the weight of gold passing through the UK's borders and adding to that total the dishoarding from the Federal Reserve Bank of New York, along with similar activity assumed for Switzerland and the other lesser gold centers, we can deduce that some 15,000 tonnes of gold have been removed from central bank vaults.
Consequently, "gold receivables" equal 46% of the 32,291 tonnes of gold reported by central banks. So only 17,291 tonnes of physical metal is left in central bank vaults.
In 1945, 68% of the world's gold was in central bank vaults, and the total quantity of money, i.e., national currency in circulation, was about $300 billion. Today the total quantity of national currency is about $30 trillion, a one hundred-fold increase in 57 years compounded at an 8.4% annual growth rate. And central banks hold in their vaults some 17,291 tonnes of gold, which is just 40% of the weight they held in 1945 and only 11.9% of today's aboveground gold stock.
Clearly, these numbers show that today's monetary system is out-of-whack, that the money-substitutes produced by central banks have become too excessive and therefore overvalued against money itself, i.e., gold. The central banks and the fiat national currency they produce are therefore vulnerable. After decades of abusive policies undermining the purchasing power of those national currencies, the central banks are running out of gold, their most valuable and powerful asset.
Consequently, history will repeat. Gold will again soar just as it did after the last manipulation scheme failed in 1971.