Why Did The Bundesbank Secretly Withdraw Two-Thirds Of Its London Gold?

Tyler Durden's picture

Two days ago we reported that the German Court of Auditors demanded that the German Central Bank, the Bundesbank, verify and audit its official gold holdings consisting of 3,396 tons, held mostly offshore, namely New York, London and Paris, at least according to official documents. It also called for repatriation of 150 tons in the next three years to perform a quality inspection of the tungsten gold. Today, in a surprising development, via the Telegraph we learn that none other than the same Bundesbank which is causing endless nightmares for all the other broke European nations due to its insistence for sound money, decided to voluntarily pull two thirds of its gold holdings held by the Bank of England. According to a confidential report referenced by the Telegraph, Buba reclaimed 940 tons, reducing its BOE holdings from 1,440 in 2000 to 500 in 2001 allegedly "because storage costs were too high." This is about as idiotic an excuse as the Fed cancelling its reporting of M3 in 2006 because "the costs of collecting the underlying data outweigh the benefits." So why did Buba repatriate its gold? Ambrose Evans-Pritchard has an idea.

The shift came as the euro was at its weakest, slumping to $0.84 against the dollar. But it also came as the Bank of England was selling off most of Britain's gold reserves – at market lows – on orders from Gordon Brown.


Peter Hambro, chair of the UK-listed gold miner Petropavlovsk, said the Bundesbank may have withdrawn its bullion in self-protection since it did not, apparently, have its own specifically allocated bars in London. "They may have decided that the Bank of England had lent out too much gold, and decided it was safer to bring theirs home. This is about the identification. Can you identify your own allocated gold, or are you just a general creditor with a metal account?"


The watchdog report follows claims by the German civic campaign group "Bring Back our Gold" and its US allies in the Gold Anti-Trust Committee that official data cannot be trusted. They allege central banks have loaned out or "sold short" much of their gold.


The refrain has been picked up by German legislators. "All the gold must come home: it is precisely in this crisis that we need certainty over our gold reserves," said Heinz-Peter Haustein from the Free Democrats (FDP).

Speculation aside, the fact that central banks, and even banks of central banks (i.e., the BIS), have long lent out gold, is no secret to anyone, traditionally to satisfy short-term physical gold confirmation claims upon a spike in demand, usually associated with a liquidity shortage (when the value of gold as monetary collateral truly shines). The problem with this rehypothecation scheme is what happens when the counterparty suddenly finds themselves insolvent, the gold has since been re-re-rehypothecated, and nobody really knows whose gold it is any more. This becomes a drastic problem when a counterparty in a collateral chain suddenly goes broke... like MF Global did last year, and the lawsuits started flying trying to determine whose gold is where. Needless to say, it was the London office of MF Global that was at fault for breaching a rehypothecation chain (because only in London was there no collateral haircut limit on rehypotehcation), and once physical delivery demands arose, nobody could locate bar XYZ with a given serial number.

That, or the Bundesbank merely foresaw the ultimate unwind of the failed European mercantilist experiment at the start, and refused to leave its most precious asset in the hands of the banker oligarchy which it knew would do everything in its power to procure said gold once the feces hit the fan. Sure enough, BUBA's 'non-denial' denial confirms this too:

The Bundesbank said it had full trust in the "integrity and independence" of its custodians, and is given detailed accounts each year. Yet it hinted at further steps to secure its reserves. "This could also involve relocating part of the holdings," it said.

Yet what is left unsaid in all of the above is that Germany has done nothing wrong! It simply demanded a reclamation of what is rightfully Germany's to demand.

And here is the crux of the issue: in a globalized system, in which every sovereign is increasingly subjugated to the credit-creating power of the globalized "whole", one must leave all thoughts of sovereign independence at the door and embrace the "new world order." After all this is the only way that the globalized system can create the shadow cloud of infinite repoable liabilities, in which we currently all float light as a binary feather, which permits instantaeous capital flows and monetary fungibility, and which guarantees that there will be no sovereign bond issue failure as long as nobody dares to defect from the system in which all collateral is cross pledge and ultra-rehypothecated... for the greater good. Until the Buba secretly defected that is.

And this is the whole story. Because by doing what it has every right to do, the German Central Bank implicitly broke the cardinal rule of true modern monetary system (never to be confused with that socialist acronym fad MMT, MMR or some such comparable mumbo-jumbo). And the rule is that a sovereign can never put its own people above the global corporatist-cum-banking oligarchy, which needs to have access to all hard (and otherwise) assets at any given moment, on a moment's notice, as the system's explicit leverage at last check inclusive of the nearly $1 quadrillion in derivatives, is about 20 times greater than global GDP. This also happens to be the reason why the entire world is always at most a few keystrokes away from a complete monetary (and trade) paralysis, as the Lehman aftermath and the Reserve Fund breaking the buck so aptly showed.

We are confident that little if anything will be made of the Buba's action, because dwelling on it too much may expose just who the first country will be (or  already has been) when the tide finally breaks, and when it will be every sovereign for themselves. Because at that point, which will come eventually, not only Buba, but every other bank, corporation, and individual will scramble to recover their own gold located in some vault in London, New York, or Paris, or at your friendly bank vault down the street, and instead will merely find a recently emptied storage room with humorously written I.O.U. letters in the place of 1 kilo gold bricks.

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kliguy38's picture

Perhaps they just wanted to help put a little "gum" in some leaks.......

sunaJ's picture

As central planners catch up to the idea that physical possession is 9/10ths of the law, the fraud will soon be revealed.

Mae Kadoodie's picture

Be careful, I hear that some I.O.U.'s are actually made of tungsten.

jeff montanye's picture

i'm starting to wonder where that one tenth of the law is for those not in possession.  mf global doesn't leave a good taste in my mouth.

CrockettAlmanac.com's picture



Because at that point, which will come eventually, not only Buba, but every other bank, corporation, and individual will scramble to recover their own gold located in some vault in London, New York, or Paris, or at your friendly bank vault down the street, and instead will merely find a recently emptied storage room with humorously written I.O.U. letters in the place of 1 kilo gold bricks.


"Kilroy: Up yours baby."


FEDbuster's picture

Sure would be nice to audit and assay the gold at Ft. Knox right about now.  Maybe Geraldo could host a big FOX special, "The Mystery of Ben Bernanke's Vaults"?  Most likely with an ending similar to his last "Vault" show.

Orly's picture

The last "vault" being full of stale air and dust?

FEDbuster's picture

Bingo!  A whole lot of bupkis.

DoChenRollingBearing's picture

Again, the FRBNY holds mostly foreign gold, their total holdings are some 7000 tonnes (yes, including a bunch of Germany's).  Ft. Knox (along with a little in San Francisco, West Point and a bit at the FRBNY) adds up to 8000 + tonnes of US gold.  Assuming all the gold is legitimate (my guess is yes that it is), then if I were Germany I would pull at least half of their gold from the FRBNY as well.

Who's going to invade Germany?  Russia?  Poland?

This whole issue is yet another reminder to ALL OF YOU that physical gold is likely to get very scarce...  If you do not own any, then you better get started!

strannick's picture

"Shipped the gold abroad in case of a Soviet attack''. Might have well shipped it to Moscow for safe-keeping.

Seb's picture

"Might have well shipped it to Moscow for safe-keeping."

Bad idea. They tend to keep for good anything they receive for "safe keeping".



Crime of the Century's picture

They tend to keep for good anything they are allowed to touch...



DeadFred's picture

Better get it out of New York right quick. I hear them Iranians might invade at any time.

GCT's picture

Dochen and the President using the emergency powers act when things really start getting worse can confiscate it all. and not return any gold to anyone, including soverigns.

seataka's picture

I chatted with a gal who lives in Ft. Knox who said it was common knowledge there was no gold in Ft. Knox.


Orly's picture

You seriously trust a girl from Kentucky?

blindman's picture

your avatar looks just like a women i
once called a neighbor and she was from kentucky,
never saw her wearing shoes. once or twice she
watched my son but honestly, i never trusted her.
sometimes you just have to have faith.

Orly's picture

Why on earth would anyone wear shoes when there's the cool blue grass between your toes?

Dead Canary's picture

What does a girl from Kentucky put behind her ears to make herself more attractive?

Here ankles.

JonNadler's picture

don't tell anyone but Orly was raised in Kentucky

seataka's picture

Yes, I would, The indian word it comes from sounds like  ken\tuh/key or kentahkee, which means "the happy hunting ground" it was considered heaven. "WALL STREET" on the other hand was named after a wooden wall that was built by Dutch traders, @1620 after they had signed a peace treaty with the locals, who called the place they signed it "Hoboken" which means "pipe of peace" and then they slaughtered them. The line of that wall that was built to protect the Dutch from the enraged indians, after the Dutch massacre of the indians, is the street in New York City called "WALL STREET. (ref: http://www.sidis.net/TSChap7.htm)

Orly's picture

Very interesting history.  Thanks for sharing.


walcott's picture

In Ft. Knox Kentucky it was common knowledge that there never was any gold in Ft. Knox.

Mister Ponzi's picture

When the tide finally breaks you don't want to be long tungsten. Supply shock, bitchez!

merizobeach's picture

How exactly would the uneducated common people of Kentucky have any goddamn clue whatsoever how much gold is stored in Ft Knox?  Those stupid motherfuckers probably couldn't locate all fifty states on a map.

dbTX's picture

Obama claims to have been in all 57 states

Arthur Borges's picture

You mean Goldfinger was misinformed or maybe even set up by the FBI like some 21-year-old Bangladeshi who drove up in front of New York's Federal Reserve with nothing more destructive than the gas in his tank?

I'm so disappointed in James and Pussy.

SafelyGraze's picture

"Why Did The Bundesbank Secretly Withdraw its Gold Two-Thirds out of London?"

it sounds like a ribald riddle

hope it has a happy ending

nmewn's picture

Oddball: Hi, man.
Big Joe: What are you doing?
Oddball: I'm drinking wine and eating cheese, and catching some rays, you know.

piceridu's picture

What's with the negative waves?

Dr Benway's picture

IOUs are as good as money. Go ahead, count it all up. Every last ounce accounted for.



FreedomGuy's picture

Start a pool in your office to guess how many times the same gold bar has been sold or held in inventory for a different account. Apply the same guess to GLD or any other paper gold accounts.

merizobeach's picture

According to Jim Rickards, perhaps about twenty times.

Crime of the Century's picture

According to Jeff Christian, it is 100 paper to 1 physical, and many of those players foolishly believe they also have claims.


jmcadg's picture

According to Jeff Christian he later admitted to 400:1 paper:physical.

Musical Chairs - 400 people dancing, 1 chair left and when the music stops you're already sitting on it. :)

mjcOH1's picture

I'm thinking the red tape involved in shipping that gold is about to get a lot more time consuming.   Nothing to do with where it's going of course.   But there should be some sort of genetic testing to determine what goose laid it and its history for the last 100 yrs or so.

Should all be cleared up in a couple of years, or never if the Euro implodes.  Whichever comes last.

FEDbuster's picture

Wonder how much of the Venezuela gold has made it down to Hugo's vaults?  Looks like he is ahead of the curve on that call.

knukles's picture

Venezuela had announced some time ago that the deliveries had been accomplished.
Remember, it was shortly after Hugo demanded his gold back from London that the Arab Spring-a-ling forces miraculously captured Tripoli and within days announced a massive sale of Libya's gold which was held at the BoE in order to pay for arms, ammo and fighters salaries.

Now, there has just Fuck All Never been Rebels in any Fucking Country ever sold Gold Reserves to pay for the Arms and Ammo, etc., being Given to Them for free by the Supporting Forces.

It doesn't happen that way.

The so called sale of Libyan gold was made in order to be able to dip into one dwindling unallocated pile of shiny in order to make physical to Hugo.

In My Not so very Humble Opinion because that's the only way all these stories fit together.....
liberal application of Occam's Razor

A ton here and a ton there and pretty soon you're talkin' real gold.

DoChenRollingBearing's picture

+ 1  I'll buy that knukles!    I'll buy more gold soon!  

Don't get left out as the gold train pulls out of the station...

fuu's picture

I always thought the swiftness of setting up the Central Bank of Benghazi was suspect.

Orly's picture

You mean like waaay before the civil war was over and Khaddafi wasn't even dead yet kinda swiftness?

knukles's picture

See ya'll are catchin' on.

Good on ya'

fuu's picture

Yes, they formed a new national oil company at the same time.

knukles's picture

There ya go'
Only reasons to invade somebody...
Oil or Gold

Watch real close....
Listen to the sabres rattling.


And PS on the "new" oil co.
If I remember correctly, BP is in big time...
They'd been nationalized earlier, etc.


ParkAveFlasher's picture

Wow, so Hugo essentially pushed the button on Qaddafi?  I can believe it.