Exclusive: Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

Tyler Durden's picture

Over the past several years, the German people, for a variety of justified reasons, have expressed a pressing desire to have their central bank perform a test, verification, validation or any other assay, of the official German gold inventory, which at 3,395 tonnes is the second highest in the world, second only to the US. We have italicized the word official because this representation is merely on paper: the problem arises because no member of the general population, or even elected individuals, have been given access to observe this gold. The problem is exacerbated when one considers that a majority of the German gold is held offshore, primarily in the vaults of the New York Fed, and at the Bank of England - the two historic centers of central banking activity in the post World War 2 world.

Recently, the topic of German gold resurfaced following the disclosure that early on in the Eurozone creation process, the Bundesbank secretly withdrew two-thirds of its gold, or 940 tons, from London in 2000, leaving just 500 tons with the Bank of England. As we made it very clear, what was most odd about this event, is that the Bundesbank did something it had every right to do fully in the open: i.e., repatriate what belongs to it for any number of its own reasons - after all the German central bank is only accountable to its people (or so the myth goes), in deep secrecy. The question was why it opted for this stealthy transfer.

This immediately prompted rampant speculation within various media outlets, the most fanciful of which, of course, being that the Bundesbank never had any gold to begin with and has been masking the absence all along. The problem with such speculation is that, while it may be 100% correct and accurate, there has been not a shred of hard evidence to prove it. As a result, it is merely relegated to the echo chamber periphery of "serious media" whose inhabitants are already by and large convinced that all gold in the world is tungsten, lack of actual evidence to validate such a claim be damned (just like a chart of gold spiking or plunging is not evidence that a central bank signed the trade ticket, ordering said move), and in the process delegitimizing any fact-based investigations that attempt to debunk, using hard evidence, the traditional central banker narrative that the gold is there and accounted for.

And hard evidence, or better yet a paper trail of inconsistencies, is absolutely paramount when juxtaposing the two most powerful forces of our times: i) the central banking-led status quo (which is de facto the banker-led oligarchy whose primary purpose in the past several centuries has been to accumulate as much as possible of the hard asset-based fruits of people's labor, who toil in exchange for "money" created out of thin air - a process which could be described as not quite voluntary slavery, but the phrase would certainly suffice), and ii) "everyone else", especially when "everyone else" still believes in the supremacy of democratic forces, accountability, and an impartial legal system (three pillars of modern society which over the past 4 years we have experienced time and again have been nothing but mirages). Because without hard evidence, not only is the case of the people against central bankers non-existent, even if conducted in a kangaroo court co-opted by the banker-controlled status quo, it becomes laughable with every iteration of progressively more unsubstantiated accusations against the central banking cartels.

Finally, when it comes to cold, hard facts, which expose central banks in misdeed, even the great central banks have to be silent silent, as otherwise the overt perversion of justice will blow up the mirage that modern society lives in a democratic, laws-based world will be torn upside down.

And while others engage in click-baiting using grotesque hypotheses of grandure without any actual investigation, reporting or error and proof-checking to build up hype and speculation, which promptly fizzles and in the process desensitizes the general public and those actually undecided and/or on the fences about what truly goes on behind the scenes, Zero Hedge travelled (metaphorically) in space - to London, or specifically the Bank of England Archives - and in time, to May 1968 to be precise.

While there we dug up a certain memo, coded C43/323 in the BOE archives, official title "GOLD AND FOREIGN EXCHANGE OFFICE FILE: FEDERAL RESERVE BANK OF NEW YORK (FRBNY) - MISCELLANEOUS", dated May 31, 1968, written by a certain Mr. Robeson addressed to the BOE's Roy Bridge as well as its Chief Cashier, and whose ultimate recipient is Charles Coombs who at the time was the manager of the open market account at the Fed, responsible for Fed operations in the gold and FX markets.

This memo, more than any of the other spurious and speculative accusation about Buba's golden hoard, should disturb German citizens, and of course the Bundesbank (assuming it was not already aware of its contents), as the memo lays out, without any shadow of doubt, that the BOE and the Fed, effectively conspired to feed the Bundesbank due gold bars that were of substantially subpar quality on at least one occasion in the period during the Bretton-Woods semi-gold standard (which ended with Nixon in August 1971).

The facts:  

At least two central banks have conspired on at least one occasion to provide the Bundesbank with what both banks knew was "bad delivery" gold - the convertible reserve currency under the Bretton Woods system, or in other words, to defraud - amounting to 172 bars. The "bad delivery" occured even as official gold refiners had warned that the quality of gold emanating from the US Assay Office was consistently below standard, and which both the BOE and the Fed were aware of. Instead of addressing the issue of declining gold quality and purity, the banks merely covered up the refiners' complaints 

It is this that the Bundesbank, the German government, and the German people should be focusing on. If in the process this means completely ridiculing the Buba's "she doth protest too much" defense strategy that what is happening in the media is a "phantom debate" as per Andreas Dobret's recent words, so be it. In fact, one may be well advised to ignore anything Buba has said on this matter, because in attempting to hyperbolize the matter out of irrelevancy, the Buba is now cornered and will have no choice now but to explain just what the true gold content of the gold even in its possession is, let alone that which is allocated to the Buba account 50 feet below sea level, underneath the infamous building on Liberty 33.

Full May 1968 memo from the BOE to the NY Fed: highlights ours:




U.S. Assay Office Gold Bars


1.  We have from time to time had occasion to draw the Americans’ attention of the poor standards of finish of U.S. Assay Office bars. In addition in 1961 we passed on to them comments from Johnson Matthey to the effect that spectrographic examination did not support the claimed assay on one bar they had so tested (although they would not by normal processes have challenged the assay) and that impurities in the bar included iron which caused some material to be retained on the sides of crucible after pouring.


2. Recently, Johnson Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery form for account of the Deutsche Bundesbank. These bars formed part of recent shipments by the Federal Reserve Bank to provide gold in London in repayment of swaps with the Bundesbank. The out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss. Asked to comment Johnson Matthey have indicated verbally that:-


(a) the mixing of “melt” bars of differing assays in one “pot” could produce a result which might be a contributing factor to a heavier loss in fine weight but they did not think this would be substantial ;


(b) a variation of .0001 in assay between different assayers is an extremely common phenomenon;


(c) over a long period of years they had had experience of unsatisfactory U.S. assays


3. It is not, however, possible to say that the U.S. assays were at fault because Johnson Matthey did not test any of the individual bars before putting them into the pot.


4. The Federal Reserve Bank have informed the Bundesbank that adjustments for differences in weight and refining charges will be reimbursed by the U.S.Treasury.


5. No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them. The peculiarity of the out-turn will be known to the Bundesbank: it has so far occasioned no comment.


6. We should draw the attention of the Federal to the discrepancy in this (and any similar subsequent such) result and add simply that the refiners have made no formal comment but have indicate that, although very small differences in assay are not uncommon, their experience with U.S. Assay Office bars has not been satisfactory.


7. We hold 3,909 U.S. Assay Office bars for H.M.T. in London (in addition to the New York holding of 8,630 bars). After the London gold market was reopened in 1954 we test assayed the bars of certain assayers to ensure that pre-war standards were being maintained. It might be premature to set up arrangements now for sample test assays of U.S. Assay Office bars but if it appeared likely that the present discontent of the refiners might crystalise into formal complain we should certainly need to do this.  In the meantime I would recommend no further action.


31st May 1968



To summarize: Bank of England discovers discrepancies with US Assay Office gold bars, notifies the NY Fed that its gold bars have major "bad delivery" issues, but, and this is the punchline, on this occasion, we'll keep it quiet, because the Bundesbank got these bars. This is merely one documented assay occasion: one can imagine that of the hundreds of thousands of gold bars in official circulation, the "good delivery" quality of bars outside of the US, and perhaps BOE, official holdings has progressively declined over the decades of Bretton Woods. One can also only imagine what has happened to all those "good delivery" bars currently held by the Fed as custodian at the NY Fed. Literally: imagine. Because there is no way to check what the real gold consistency of these gold bars is, and whether the refiners found ongoing future inconsistencies with "good delivery" standards of bars handed off to other "non-core" central banks. And, yes, without further evidence the above is merely speculation.

As to the remaining relevant facts: the US ran out of good delivery gold in March 1968 and only had coin bars remaining. Which is why it closed the gold pool and went to a two-tier price system. The Bundesbank went on to cover some of the outstanding gold debts of the Fed to the gold pool. Subsequently, the US then did several deals with the BOC to get a substantial amount of gold to pay back the Bundesbank which was sent over to England from March until June 1968. One can, again, only speculate on the quality of said gold. The Fed then created unsettled accounts to account for these transfers between itself and the Buba.

In light of the above facts and evidence, one can see why the Buba is doing all in its power to avoid the spotlight being shone on the purity of its gold inventory: after all the last thing the German central banks would want is someone to go through the publicly available archived literature, to put two and two together, and figure out that it does not take one massive "rehypothecation" (see "to Corzine") event for German gold credibility to be impaired: all it takes is death from a thousand micro dilutions over the decades to get the same end result. Because chipping away one ounce here, one ounce there for years and years and years, ultimately adds up to a lot.

We eagerly look forward to the Buba's next iteration of self-defense. We can only hope that this one does not include a reference to a "phantom debate", to "East German terrorist Simon Gruber" or to Goldfinger, as it will merely further destroy any remaining credibility the Bundesbank may have left in this, or any other, matter.

* * *

Look forward to more archive-based disclosure ot what may have happened to Buba's, and not only, gold in the coming days and weeks.

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Dick Fitz's picture

Damn fine Sherlocking Tylers!

falak pema's picture

kaiser s is organising the next heist by taking us back into time; cute! 

Itch's picture

How can you be speechless when you are having words put in your mouth?

knukles's picture

It's that momentary lapse when you get that Central Bank reach-around


Like jumpin' into ice cold water....

No Euros please we're British's picture

Guess it's all in China now anyway. Wonder if they thought about assaying their gold holding?

toady's picture

Don't bet on it.

They were buying fast & furious just before that last bunch of tungsten filled bars was 'discovered'

I'm thinking they were made especially for the Chinese and the ones that were found leaked out into the general population.

Parrotile's picture

The Chinese who are in a position to "hold gold" are a lot smarter than you give them credit for. A Chinese colleague's family has a "comfortable" gold holding, and EVERY SINGLE BAR was independently assayed by gravimetry, ultrasound and XRF BEFORE they handed over a single cent!

The people have learned the hard way to never trust anyone, especially "Westerners Bearing Gold Bars!"

smiler03's picture

Ah yes maybe, but, did they peel the gold off?

/s for the retards

zilverreiger's picture

EU  10 000 tonnes

US   8 000 tonnes

total GOLD in the world  175 000 tonnes

purported national public gold is but a speck


CrockettAlmanac.com's picture




World gold holdings (2008) (Source: World Gold Council)

Holding     Percentage
Jewellery     52%
Central banks     18%
Investment (bars, coins)     16%
Industrial     12%
Unaccounted     2%



akak's picture

I hate these kind of disingenuous and misleading stats put out by the World Gold Council, who are just barely-concealed Nadlerites.

In fact, the VAST amount of what they list as merely "jewelry" is REALLY investment gold, simply held in the form of jewelry, mainly by a huge number of Indians, Arabs and other Asians, who traditionally do not hold gold in the form of coins or bullion bars.

Urban Redneck's picture

Americans with physical to diversify would do well to learn from their foreign fellow gold hoarders.  The IRS would have a difficult time regulating gold JEWELRY as a "monetary instrument"

CrockettAlmanac.com's picture


In fact, the VAST amount of what they list as merely "jewelry" is REALLY investment gold, simply held in the form of jewelry, mainly by a huge number of Indians, Arabs and other Asians, who traditionally do not hold gold in the form of coins or bullion bars.


That may be true but the bulk of private Indian gold does exist in the form of jewelry. I imagine that the distinctions have something to do with how the Gold Council collates it's data having received figures from mints, jewelers, etc. You are free to make any assumptions you wish about why an individual holds gold in any particular form.

akak's picture

Crockett, to claim that all the gold held in the form of jewelry in India and elsewhere in Asia exists merely to decorate women on their wedding day is as disingenuous, and ridiculous, as claiming that everyone who holds gold Krugerrands, Maple Leafs, American Eagles or other bullion coins does so for purely numismatic reasons.  It is nothing but obfuscation and an outright lie.

PS: I did not downarrow you.

CrockettAlmanac.com's picture

From what I can see the Gold Council didn't claim that Indian jewelry was not intended as a store of value. All I see is a column for jewelery. It doesn''t say, "This is jewelry which is meant solely for decoration and it's not intended as a store of wealth." If the Gold Council gets figures from producers who sell gold in differing forms such as mints and jewelers then they can report categories such as bars/coins as opposed to jewelry. Is there a method you can suggest which the gold council could use to differentiate what percentage of jewelry  is produced and sold is meant for decoration as opposed to jewelry which is meant as a store of wealth or has a dual roll? I don't believe that the producers who provide that information to the Gold Council know the answer themselves. Perhaps they could have their customers fill out questionnaires and that could be reported to the Gold Council as well.

akak's picture

Crockett, I understand your argument, and I don't, strictly speaking, disagree with it.  What I DO disagree with is the World Gold Council's implicit claims (often and endlessly repeated by the dishonest, disingenuous likes of Jon Nadler) that all that Indian gold jewelry is merely ornamentation and NOT the investment gold that the vast bulk of it in reality actually is.  By constantly highlighting the form of all this gold, they intentionally dismiss and try to downplay the reason why Indians, and others, actually hold all that gold, which is in fact investment, the physical form of it being largely irrelevant.

CrockettAlmanac.com's picture

I've also heard that the Gold Council participates in gold slamming. I can't answer for that. I just post those stats because they're the only ones I can find and that's better than nothing. Another source would be great.

All Out Of Bubblegum's picture

Holy shit. Nice shooting, ZH.

Mark Carney's picture

my spidy senses tell me this TD discovery is what started the whole buba relamation ov zee gould

CrockettAlmanac.com's picture

In the chill of night, at the scene of the crime, like a streak of light he arrives just in time.

Burr's 2nd Shot's picture

Thank goodness all of the US gold is safe in Fort Knox! I saw something on TV saying so...

upWising's picture

Thank God there's finally SOMEBODY here on Zero Hedge who REALLY TRULY LOVES AMERCIA!!!  I know you love Amercia as much as Jesus and I love Amercia because YOU BELIEVE YOUR TELEVISION!   We know, unlike all these Amercia-hating, commie-pinko-devil-lovin', bed-wettin' Zero Hedgers that EVERYTHING ON THE TeeVee IS TRUE!!!  Praise Be!

Now remember:

WATCH YOUR TELEVISION!  (If a little is good, a LOT is better).
DRINK American ALCOHOL!  (Once again, if a little is good, a lot is better).
and if you do all this, even if you are just sittin' in the BarcaLounger wavin' your American Flag,

IF YOU HAVE FAITH IN THE SYSTEM, you are Defending the Homeland!!!

Amercia is Jesus' Favorite Country!  ©


willwork4food's picture

I take great offense at this. I love ZH and I have not wet my bed in weeks.

Gadocat99's picture

This is rubbish.  This is just normal bitching by assayers working with coin melt bars.

NotApplicable's picture

So... if someone steals 10% of your gold, that's okay?

Gadocat99's picture

The Fed made up any discrepancies and paid for the assay.  10%? no way.  More like 0.01%  This is a non-story. 

Bay of Pigs's picture

I'm sure the gold swaps and leases are a "non story" too?


The Gooch's picture

Kevin! It's you! 


Cheers, ZH

AUD's picture

Actually Gadocatt, the note could be taken to say that the US Treasury will reimburse if it receives a formal complaint.

There is an opinion that the peculiarity of the out-turn will be known to the Bundesbank. The gold however was/is stored in London for the account of the Deutsche Bundesbank.

So why then, No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them?

At face value, it would seem that the BoE was happy to clear payment in sub-standard gold.

smiler03's picture

@ NotApplicable

Can you tell me where you get the 10% figure from? Clearly 25 people agree with you but where do you get the figure from? If I say it's 20%, will I get 50 upvotes?

ironsky's picture

I am going to read this whole article but I found it easier to read the english translation of Proust's Remembrance of Things Past.

mick_richfield's picture

I just bit into that book, and it reminded me of a petite madeleine.

CrockettAlmanac.com's picture

I own a copy. Probably in the attic.

smiler03's picture

I made a mistook, again.

Yellowhoard's picture

Calm down Germany.

How about a bong and a blintz?

Shmoke and a pancake?

Kaiser Sousa's picture

Buy mo' stocks.....
Hee, hee,hee.....

I know where my real money is.......

AllAboutTheBenjamins's picture

Simon Gruber will be disappoint.

Dr. Richard Head's picture

Did you hear Al Queda and the Taliban have inflitrated German borders and have set up numerous training camps around the hillsides?  Furthermore, Angela has been developing a nuclear arsenal that rivals that of Israel.  Just last week an American drone was also shot down on the eastern German border, but the US claims it was in intnerational waters.

I haven't heard it either, but wouldn't be surprised if that vitriol was spewed from the MSM organ.

fuu's picture

Didn't Germany help Iraq build the bunkers Saddam was hiding in? Their treason has been going on for decades...

malikai's picture

No need, just blame them for Europe. That's about as good a reason as any these days. Hell, we did Ghaddafi for less.

fuu's picture

They supply nuclear technology to Iran in opposition of sanctions. They must be stopped.

Tenshin Headache's picture

Did you not notice the key role that German technology played in the Stuxnet takedown of Iran's centrifuges?

I think Germany was quite happy to take Iran's money knowing the whole thing would be taken apart by a virus. A good chunk of Iran's capital went poof, and meanwhile the sanctions continue, complicating efforts to get the program fully back on track.

That's the way I view it, in any event. A slick bit of sabotage, economic benefit to Germany and a stranglehold around Ahmadinejad's neck.

willwork4food's picture

Above anything else, they refuse to sell Becks @ prices the average american can afford. Clearly, we have a problem.

Jam Akin's picture

Not only that but what they send here as Beck's is not the good stuff...they keep that for themselves.  Terrorists!

ThirdWorldDude's picture

Story already in progress : EU budget talks hit stone wall

knukles's picture

This just in:  US budget talks splatter upon hitting pavement.  No future bounces anticipated.


(I keep getting that vision of Major "King" Kong (Slim Pickens) riding the bomb out of the B-52 over Russia in Dr. Strangelove screaming "Yippee Ki Yea")