Gold Leasing: The Case Of The Disappearing Gold

Tyler Durden's picture

From Jeff Thomas Of International Man

The Disappearing Gold

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.

But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:

  • If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.
  • If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.
  • If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.

That’s quite a bit of risk.

In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.

So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.

The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”

For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.

Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”

If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.

However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.

What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.

So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.

All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)

If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day after a run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)

We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.

In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

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Hulk's picture

The coming short squeeze in Gold and Silver is going to be one for the record books...

Got Gold ??? Got Silver ??? Got any rags, any bones, any bottles today ???

Victor The Cleaner's picture

The cool point that's gonna surprise all the gold bugs is that there will be no short squeeze.

The paper gold price (i.e. the "official" London price) will simply continue to drop. Then, at some point, the market will run out of (physical) reserves. Trading will stop. Cash settlement. At this point, the dollar will go down the drain, and nobody will get any milligramme for their dollars any longer. Capital controls. The U.S. government will block most if not all FOREX transactions. And they will sell some of their official gold to select counterparties in order to secure vital imports (this slimey smelly black stuff that comes from the Arabian desert).

Some time later, there will be a new liquid market for gold, but physical only. It will be in Euros. But you guys in the U.S. won't have acces because you cannot get any Euros due to the capital controls. Only once the dollar is down the drain and either there is some arrangement with the foreign creditors of the U.S. or there is an official new curreny, only then will you be able to buy Euros or even gold directly. Then (and only then) your government will encourage trading gold (physical that is).



DoChenRollingBearing's picture

+ $55,000

And THAT is the single best reason to own gold.

DaveA's picture

That's exactly what happened after the French Revolution. Problem is, if politicians make dollars worthless and gold illegal, with what will they pay police and soldiers to protect their sorry asses? All it takes is a young corporal from Corsica to say, "put me in charge and you'll be paid in gold".

Victor The Cleaner's picture

It can be done. You just pay your police with printed money. Easy because you are a currency issuer and the Fed is subordinate to the Treasury Department in exchange rate and reserve issues. Sure, you need to keep increasing the public sector salaries quite rapidly in order to preserve their purchasing power.

No, nobody from Corsica needed. Think about Zimbabwe. Who is still the president/dictator? Right. He wasn't replaced. Who still heads their central bank? Right. It's still Gideon Gono. He is also still in office.

Hyporinflation is quite ruling class friendly, it seems.



vamoose1's picture

  prefer  gideon  gonzo myself   sidesplitting  cat

Titan Uranus's picture

I'm not taking financial advice from someone who can't spell 'access'.

Actually, when the dollar tanks there will be lots of "money" out there, whether in the form of gold bars, silver coins, toilet paper, or .22 long rifle rounds.  I wonder which will be easiest to carry...

Banksters's picture

It is like AIG selling insurance on derivatives and having NO WAY OF PAYING OUT the claims when the policies go bad.- it wasn't in their business model...  In other words the vast majority of finance is built on FRAUD.   When the fucker blows up, no only do they get their bonuses but immunity from prosecution and a tax payer bailout- all in the name of stablizing the 'system'.   With that said, I'm sure that Fort  KNox is empty, if it weren't we would have annual audits.   


If Americans don't revolt soon, we'll be under overt fascist rule.    

Raymond Reason's picture

Fort Knox and New York Fed may be empty, but you can bet your last dollar, there is gold in Rothschild's basement. 

Beam Me Up Scotty's picture

I bet Soros has a big vault full in his basement too.

Karlus's picture

If gold really was the issue, why keep selling eagles? Giving gold to the ppl seems counterproductive

DosZap's picture

Fort Knox and New York Fed may be empty, but you can bet your last dollar, there is gold in Rothschild's basement.


U forgot West Point.

Lets_Eat_Ben's picture

Isn't that somewhere near the capstone?

RockyRacoon's picture

Revolt?  I have second thoughts about that happening any time soon:

"An unconscious people, an indoctrinated people, a people fed only partisan information and opinion that confirm their own bias, a people made morbidly obese in mind and spirit by the junk food of propaganda, is less inclined to put up a fight, ask questions and be skeptical."  --Bill Moyers

Banksters's picture

Edward Bernays - "The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society.



However, it doesn't take the masses, it takes a minority who ultimately awaken them.  Call it setting a brush fire in the well regulated group mind!  People know things are fucked up, and I believe that the govt and propaganda outlets are losing control.   Regardless, the ponzi is blowing up in real time- I highly doubt people are hedging the cost to fill up their gas tanks with the S& P 500.   Even if they did, the market would collapse when they cashed out for retirement.   


FeralSerf's picture

Removal of gold as a possible currency is necessary to prevent it from becoming an alternate to the Jewish confetti/legal tender we are forced to accept.  The two cannot co-exist if the money printers are to remain in power.  The money printers have no intention of abdicating.

The paper they print is the stuff the army and the police get paid with.  The army doesn't like it when they don't get paid.

Acidtest Dummy's picture

The police can pay themselves, it is their privilege for obeying the elites. The army is first in line to get paid, but they are not allowed to take their weapons with them when they go to the bank to cash their paychecks.

e_goldstein's picture

"If Americans don't revolt soon, we'll be under overt fascist rule."

Um, kinda have already been there for about 100 years now.

Joebloinvestor's picture

If I was Germany, as soon as the US said it would take seven years I would have:

1. Told the US that 20% just increased to 50%

2. Told the US an auditor was on a plane the next day to audit EVERYTHING.

fonzannoon's picture

Germany asking for 20% is an assumption. I assume they asked for all of it. 20% over 7 years was the answer, followed by "if u are lucky". Followed by "WTF are you gonna do about it anyway"? 

donsluck's picture

Exactly. Bush declared we are not subject to the International Court. Shooting from the hip, I doubt Obummer retracted that stance.

Acidtest Dummy's picture

There is no statute of limitations for crimes against humanity. Only that they must be held to account before they die of old age.

wee-weed up's picture

Sad that The Fed can tell Germany to fuck off... but the tentacles of globalization penetrate everywhere!

Titan Uranus's picture

'Followed by "WTF are you gonna do about it anyway"?'

Is that like when you owe me 10 bucks you have a problem, but when you owe me a million bucks I'm screwed?

MiltonFriedmansNightmare's picture

You and what army, what army Joe? Isn't that what it ultimately comes Dow to every single time? Brute force

Acidtest Dummy's picture

"We search these documents in vain for one that survives its usefullness to the stronger party." -Haile Sallasie, to the League of Nations (protesting Italy's aggression in Ethiopia.)

Room 101's picture

That's the point, though.  The German bankers have no more interest than ending the ponzi than the American ones do.  The German repatriation....when the Fed gets around to just a ruse to try to quiet the sheeple on their domestic political front. 

Waterfallsparkles's picture

I do not understand how something leased can become an asset. 

So, if I lease a House I can consider the value of the house on my balance sheet?  Same with a car.  If I lease a Car I can claim the value of that Car on my balance sheet?

FeralSerf's picture

If you're the lessor, of course it's still your asset.  When you rent your house or car to someone else, that person doesn't become the owner of the asset.  They only have the use of the asset for the agreed upon time.  And if that asset didn't really belong to you when you (sub)leased it, use of it can also legally be taken away from your lessee.

A Nanny Moose's picture

even the "owner" of the house/car, are just renting it from the gubmint.

Raymond Reason's picture

Same as renting out a home, it is your asset.  The difference is that your lessee cannot then sell your home, or use it as collateral to purchase bonds.  Special rules for the bullion banks. 

RockyRacoon's picture

The lessor, especially of a commercial property, can claim his lease as an asset, for the term of the lease.  It is a business asset since it is part of the actual business itself.  It's a sort of rehypothecation. 

Raymond Reason's picture

But are the bullion banks not considered lessees (is that a word)?   I see what you are saying though.  But i was a lessee of a commercial property, and the only thing i was allowed to claim as an asset was " tenant improvements" . 

RockyRacoon's picture

There are at least a dozen types of commercial leases, each with its own lessee rights to "ownership" of the property.

Raymond Reason's picture

No doubt you are correct, as we can see with bullion banks.   

Bansters-in-my- feces's picture


The answer to your question is "yes"

If you are a central Banker.

hallywood's picture

Claim checks for the LBMA, CME and other 100:1 fractional reserve gold platforms that allow investors to participate in price movements will be cash settled when the price inevitably goes parabolic. If you don't own physical gold you can touch, you don't own REAL gold, which for 6000 years has been a store of value at whatever price it is traded. If you understand this premise, you may be able to participate in the greatest trasnfer of wealth in the last 100 years. It's coming........

PLira's picture

This piece was emailed on 1/28. Funny it took so long to make ZH.

I find it pretty good but then, what do I know. I also like that they don't shill their site at the end of the article like so many others. Of Course, they do fish for takers in their emails on occasion.

Here is yesterdays piece:


I have no affiliation with IM but I do enjoy these articles to get me brain juices flowin.

rlouis's picture

So does that mean GS/JPM insider clients are going to re-cast numbered gold bars?

Volaille de Bresse's picture

The farce is about to end... Thank you Chavez, thank you Merkel!

BattlegroundEurope2011's picture

Transparency anyone?


francis_sawyer's picture

 "During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany"


Ha! Jokes on you... You were worried about the Russians when you should have been worried about the Jews... [Junk away if you think it's ABSURD to make that connection, which one could EASILY bring to the surface by a full scale audit]... As always ~ We'll NEVER KNOW [but should immediately begin junking the mere thought of such impropriety because THE GOVERNMENT & THE MEDIA NEVER TELL LIES ~ rolls eyes]...

I can tell you this much... francis_sawyer didn't steal it... [but feel free to make me out to be the BAD GUY at your pleasure]...

FeralSerf's picture

Goyim are livestock.  It says so right here in the Talmud.  Why Goyim think they own anything is a mystery.

francis_sawyer's picture

I don't want to get into a 'religious' debate on the subject [Because it's my firm belief that RELIGIONS are just something that people use to hide behind & to create justifications for their actions]...


Instead ~ to me, it's all about ATTITUDE...

If one were to delve into the ATTITUDE behind, say, "kosher food", they'd find that it is described [by their own people], as a PATH TO HOLINESS... Now ~ having said that, it is within that same belief system [or, ATTITUDE], that "goyim", [as you describe], are NOT considered, in one way or another, subject to the same PATH TO HOLINESS system [when it comes to eating food]...

IOW ~ There is ZERO 'Path to Holiness' (one way or another), for goyim... They're absolutely negated by birth...

This makes them WORSE than livestock [because some parts, of some 'livestock', can actually be deemed kosher]... instead ~ they are PIGS...

To make it worse [& to REALLY drive home the point]... Food that could be considered 'kosher' can NO LONGER be considered kosher if it is then prepared in a pan that formerly was used to prepare a non-kosher meal...

On the same token... "non-goyim" [aka "tribesmen"], even if they fall off the wagon & don't eat kosher food, are still candidates for the PATH TO HOLINESS...


Please try to remember that this has ZERO to do with 'religion' in the mind of francis_sawyer... I just wonder what sort of mindset could even invent an attitude such as described above...

LasVegasDave's picture

RIIIIIIIGHT.  cause this article is about kosher food


francis_sawyer's picture

Look dipshit... There were 5 other topics on ZH today that I dropped comments on that had ZERO mention of 'kosher food' [by metaphor] or anything even close... Here's one of them [from your good friend Terminus ~ who appears to be ok with 'superficial' comments like YOURS, instead of 'articulated' arguments]...


Does the ADL pay you by the hour [or by the comment ~ because you only show up on 'SPECIAL' occasions ~ are you like, 'Sheldon Adelson's pool boy or something]?... And, as always, [as stated above]...

I can tell you this much... francis_sawyer didn't steal it [reference to the GOLD, which was, in fact, the thread topic]... [but feel free to make me out to be the BAD GUY at your pleasure]...

LasVegasDave's picture

Right, I am on the ADL and Sheldon Adelson's payrolls.

You are some fuckin clueless chump

francis_sawyer's picture

Thanks for the confirmation...


& "ON A LONG ENOUGH TIMELINE"... We're ALL fuckin clueless chumps... [Though I'm proud to announce that I'm neither on Sheldon Adelson's payroll, nor the ADL's ~ So at least I have that going for me]...

FeralSerf's picture

Homo sapiens are tribal animals.  When there are conflicts for resources, The Tribe comes first.  And there must be a dogma to unite The Tribe.   (e.g. They hate us for our freedom.)   Why do Americans need a military that is larger than all the rest in the world's militaries combined?

“Our race is the Master Race. We are divine gods on this earth. We are as different from the inferior races as they are from insects. In fact, compared to our race, other races are beasts and animals, cattle at best. Other races are considered as human excrement. Our destiny is to rule over the inferior races. Our worldly wise kingdom will be ruled by our leader with a rod of iron. The masses will lick our feet and serve us as our slaves.” — Israeli Prime Minister Menachem Begin (1977-1983) in a speech to the Knesset [New Statesman Magazine June 25 1982]

"Religion is regarded by the common people as true, by the wise as false, and by the rulers as useful." -Lucius Annaeus Seneca (4?BCE - 61CE)

francis_sawyer's picture

 "Religion is regarded by the common people as true, by the wise as false, and by the rulers as useful."


I like that... That sums it up for me... I like uncomplicated things...