Commodity Trading Giant Exits Physical Gold Due To "Lack Of Physical With A Documented Origin"

Tyler Durden's picture

Back in March, otherwise very under-the-radar Swiss commodities trading giant Gunvor and the fifth largest oil trader in the world, made headlines in the press when one of its then-Russian owners, billionaire Gennady Timchenko (estimated net worth of $8.5 billion), sold his entire 44% stake in the company to his partner in the firm, Torbjorn Tonqvist, just a day before the US revealed its first round of sanctions against individuals affiliated with the Putin regime. Timchenko was among them. As a result of the sale, however, Gunvor avoided falling on the US sanctions list and a Treasury official said that "Gunvor Group Ltd. isn’t subject to automatic blocking from dealing with U.S. persons under Russian sanctions because co-founder Gennady Timchenko owns less than 50 percent of the company."

Since then the Geneva-based company rarely appeared in the media which is how the nondescript company lliked it. Until last week, that is, when Bloomberg reported that the company was giving up trading physical precious metals, read gold, less than a year after the commodity house started a business dedicated to buying and selling gold. Gunvor is, or rather was, one of the few large commodity firms that handles precious metals. The move into gold was part of an expansion into non-oil businesses that now include iron ore, industrial metals and natural gas. Gold trading was done by a handful of people in Singapore and Geneva.

Gunvor's move away from physical commodities trading in itself is not surprising: recall that first it was Germany banking titan Deutsche Bank which announced it would no longer trade physical precious metals last month.

According to Bloomberg at least two traders are leaving the company in Geneva and Singapore: Francois Beuzelin, hired in 2012 as head of metals in Geneva, and Cedric Chanu, who started in Singapore in January as a precious-metals trader. Chanu declined to comment by phone and Beuzelin didn’t answer calls to his office nor an e-mail sent via his LinkedIn account.

But the biggest surprise in this story was the reason why Gunvor chose to discontinues its gold trading. Per Bloomberg, "executives decided to abandon the precious metals trading business partly because of difficulties in finding steady supplies of gold where the origin could be well documented, one of the people said."

And while we would certainly love to learn more about this problem of "undocumented" physical gold, just like that we have the most definitive confirmation yet that the story surrounding China's rehypothecated commodities scandal in the port of Qingdao which as previously reported included copper and aluminum and which mysteriously disappeared just as abruptly as it first appeared, not only also involved the precious yellow metal but never really went away, and instead what appears to have happened is that "robosigned" physical gold - or gold whose ownership traders are unable to validate - has now flooded into the global trading infrastructure.

Because if the world's fifth largest trader of commodities has chosen to outright not trade gold, and thus not generate value for its shareholders over risks and fears that another, or two, or three, or a countless number of other prior "owners" may come knocking one day and demanding delivery of gold whose origin could not be documented by its trading intermediaries, and whose ownership link Gunvor is unable to trace, then just what on earth is really going on with the world's physical gold inventory (here's looking at you, Chinese gold-backed Commodity Funding Deals), and just what is the catalyst that will unleash what is essentially the infamous US mortgage robosigning scandal onto the gold arena, at which point owners of gold realize the gold they thought they owned, even if held safely in a deposit box deep in a gold vault in a safe offshore location, in reality "belongs" to someone else?

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Publicus's picture

This is why paper is superior to physical.

CrazyCooter's picture

I gol'd.

Regards,

Cooter

H/T the bitcoin bug from this mornings thread for the new lingo!

El Oregonian's picture

Kind a reminds me of those Gold-foiled chocolate coin candies.

GO PHYSICAL FOR THE WIN!!! 

DoChenRollingBearing's picture

 

 

Fewer and fewer seem to be in the physical gold game.  I do not know what that means, but I sure am glad that I have been a buyer of physical gold since the mid-1980s.

And gold coins will NOT have the ugly provenance issue that bullion bars might...

*  *  *

From the article above:

"...billionaire Gennady Timchenko (estimated net worth of $8.5 billion), sold his entire 44% stake in the company to his partner in the firm, Torbjorn Tonqvist..."

Gennady Timchenko is one of Putin's billionaire buddies I referred to on another thread.  

He must be lucky I guess...  And this from wikipedia:

"Because of his high taxes, Gennady Timchenko moved to Switzerland in 2002.[37]"

*  *  *

I just saw this at reddit (100 roubles / euro now):

http://www.reddit.com/r/worldnews/comments/2pgswq/ruble_hits_100_against...

Pool Shark's picture

 

 

"...executives decided to abandon the precious metals trading business partly because of difficulties in finding steady supplies of gold where the origin could be well documented, one of the people said..."

 

No problem, just  grind the Balinese Dancers off the bars; good as new!

http://www.imfdb.org/images/thumb/9/95/IJ-GoldBarsa.jpg/600px-IJ-GoldBarsa.jpg


zerozulu's picture

One golden rule about gold is that it is yours only if you hold it in your hands.

BaBaBouy's picture

EXCELLENT Article Tyler .........

If You Don't Take Possesion Of Your Physical GOLD, You Don't Have It!
The WOLVES Have It, Or 25 Other Entities (Same GOLD)...

j0nx's picture

I think what the article alludes to as well is that the gold bar in your hand might actually be tungsten so even phyzz aint really that safe.

SoilMyselfRotten's picture

Gives confiscation a new angle.

Sorry about those 6 gold maples you bought from Kitco last year buddy, that was Ukraines gold, you gotta give them back!

Bendromeda Strain's picture

Those are gone... but feel free to admire my lovely "black" falcon statue.

 

F22's picture

So sorry, but the gold maples are at the bottom of the lake...I'd be happy to pay you for the six ounces based on the current paper price of gold however....

BigJim's picture

I've been hearing about these 'imminent' physical shortages since I took an interest in this stuff at least 6 years ago.

Maybe Yamashita's gold is not just a myth. FOFOA rather scornfully dismissed this in one of his typically long-winded articles but I found his reasoning to be very weak.

Either Western CB vaults really are running on fumes, or there's a great deal more of this stuff than is commonly admitted.

I speak as a somewhat disillusioned PM holder myself... not that I'm going to sell; where else would I park my capital in this environment?

Oh yeah, I hear this 'shale thing' is gonna make fortunes for early investors, don't miss out! I think I'll sell my PMs and get me some of that junk bonds! With oil going up in perpetuity, it's a no-brainer!

overmedicatedundersexed's picture

Bigjim, I hear you. remember the whole shebang is a criminal enterprise..set up in the west to keep wealth and power in a few hands. So we tolerate or forget it is crime we are looking at, and give creedence to those experts who give us logic to find safe investments, graphs, data, PE's, ROI..when a few hands really determine the winners..PM's have no counter party risk, but they do have major legal risk, the pols can make You the criminal for owning them..remember we all are trying to figure out what the major players will pick as winners. nothing else matters in these markets..good luck, hope they let the small investor live another day.

BigJim's picture

Thanks. In the end it's 'only' money ;-)

Bendromeda Strain's picture

the pols can make You the criminal for owning them

Well then, who is to blame for continuing to tolerate that kind of behavior? Because if you comply, start practicing your mewling for when they outlaw all physical currency.

Citxmech's picture

If you don't hold it. . . 

Hulk's picture

you'll get your shoes all wet...

SoilMyselfRotten's picture

LOL, it coulda been worse

AlaricBalth's picture

Davy Jones has owned my gold for quite awhile now, under about 100 fathoms of deep blue sea.

A Nanny Moose's picture

.gov will figure out a way to tax it.

PTR's picture

"I don't...like boats."  - Carlito Brigante

summerof71's picture

I've been buying shovels all year, now it's time to go digging.

Fuku Ben's picture

We always have openings available in our organization for talented visionary entrepreneurs like yourself. Shoot us an updated resume if you have some spare time in between digs

If you've leveraged your talents to their full capacity we don't expect to be hearing from you

http://www.zerohedge.com/news/2014-12-16/commodity-trading-giant-exits-p...

JustUsChickensHere's picture

Just have to say - Gold. if you dont hold it (in your hand!) you dont own it .... but you also need to protect it against other people trying to claim it (or steal it).

PM's are good, but something to note: Bitcoin or more precisely, the private key that controls some Bitcoin, can be held too. If it is held offline in a paper wallet, and that wallet is secured properly, there is no need for the provenance of ownership that is the issue in this article.

 

 

p00k1e's picture

How much did you lose in Bitcoin?  You’re anonymous, let us know. 

BigJim's picture

As an owner of silver, I don't feel in a position to gloat about bitcoin holders' losses.

medium giraffe's picture

Meh, silver's mispriced and you know it.  Commence gloating.

BigJim's picture

The market can stay mispriced longer than I can stay solvent :-)

Bendromeda Strain's picture

There's the rub. The term strong and weak hands indeed refers to how much they can extract back against someone's wishes.

spinone's picture

Dont think of it in terms of dollar value if you're not going to flip it.  Give it to your grandchildren.

jughead's picture

This is why a hole in my property is superior to bank vaults and paper.

DeadFred's picture

No one has claim to a gold coin except the one who has it in his hands

sysin3's picture

It ain't "physical" unless it is in your pocket.

sysin3's picture

"Well, I own 10,000 ounces of gold !  I'm such a smart guy."

"Where is that gold, smart guy ?"

"Oh, it's in a very safe vault in Switzerland."

There's a sucker born every minute.

I am a Man I am Forty's picture

there are no safe places for gold, tell me one and I will tell you why it's not

in4mayshun's picture

There are no safe places for anything. That's life.you roll the dice and try to use prudence in your decisions.

Squid-puppets a-go-go's picture

prudence... now thats a word more out of parlance than the word 'parlance'2

AuEagleNest's picture

Trick question. It woldn't be safe if I told anyone.

spinone's picture

I've got a bridge in Brooklyn to sell ya then.

FieldingMellish's picture

Buy from a miner. Origin documented.

Urban Redneck's picture

Actually UNDOCUMENTED or SUSPICIOUSLY DOCUMENTED GOLD has been an issue in the gold industry for many many, many, years -- specifically from miners in certain jurisdictions.

In fact back in the "good old days" (before rehypothecation was trendy) it was the miners who were the problem...

More recently the charlatans at the World Gold Council used the issue an opportunity to peddle "conflict free" gold in an effort to strengthen the bullion banks and large miners oligopoly.

And now John Corzine's buddies figure that if they can't dig gold out of the ground for $5/oz, then perhaps the lawyers can get them some at $500/hr...

The number of lawyers involved the physical gold trade is sickening... particularly since the very next step is usually (re-) refining, so its not the purity of gold that is in question.

Caveat Emptor/Caveat Venditor, Common Law/Civil Law, fungible goods crossing international borders, and since the banks and business write the trade treaties for their little meat puppets like Obamy and Bushy -- you can guess who doesn't need to beware...

Just because the supposed origin of gold is a miner, doesn't mean that is documented, much less legitimately documented.

The fact that over 25 people would blindly up-vote that comment tells you all you need to know about the true level of knowledge and wisdom of the gold trade here...

ebworthen's picture

Sweet.  Death to the paper markets.

Demand physical possession.

Fun Facts's picture

Any player with 10b or so can bust the ponzi scheme by taking delivery on every ounce left at the crimex and LME.

greatbeard's picture

If you have access to unlimited funds to short, plus you can settle in cash, rather than metal, that scheme doesn't work. More than likely the reason it hasn't been done is because of that catch 22.

Fun Facts's picture

cash settle = default.

If you have a position on the comex, at the first whiff of cash settle you do what?

You move your position to another exchange. This eventually ends up as a limit down movement on the comex and limit up on the deliverable exchange.

To make a long story short, work it all out and you have a catastrophic chain reaction of exchange failures and the only gold exchanges left are the physical exchanges in Asia, going for about 10x current syndicate rigged price.