Does ANY central bank hold the physical gold it says it does?

Most gold analysts tend to disbelieve Chinese figures for its central bank gold holdings.  China has a track record of holding physical gold in other accounts than those it reports monthly to the IMF – and then from time to time moving some of this gold into the reporting account – the last such occasion being in July last year when its reported reserves rose from 1,054 tonnes overnight to 1,658 tonnes – a rise of 57%.

Since then China has been reporting official gold reserve purchases monthly – but again no-one outside the Chinese government system knows whether this is an accurate representation of what China is buying on the open market, or perhaps just a part of it, or whether the country has a further enormous stash of physical gold lodged in other non-reported accounts, or perhaps even in the vaults of the state-owned commercial banks, which are believed to hold perhaps as much as 2,000 tonnes of the yellow metal.

But at least China has been partly honest in telling the world that it has been somewhat economical with the truth over its real gold reserve levels in the past – and may still well be holding much more than it officially admits.  But what about other nations and their gold holdings?  Do we have any real reason to believe they are what they say they are?  Many central banks are known to have entered into gold swaps with commercial entities which allows them to retain the accounting fiction that they still possess this physical gold, yet it is actually held elsewhere and may not be returnable in a tight supply situation.  The latest such central bank to do so is almost certainly that of Venezuela, officially the world’s 16th largest holder of gold, which has exported over 48 tonnes of gold to Switzerland over the past few months, yet still apparently reports an unchanged central bank gold holding of 361 tonnes to the IMF.

Regarding Venezuela specifically, gold researcher Koos Jansen published his analysis on  which showed firstly that the IMF published holding differed from that reported by the Venezuelan central bank by some 65 tonnes as far back as in November last year (See: Venezuela Exported Another 12t Of its Official Gold Reserves To Switzerland In February) and presumably the difference is now greater still.  So much for IMF gold reserve statistics for Venezuela alone.  How many more countries misstate their reserves in the interests of economic status and perception?

For some years there have, for example, been a considerable number of articles, admittedly written mostly by strongly pro-gold advocates, suggesting that the biggest gold reserve of all – that held by the USA of 8,133.5 tonnes – is bogus.  A link to a recent such is here: FORT KNOX Gold Paradox which sets out some of the thinking behind the doubts expressed over the U.S. gold holdings.  While some of the article is undoubtedly valid in terms of the anomalies in resisting any audit of the gold holdings, one of the reasons expressed for blocking such a Fort Knox audit – that “Fort Knox Bullion Depository is essentially empty of real gold – say it contains less than ten million ounces of gold but also contains perhaps 140 million ounces of gold plated tungsten”, is perhaps stretching the bounds of credibility a little too far.

But is this just the tip of the iceberg?  Gold could be beginning to play an advancing role in the global economic system – at least mega powers Russia and China appear to believe so, among others.  And they may be two of the players who might contribute most strongly.  Both are announcing official purchases of gold month in-month out to try and build their reserves but both have a huge way to go before they match those of the world’s top gold holders – the USA, Germany, Italy and France – and as a proportion of their forex reserves gold still accounts for only just over 15% for Russia and a minute 2.2% for China.  That compares with over 75% for the USA, 69% for Germany, 63% for France and 68% for Italy – at least on the figures as reported to the IMF.  For the latest IMF Official Gold Holdings click here.)

But as will be pretty obvious to most of our readers, so much financial data put out there is at best mostly misleading and at worst totally dishonest.  In today’s financial world it is perception which rules and it is almost certainly in a country’s interests (at least among the major gold holders) to keep their gold reserves as looking as strong as possible.  A bit of statistical manipulation, or even misreporting, may help them achieve this aim and keep all appearing well on the financial and economic fronts.

One thought on “Does ANY central bank hold the physical gold it says it does?

  1. jannieuwenhuijsgold April 6, 2016 / 12:48 pm

    Check out Uzbekistan?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s