A case study of physical gold stored in London Vaults in LBMA format: 400oz bars.
Undertaken by Ronan Manly, Bron Suchecki, Koos Jansen & Nick Laird.
Start with Ronan's article to get a base idea of stocks of gold in London: How many Good Delivery gold bars are in all the London Vaults?...including the Bank of England vaults
We obtained 4 datapoints to reference against - these are the years 2011, 2014, 2015 & 2016:
Knowing the approx stocks available in London we set to reverse engineer the statistics known to arrive at how much gold there is known & how much unknown, where it is stored & who owns it.
- The first reference (November 2011 - page 5) to showcase 9,000 tonnes worth $500 billion.
- The second reference (2014?) states approximately 7,500 tonnes of gold held in London vaults with approx 3/4 in the BoE.
- The third reference (June 2015 - page 19) is that there are/were 500,000 bars worth 237 billion left in the London vaults = approx 6256 tonnes.
- The fourth reference (February 2016) states approximately 6,500 tonnes of gold held in London vaults with approx 3/4 in the BoE.
Ronan did a fantastic search unearthing Central Bank's reserve holdings which should be read to get an overview of the data: Central bank gold at the Bank of England
The ETF holdings I already had in the Gold Charts R Us database so I just had to back reference the dates to build the datasets.
Bron supplied the BoE holdings referenced from their annual reports.
From this study we could ascertain the total stocks held in London, track down the gold held inside the Bank of England & track down the gold held in private vaults in London.
Obviously we know what we know but the great unknown is what's exactly left over and it is stored in these London vaults.
This series of charts is designed to show the known & to graphically describe the unknown.
My main focus is to try to bring into context the size of the "London Float" out of the shadows and into the light of day.
The London Float being the working supply of gold available to meet the markets daily needs.
One must treat this with the consideration that much of the known gold shown is already owned & not available to meet the markets needs - not unless the owner wants to sell.
The presumption being that the Central Banks reserves are not available to the market.
They do lease/swap but under their own intent & of late the trend has been to not lend in risky markets but rather to claw back physical into direct ownership.
The years around 2000 were when the Mine Hedge Book was most active with approx 3200 tonnes being lent into the markets by the Central Banks.
By 2007 much of the Hedge Book had been closed out & they were under 1000 tonnes falling under 100 tonnes by 2013.
From 2011 gold repatriations of Central Bank reserves started & since then have only grown.
So one presumption from this study is that over time the stance of the Central Banks has been to reduce their lending & bring their gold closer to home.
Hence the presumption that the gold held in the Bank of England is mostly all there, unencumbered & released from leasing & swaps.
Obviously some will still be lent out but the presumption is that the tonnages lent out are far smaller than in the past.
What can we surmise from these statistics presented below in the charts?
We know that there is 1775 tonnes of gold in the London Vaults system outside the BoE vaults.
We have worked out that ETFs have 1679 tonnes.
We have worked out that there is only 96 tonnes of gold outside the BoE vaults but within the London vaults system.
We have worked out that the total London pool rose 244 tonnes in the last year.
(What's stored in the other vaults - non great unknown?)
We have worked out that the BoE has 3779 tonnes of Central Bank reserve gold.
We have worked out that the BoE has another 946 tonnes of which most would probably be other Central Banks reserves.
Of how much we cannot be certain.
This leaves a total of 1042 tonnes of which we are uncertain.
We can presume that 90% of this would be other CB's reserves.
We can deduce that the total stocks of London gold has dropped from 9000 tonnes down to 6500 tonnes which is a drop of 2500 tonnes over 6 years.
That's an average of 417 tonnes per year leaving the London Float.
The UK Imports approx 619 tonnes per year & exports approx 406 tonnes per year (since 1999) according to the EuroStats database (thanks kindly Koos).
However with the recent gold demand from Asia these statistics have changed dramatically.
Since the start of 2011 the UK has imported 3880 tonnes & exported 4696 tonnes with net exports of 816 tonnes seeing exports double their normal average to 763 tonnes per year.
This leaves the London Vaults with a FLOAT of between 1042 tonnes and 96 tonnes with the probability that it is closer to the lower number.
If it is closer to 100 tonnes then London does have a problem as a FLOAT of this size is not enough to cover their flows for more than a few months.
Note: The LBMA statistic of 6500 tonnes was made in February 2016 whereas the ETFs statistics have been compiled on September 30th 2016.
During this period ETFs have added 399 tonnes & the UK has net imported approx 800 tonnes which implies an additional net 400 tonnes being added to the float.
The COMEX Float
This is a similar position to Comex where though there are plenty of stocks in the Eligible category (already owned) there is a small FLOAT available to cover normal flows in the Registered stocks.
The COMEX delivers approx 6 to 9 million ounces per year - current stocks available for delivery = 66 tonnes (Oct 2016)
Deliveries have picked up strongly this year with 4.9 million ounces in the first 9 months.
So on both sides of the Atlantic there is a current shortage in their respective FLOATS.
That is there is little freely available gold to satisfy the current rampant Asian demand.