Last year the
story went around the world: Banco de México (Banxico) refused to reveal in what country its reserves of gold were stored. Mexico
Today, thanks to the Federal
Transparency Law, Banxico has become perhaps the first central bank to reveal
in writing the amounts of its gold holdings as well as the names of its
custodians and the locations where it s gold holdings are supposedly held.
It was quite difficult to
obtain this information, for the Bank refused again and again to hand over the
information until compelled to do so by a ruling of its own “Department of Management
for Rules Control”, which is the entity in charge of dealing with appeals
presented as “Appeals for Revision”.
The wrangling went on for
four months, during which Banxico insisted that it was necessary to classify as
“Reserved” all information refering to its gold position; it claimed that
revelations might “harm the financial,
economic or monetary stability of the country”.
Once the four cases were
resolved favorably, the Liaison Unit of the central bank notified this
journalist through the following
documents: REF.: 22.25.2012, I22.27.2012, I22.28.2012 y REF.:I22.29.2012, as
follows:
- “At
month’s end, April 2012, Banco de Mexico maintained a position in fine
gold of
- Banxico “has been informed and knows the specific location of the gold
position that forms part of its reserve of International assets”
- The
countries where these reserves are located are “United States of America, England and Mexico.” And also, “the acquisitions of gold during March and April 2012 are under
custody in England”.
- And besides, it is precisely there in “the city of London, England, where
more than 99% of the gold which
the Bank of Mexico maintains outside the country is presently under
custody…”
The distribution would
be: in England ˃94.23%; México, 4.82%; United States ˂1% Voilá.
Though the figures refer
to past April, they are still current.
This is so, because from
then up to the present, Banxico’s gold has remained almost unchanged, but also
because in its last communiqué it has advised that it is not thinking of moving
its gold bars: “The Bank of England is one
of the world’s most important custodians
of gold, for which reason maintaining our gold position with this institution
minimizes the costs of storage and transfer of gold.” [Our emphasis]
Besides all this, what is
worrisome is that Banxico believes that its gold is safely stored because it is
in the hands of the famous Bank of England (BofE).
Yes, London
We find one of the reasons
for concern in an analysis presented some days ago by the world expert on
precious metals, Eric Sprott, “Do Western Central Banks HaveAny Gold Left?” in which he points out
that given the increase in physical
demand for the metal observed during the past decade, it is not possible to
identify the source of all the supply of gold to satisfy that demand; Sprott
points to the central banks who, by means of legal accounting shenanigans, are supplying it without having
to report it on their balance sheets…but they are in fact, emptying their
vaults. Is Banxico’s gold really at BofE?
But let us go further. As
in 2011, Banxico once again answers that “it
is not possible to specify with certainty the number of bars purchased”
(sic). This leaves the door open to only two possibilities: either Banxico is a
client of the so-called “Bullion Banks” (banks who specialize in precious
metals) or it has a direct arrangement with BofE.
The first case is the
more likely, for Banxico’s ignorance regarding the number of bars purchased,
plus the references made last year to the London Bullion Marketing Association
(LBMA) and its revelation that BofE is the custodian, leads us to think that it is the holder of an Unallocated Account, or paper gold, whicaccount
only gives the holder a simple “general right” to the metal but not the
ownership of specific bars. It is the “Bullion
Banks” who handle this type of account and not the BofE.
We must remember that the
Bullion Banks operate under a system
of fractional reserve, which in essence allows them to sell or loan out several
times one same lot of metal, leading many other investors to think that they
are legitimate owners of our gold. This abundant “supply” has of course played
a fundamental role in the suppression (manipulation)
of the price of gold for years.
Now, let us suppose Banxico
to be in the second case, with a direct arrangement with BofE. Such a situation would
be quite scandalous, and we say this because at least officially, the BofE is supposed to provide only the service of administration on an allocated basis, that is to say, on
individual bars with stamped serial numbers and stamped certifications of
purity and weight . Why does Banxico not have this information, in such a way
that it can state exactly how many bars of gold it purchased?
In any case, based on the information which it has twice given us, in which it states that it does not know how many bars of gold it purchased outside the country, Banxico is in fact the owner of only 100% paper gold, and not physical gold.
This means Banxico is
trusting the corrupt system of fractional reserves; in a massive run where all
are rushing to take possession of their physical gold, that system will not be
able to deliver Banxico’s reserves. Not for nothing has Hugo Chavez, recently
re-elected president of Venezuela
To state the matter
clearly: the problem is that more gold
has been sold in the world than can be delivered, and that means we are
running a very high risk.
In the field of
investment in precious metals property is defined by physical possession, for
one reason: not having it, the creditor is exposed to the depositor’s default,
who may have loaned or even sold the metal, as we have explained.
Therefore, the majority
of Mexico
We cannot fail to mention
that in the face of a crisis in the global monetary system such as is now
evolving, there are those, especially in Asia ,
who are acting correctly in the precious metals game: they are purchasing and
taking physical delivery.
This is fundamental, for
the central banks and the most powerful governments on the planet are caught up
in a devastating and unstoppable race of monetary
printing (as QE3 of the Fed) and public deficits to “stimulate” their
economies just as the tide of debt is up to their ears.
The final outcome of this
cannot be other than disaster, and then the whole world will be seen chasing
after gold that will not be there for
all claimants.
In
this light, it is clear that the reasons we have presented are more than
sufficient to worry Agustin Carstens, Governor of Banxico, when he thinks about
a gold which, until it is in our vaults, will not be more than a pretty but
unreal golden dream.
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memob@hotmail.com
