Central banks operating in stealth at the heart of the London Gold Market

Central banks operate at the heart of the London Gold Market, buying, selling, and lending gold, but everything they do is shrouded in secrecy.

While many people will be familiar with the term ‘London Gold Market’, most will have little knowledge about its inner workings, especially when it comes to how, and to what extent, the world’s central banks trade and lend gold in London through the Bank of England and the LBMA bullion banks.

And that’s the way they like to keep it. Never in the history of financial markets has there been a trading venue that has been more opaque, more secretive, and more impenetrable than the London Gold Market. Especially when it comes to central bank gold operations.

That the London Gold Market (meaning the wholesale market) is controlled by a cabal of LBMA bullion banks is widely known, but what’s not so well understood is that within the core of this haze sits the Bank of England, overseeing, coordinating and facilitating the central banks of the world to conduct their gold transactions, including the ultra-secretive gold lending and gold swap transactions.  

It was for this reason that the famous ‘Another’ said that:

“If you are searching for facts you will find them, but the items you find will not be true! Did you think that the high-powered world of the LBMA would operate in a fishbowl for all to see?

We cannot take what is on the outside as evidence for what is on the inside. To find the answer work with inside assumptions and extrapolate them to the outside!”

In this quote, ‘Another’ was specifically talking about central banks, for he continued:

“Think now:

Would the world’s central banks really have kept gold this long if they only valued it at it’s ongoing commodity price?”

The Bank of England, The BIS, and The LBMA 

Why I highlight this here is that last week an unusual and surprising article was published by Bloomberg titled “Bank of England gold ommands high premium, signals Central Bank buying”.

The article, quoting anonymous ‘bullion traders’, claimed that gold bars stored in the Bank of England’s gold vaults in London had, during May, been selling ‘for unusually high premiums’ of between 30 – 40 US cents per troy ounce, and as high as 50 US cents, when usually these premiums would, according to Bloomberg, be between 0 – 20 US cents. The premiums on the BoE gold, said Bloomberg sources, had also diverged on the upside compared to premiums on similar gold bars held in commercial vaults in London, such as the JP Morgan vault in the City of London (which is under Carmelite St / John Carpenter Stnear Inner Temple). 

The punchline of Bloomberg’s article, was that “these premiums are at least in part being driven by buying from the Bank for International Settlements [BIS], which regularly trades the metal on behalf of the world’s central banks’.

This Bloomberg factoid was again attributed to an anonymous source, specifically “a person with direct knowledge,…asking not to be identified because the information isn’t public.”

Another anonymous person told Bloomberg that “the BIS bought as much as 1 million ounces of BOE metal from various commercial banks at a premium of 30 to 40 cents recently”.

All of which led Bloomberg to conclude that “central banks may be back in the market buying”.

The trouble with all of this is that none of it can be verified or confirmed since all of the sources Bloomberg quotes are anonymous. The icing on the cake was that both the BIS and Bank of England declined to comment, with Bloomberg stating that:

a spokeswoman for the BIS declined to comment, citing client confidentiality. The BOE declined to comment.

So with the alleged protagonists declining to comment, then why did commercial bullion traders with ‘direct knowledge’ decide to comment about non-public information, while at the same time asking not to be identified? And who first approached Bloomberg? Was this article planted by the bullion banks and/or Bank of England / BIS into the media via Bloomberg? And if so to what end?

While we know that gold prices are derived not from physical gold demand but from trading of unallocated synthetic gold credit in London and trading of gold futures on COMEX, Bloomberg continues to push the establishment line that central bank activities in the gold market help the gold price, as it wrapped up its article with the unsubstantiated claim that “central banks helped underpin gains in gold prices for most of the last decade”.

But not a word about the secretive world of central bank gold lending at the Bank of England, which actually does the opposite and expands gold supply by lending gold to LBMA bullion banks, while pretending the central banks still hold it, and in this way keeps the gold price from rising. In the euphemistic wording of the Bank of England and LBMA, this gold lending ‘provides liquidity to the London gold market’, which in other words means creates supply which does not exist.

Continue reading at https://www.bullionstar.com/blogs/ronan-manly/central-banks-operating-in-stealth-at-the-heart-of-the-london-gold-market/

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