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Robert Lambourne: ETF gold and BIS swaps may be linked to double counting
By Robert Lambourne
Tuesday, November 5, 2024
Here are a few observations about GATA Secretary/Treasurer Chris Powell's exchange with Thom Calandra of The Calandra Report regarding Cyrille Jubert's essay at GoldBroker, which cited the misuse of unallocated gold accounts.
First, gold sight accounts -- unallocated gold accounts -- have a long history and pre-date the creation of the Bank for International Settlements. They were originally used to avoid the costs and difficulties of moving physical gold when gold was used to finance trade. So they were not created to facilitate double counting, but I'm sure that gold industry veteran Peter Hambro is right that the BIS recommended their use for gold trading and, as GATA has pointed out for years, they facilitated double counting of gold holdings.
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Many years ago I researched the use of sight and earmarked gold accounts by the BIS and there is something on this on the GATA daily dispatch archive. The BIS report on Nazi German gold was a useful source document.
Secondly, as we have discussed regularly, exchange-traded fund gold supposedly held by gold bullion banks is highly likely to be the source of the gold swapped via the BIS and to be deposited in a BIS designated gold sight account at the Federal Reserve. We have also noted that these swaps are plausibly linked to the double counting of gold supposedly held by ETFs and might be a way in accounting terms to return to the Fed gold that has been double-counted. The BIS gold swaps peaked at more than 500 tonnes, so perhaps that is an indication of the scale of double counting.
I find it suspicious that the reported swaps volumes fell when JPMorganChase took on a greater custodial role of ETF gold.
Thirdly, I believe that a gold price reset will involve the U.S. government forcing the ETFs to sell their gold to the government. One reason I believe this is that it will enable the historical double counting of gold to be hidden. I assume that any admission by a future administration that there was incorrect reporting of gold holdings would likely lead to troublesome legal claims. This is perhaps why the United States might prefer to co-operate with China on a revaluation of gold.
Such a revaluation will present have unpleasant consequences for Americans, so from a timing viewpoint doing it early in the next federal government administration would make sense.
Hence I believe that there are good reasons to believe that a revaluation could happen soon.
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Robert Lambourne is a retired business executive in the United Kingdom who consults for GATA about the involvement of the Bank for International Settlements in the gold market and U.S. government debt.
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