346 Tons Of Gold On BIS Balance Sheet

The big news point of the day is a newly discovered 346 tons of gold on Bank for International Settlements (BIS) balance sheet.  The information can be found in a footnote in the BIS’s annual report. Page 163.

Included in “Gold bars held at central banks” is SDR8,160.1 million (346 tonnes) (2009: nil) of gold, which theBank held in connection with gold swap operations, underwhich the Bank exchanges currencies for physical gold.The Bank has an obligation to return the gold at the end ofthe contract.
The news spooked the gold market, and many of the participants view this as a confirmation of numerous conspiracy theories on central bank(s) manipulating gold price.
Also notable is the fact that BIS was involved in a similar operation only twice before: in 1970s and in 1960s. FT.com Alphaville: Some BIStoric gold swaps.
Who could be responsible for the swap(s)? The list of possible institutions having this quantity of gold is quite short: U.S., the IMF, China, Switzerland, Japan, Russia, India, and Taiwan.
I would definitely bet on the FED.
The question remains whether will we ewer found out who the guilty party is, but the story offered a much needed correction for the gold price. I wrote relier that I find gold over bought and over owned. If this translates in to a meaningful correction this is the time I would suggest going long for the gold.
Related reading:
FT.com Alphaville: Some BIStoric gold swaps.

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This entry was posted on Wednesday, July 7th, 2010 at 5:52 am and is filed under Commodities, Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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