Thursday, May 9, 2013

Why There May Be a Lot Less Gold than We Realize

The amounts of gold leased by central banks is a very closely guarded secret, and we do not have direct information on them, which means we have to try and back-calculate these amounts by other means.

A recent and thought-provoking study regarding gold leasing was done by Sprott Asset Management in March.

After accounting for all known flows of gold into and out of the US over the past 22 years, the Sprott team arrived at a figure of nearly 4,500 tonnes of gold that cannot be accounted for.


If indeed the US is short 4,500 tonnes (or 145 million ounces), then for every dollar that the price of gold is dropped, $145 million of potential losses are avoided on the repurchase of the leased gold.

This could be the story of the decade, maybe century, if the Sprott data is remotely accurate.

There's a lot of missing gold in the US equation, and it had to come from official sources, either of US origin or belonging to other countries.

Either way, the leased gold represents a tremendous liability of the Fed and the bullion banks to which it was loaned.

[h/t Jim Sinclair]