This is a Big Deal

166
Mon, Jan 14, 2013 - 11:23pm

For now, it's just a ZeroHedge report, based upon the reporting of the German website, Handelsblatt. The report says that an announcement is due on Wednesday. So I guess we'll know for sure in about 24-36 hours.

Here's the original report:

https://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will-deutsches-gold-zurueckholen/v_detail_tab_print/7629600.html

Though Turd is officially 5/8 German by descent, my working knowledge of the language is limited to danke, bier & lederhosen. Perhaps there's a German or otherwise European Turdite out there who would care to translate the text for the community at large?

ZH also did their own translation and analysis. Below is a link but, since it's so potentially important, I'm going to c&p the entire article, too. I hope that the Tylers don't mind too much.

This "event" could seriously rattle not just the gold market in the next few days. Pay close attention and watch for furter headlines.

TF

https://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

In what could be a watershed moment for the price, provenance, and future of physical gold, not to mention the "stability" of the entire monetary regime based on rock solid, undisputed "faith and credit" in paper money, German Handelsblatt reports in an exclusive that the long suffering German gold, all official 3,396 tons of it, is about to be moved. Specifically, it is about to be partially moved out of the New York Fed, where the majority, or 45% of it is currently stored, as well as the entirety of the 11% of German gold held with the Banque de France, and repatriated back home to Buba in Frankfurt, where just 31% of it is held as of this moment. And while it is one thing for a "crazy, lunatic" dictator such as Hugo Chavez to pull his gold out of the Bank of England, it is something entirely different, and far less dismissible, when the bank with the second most official gold reserves in the world proceeds to formally pull some of its gold from the bank with the most. In brief: this is a momentous development, one which may signify that the regime of mutual assured and very much telegraphed - because if the central banks don't have faith in one another, why should anyone else? - trust in central banks by other central banks is ending.

Much more importantly, it is being telegraphed as such, with Buba fully aware of just what the consequences of this (first partial, and then full; and certainly full vis-a-vis the nouveau socialist regime of Francois Hollande which will soon hold zero German gold) repatriation will be in a global monetary arena, which is already scraping by on the last traces of faith in a monetary system that is slowly but surely dying but first diluting itself to oblivion. And in simple game theory terms, the first party to defect from the prisoner's dilemma of all the bulk of global gold being held by the Fed, defects best. Then the second. Then the third. Until, in this particular case, the last central bank to pull its gold from the NY Fed and the other 2 primary depositories of developed world gold, London and Paris, just happens to discover their gold was never there to begin with, and instead served as collateral to paper gold subsequently rehypothecated several hundred times, and whose ultimate ownership deed is long gone.

It would be very ironic, if the Bundesbank, which many had assumed had bent over backwards to accommodate Mario Draghi's Goldmanesque demands to allow implicit monetization of peripheral nations' debts has just "returned the favor" by launching the greatest physical gold scramble of all time.

From Handelsblatt:

Die Bundesbank hat ein neues Konzept ausgearbeitet, wo sie künftig ihre Goldreserven lagern will. Nach Informationen des Handelsblatts (Dienstausgabe) sieht dieses Konzept, das am kommenden Mittwoch bekanntgegeben werden soll, vor, den heimischen Standort aufzuwerten, in New York dafür weniger Gold zu lagern und überhaupt kein Gold mehr in Paris zu horten.

Derzeit lagert das Gold der Bundesbank ihren Angaben zufolge in New York, London, Paris und Frankfurt. In der amerikanischen Notenbank Fed lagern 45 Prozent der insgesamt 3.396 Tonnen Gold, in der Bank of England in London 13 Prozent, in der Banque de France in Paris elf Prozent und im Hauptsitz in Frankfurt 31 Prozent. Diese Verteilung soll sich nun ändern.

We present it in the original for fear of losing something in translation, but in the above reads as follows:

The German Bundesbank is developing a new approach as to where its gold will be stored. According to exclusive information, to be fully announced on Wednesday, the bank will in the future hold less gold in the New York Fed, and no more hold in Paris (Banque de France). As a result, the distribution of German gold, of which 45% is held in New York, 13% in London, 11% in Paris and 31% in Frankfurt, is about to change.

There is no need to explain why this is huge news (for those who have not followed our series on the concerns and issue plaguing German gold can catch up here, here, here, here, and certainly here) . At least no need for us to explain. Instead we will let the Bundesbank do the explanation. The following section is the answer provided by the Bundesbank itself in late October in response to the question why it does not move the gold back to Germany:

The reasons for storing gold reserves with foreign partner central banks are historical since, at the time, gold at these trading centres was transferred to the Bundesbank. To be more specific: in October 1951 the Bank deutscher Länder, the Bundesbank’s predecessor, purchased its first gold for DM 2.5 million; that was 529 kilograms at the time. By 1956, the gold reserves had risen to DM 6.2 billion, or 1,328 tonnes; upon its foundation in 1957, the Bundesbank took over these reserves. No further gold was added until the 1970s. During that entire period, we had nothing but the best of experiences with our partners in New York, London and Paris. There was never any doubt about the security of Germany’s gold. In future, we wish to continue to keep gold at international gold trading centres so that, when push comes to shove, we can have it available as a reserve asset as soon as possible. Gold stored in your home safe is not immediately available as collateral in case you need foreign currency. Take, for instance, the key role that the US dollar plays as a reserve currency in the global financial system. The gold held with the New York Fed can, in a crisis, be pledged with the Federal Reserve Bank as collateral against US dollar-denominated liquidity. Similar pound sterling liquidity could be obtained by pledging the gold that is held with the Bank of England.

And in case the above was not clear enough, below is the speech Buba's Andreas Dobret delivered to none other than NY Fed's Bill Dudley in early November:

Please let me also comment on the bizarre public discussion we are currently facing in Germany on the safety of our gold deposits outside Germany – a discussion which is driven by irrational fears.

In this context, I wish to warn against voluntarily adding fuel to the general sense of uncertainty among the German public in times like these by conducting a “phantom debate” on the safety of our gold reserves.

The arguments raised are not really convincing. And I am glad that this is common sense for most Germans. Following the statement by the President of the Federal Court of Auditors in Germany, the discussion is now likely to come to an end – and it should do so before it causes harm to the excellent relationship between the Bundesbank and the US Fed.

Throughout these sixty years, we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed [ZH may, and likely will, soon provide a few historical facts which will cast some serious doubts on this claim. Very serious doubts]. And for this, Bill, I would like to thank you personally. I am also grateful for your uncomplicated cooperation in so many matters. The Bundesbank will remain the Fed’s trusted partner in future, and we will continue to take advantage of the Fed’s services by storing some of our currency reserves as gold in New York.

Incidentally, what Zero Hedge did provide after this article, was factual evidence that the Buba's very much "trusted partner" had been skimming it on physical gold deliveries on at least one occasion, in "Exclusive: Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

So we wonder: what changed in the three months between November and now, that has caused such a dramatic about face at the Bundesbank, and that in light of all of the above, will make is explicitly very unambigous that the act of gold repatriation, assuming of course that Handelsblatt did not mischaracterize what is happening and misreport the facts, means the "excellent relationship" between the Fed and Buba, not to mention Banque de France which will shortly hold precisely zero German gold, has just collapsed.

Also, if the Bundesbank is first, who is next?

Finally, once the scramble to satisfy physical gold deliverable claims manifests itself in the market, we can't help but wonder what will happen to the price of gold: both paper and physical?

<end>

About the Author

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  166 Comments

Save_America1st
Jan 15, 2013 - 12:56am

I'll repost these from a few days back...

They're mostly for those who are newbies or those who aren't paying attention:

I guess Germany has woken up:

rage against the machine - Wake up

Others will realize they better learn to swim...or they will sink:

Tool - Ænema [uncut version - hq - fullscreen]

I'm glad we're already awake!

dnlwardHagarth
Jan 15, 2013 - 12:58am

@Hagarth

I'm with you.

https://www.ft.com/intl/cms/s/0/b82cd902-33fa-11e2-8270-00144feabdc0.html#axzz2I1Ls7t6W

If we are right, then who's next? Let's get ahead of the curve.

old tradesman
Jan 15, 2013 - 1:09am

@Hagarth and dnlward

Im going to bed because Im old and tired. but look up a post from me, two nights ago about UN troupes land grab in brazil!

The Death Ceiling
Jan 15, 2013 - 1:16am

End Of The Road

A fine effort, great for introducing themes to the uninformed.

1ooth Monkey will protect their copyright, can't imagine that youtube link will last for long.

agNau
Jan 15, 2013 - 1:25am

Yah Vol her Comandant!

www.youtube.com/watch?v=34ag4nkSh7Q And so far.....little to see in the metals as well...... I do think this will heat things up though. Silver firming.

SteveW
Jan 15, 2013 - 2:04am

Is this such a big deal?

Last I heard the Bundesbank was going to comply with the German court audit ruling by bringing 50 tons of gold for each of the next 3 years from the NY Fed.

https://www.zerohedge.com/news/2012-10-22/german-court-demands-bundesbank-audit-sovereign-gold-holdings

Waiting to see if this Wednesday's announcement differs significantly from last November's note.

ChocoHotDog
Jan 15, 2013 - 2:12am

German Translation

Zerohedge has it right. I just hope the Handelsblatt does too....

@Boswell: Better is: "Du bist ein Mensch, Turd".

I think this is just another reason to buy a gold eagle and tip the turd! Whose with me?

Hagarth
Jan 15, 2013 - 2:14am

@old tradesman & dnlward

OT: I saw that crap a few days ago, just waiting for them come to my town and "evacuate" homeowners since the land the town is sitting on was Bernie Madoffed from the natives back in 1878.

dnlward: nice link, had no idea about that. On another note the IMF paper that was released by the Gold Council today has a chart on many countries increased gold reserves since 2007. There is a note on the bottom that Mexico was not put one of the charts because Mexico would have messed the chart up since the had increased their reserves 3,321%.

The Death Ceiling
Jan 15, 2013 - 2:40am

@The Death Ceiling: "can't

@The Death Ceiling: "can't imagine that youtube link will last for long"

That's why I downloaded a copy. I'm going to repost it on my YouTube channel. What surprises me is that it's been up there since last June and it only has 498 views and 3 comments.

As to the German gold story. As everyone has said, IF it is true it is a game changer and, as ZH says, it shows that whatever trust exists between the central banks is gone. To me that is the most important part--not the gold itself--though the gold itself is really, really important.

jezfry
Jan 15, 2013 - 2:48am

Physical ownership

This move by the Germans illustrates very clearly that there is no substitute for physical ownership. With the prospect of rehypothecation very evident in international markets physical ownership takes on added significance; this move suggests the Germans think the US may not own the gold or that it has already been rehypothecated. Or perhaps they believe that some event is about to happen where owning precious metals will be critical for governments. Mmmm.

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