Fun with the GLD
As we close the books on 2013, I thought it would be fun to put the record-breaking plunder of the GLD "inventory" into perspective.
We spent a lot of time documenting the pillage of the GLD in 2013. Here are links to just a few of the biggest hits:
Let's begin with the math. The GLD began 2013 with an "inventory" of 1,349.92 metric tonnes of gold. It finished the year with an "inventory" of 798.22 metric tonnes of gold. This brings the total 2013 plunder to 551.70 metric tonnes or 40.87%, roughly 17,737,567 troy ounces of gold. As Ruprecht would say: "That's a lot".
But...how much is it, really? 17MM+ ounces is a big number and difficult to comprehend for all of us with just a handful of ounces stashed away at the bottom of a lake. So, let's have some fun, shall we?
There are approximately 400 troy ounces in each London Good Delivery bar so 17,737,567 ounces gives us 44,344 bars:
There are 192 LGD bars on this pallet:
If we had to stack all 44,344 LGD bars onto pallets holding 192 bars each, it'd take a while as we'd have to load about 231 of them:
OK, now we're getting somewhere. But, I recognize that the visual above can be a bit overwhelming. Let's look at it another way. A standard LGD bar is about 200mm long by 80mm deep by 45mm tall. If you were able to take your 44,344 LGD bars and stack them on top of each other, you'd have a stack that reaches nearly 2,000 meters into the sky! For my American friends who never quite got a handle on this whole metric system thingee, that's roughly the height of FIVE Empire State Buildings.
But, you know, stacking LGD bars more than a mile into the sky would present a bit of a engineering problem. Let's say, instead, you took your 44,344 LGD bars and moved to Oz to be with your new girlfriend, Glinda. Once there, you find that The Great and Powerful Woody has recently signed the "Oz Recovery and Reinvestment Act", authorizing an extension of the famous Yellow Brick Road, all in a Keynesian promise to provide shovel-ready jobs for out-of-work Munchkins.
You and your little crew begin laying your LGD bars end-to-end. Ten of them make a row two meters wide, matching the width of the original YBR. You lay ten more in front of those and continue to do so until you've paved an extension that employs your entire stack of 44,344 bars. By the time you're done, you will have extended the YBR by a whopping 355 meters. Maybe not far enough to get you back to Kansas but at least you would be putting your barbarous relics to good, public use.
Anyway, that's all well and good but, by now, most everyone knows that most of the gold withdrawn from the GLD "inventory" is gone for good. It has been shipped to Switzerland where it has been recast into one kilogram bars with official Chinese insignia.
With the help of my pal, Andrew Maguire, we first broke this story back in June of 2012 and it has since become well-known throughout the blogosphere:
And these Swiss refiners are now so busy that they can barely keep up:
So finally today, let's try to visualize how much 17MM+ ounces of gold is after it's been converted into Chinese bars.
According to the Shanghai Gold Exchange website (http://www.sge.sh/publish/sge/hyfw/jyzn/5748.htm), a standard SGE bar is approximately 115mm long, 52.5mm wide and about 9.5mm thick. (Again, for Americans, that's about 4.5" x 2" x 3/8") I can't seem to find an image anywhere, though, so you'll have to picture it in your head.
Now, just for fun, let's do some of the same math...
551.70 metric tonnes of gold is equal to 551,700 kilograms. As the Chinese convert the LGD bars into kilobars this, of course, yields 551,700 bars. That was easy. What's not so easy is stacking them on top of each other again. If we were to manage to pull this off, our stack would be 5,241 meters high or about 17,240 feet. Wow!
And if we laid these bars end to end, they would stretch out into the distance for 63,445 meters or almost 40 miles! Put another way...It's about 17 miles from Victoria Harbour in Hong Kong to the Shenzhen coastline. If the bars could float, The Chinese could make pretty handy, little land-bridge out of them and use it to walk their bars into permanent custody in China.
I could go on and on and have fun with this all day but I think I'll stop here and leave you with The Biggest Question to ponder:
Now that the GLD has disgorged itself of all this gold...and now that so much of this gold is "gone for good"...from where will the Authorised Particpants of GLD source new gold to replenish the fund if demand for their paper product returns when paper price inevitably resumes it's bull market?
Hmmm. Maybe they don't have to worry about this at all? So far in January, the paper price of gold has rallied over 3% from $1202 to $1240. However, as of yesterday, this hasn't mattered much to the GLD. In 2014, it has already shed another 8.66 metric tonnes of gold from its "inventory", leaving it at just 789.56 metric tonnes and down over 1% for the year...and January isn't even half over.
As Sir Walter taught us nearly two centuries ago, "oh, what a tangled web we weave"...