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So just ask them: Western central banks have enormous secrets about gold

Section: Documentation

By Lars Schall
Wednesday, October 24, 2012

It's strange what you encounter when you try to take a serious look at the gold policy of central banks and their agents, the bullion banks.

Some observers, including the Gold Anti-Trust Action Committee (GATA), estimate that Western central banks have on hand nowhere near as much gold as they claim. These observers suspect that much Western central bank gold has been sold or leased largely surreptitiously to restrain the gold price over the last two decades.

Here is the explanation provided to me in an interview by the Canadian financial analyst and fund manager Marshall Auerback when I asked: Do you think that the Western central banks and the International Monetary Fund really have in their vaults the gold they say they have?

Marshall Auerback: "In a strict accounting sense they might, but it might be irrelevant. I suspect that the central banks have not been selling much gold over the past few years since the inception of the Washington Agreement on Gold, but I think they have still been leasing considerable amounts into the gold market. From a flow standpoint, it's irrelevant whether the gold is sold or lent, as it still appears as supply in the market.


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When Deutschebank calls gold "good money" and paper "bad money". ...

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"So the key question becomes: Can the leased gold be recovered by the central banks? The work of GATA and others such as Bob Landis and Reg Howe suggests that the gold cannot be recovered. In effect you have a 'prison of the shorts' situation, whereby the gold that has been lent out and melted down to become, say, part of some Indian bride's dowry will not be coming back into the market.

"Ultimately, I think, the central banks will ratify this in an accounting sense by reclassifying the leased gold as sold, so from a stock standpoint, that will validate GATA's argument that there is far less gold being held by the central banks than is commonly believed." [1]

Moreover, major news organizations avoid the gold market manipulation issue although it might seem to be a godsend for them -- the Financial Times, The Wall Street Journal, The New York Times, Reuters, Bloomberg News, the Associated Press, etc. They seem reluctant to put to central banks any pointed questions about gold.

On August 13 GATA Secretary/Treasurer Chris Powell published a list of gold-related questions that financial journalists could put to central banks:

Since I have some experience putting questions to central banks as a freelance writer, I wish that major news organizations with large audiences and great influence would take on that task. A sample of my attempts can be found here:

-- Germany should end the secrecy and bring its gold home:

-- An exercise in futility -- Thank you for contacting the New York Fed:

-- Central Bank of Russia refuses to comment on gold questions:

-- Bundesbank again refuses to answer questions on Germany's gold:

But in spite of those experiences I was willing to try to see what would happen if I asked the questions enumerated by Powell. These questions targeted:

-- The U.S. Federal Reserve

-- Former Federal Reserve Board of Governors member Kevin M. Warsh.

-- The U.S. Treasury Department and its Exchange Stabilization Fund.

-- The Bank of England and the United Kingdom Treasury.

-- The International Monetary Fund.

-- The Bank for International Settlements.

-- And JPMorganChase & Co.

On August 27 I sent these institutions the questions drafted by Powell and asked for answers.

Here are the results.

U.S. Federal Reserve

My first email went to Michelle Smith, a press spokesperson for the Board of Governors of the Federal Reserve System in Washington DC. I wrote:

"Dear Ms. Smith: My name is Lars Schall. I am a freelance journalist from Germany (for example, Asia Times Online). I would like to forward the following questions to you regarding the Board of Governors of the Federal Reserve:

"1) What are the Fed's gold swap arrangements with foreign banks that were acknowledged by Fed Governor Kevin M. Warsh in his adjudication of GATA's freedom-of-information request in September 2009?:

"2) What are the other parties to these gold swap arrangements?

"3) Have such arrangements ever been implemented? If so, when, how, and why?

"4) What are the other gold-related documents the Fed succeeded in withholding from disclosure in GATA's freedom-of-information lawsuit against the Fed in February 2011? Will the Fed disclose them now? If not, why? See:

"Thank you for your attention.

"Best regards, Lars Schall."

Ms. Smith then wrote to her colleague, Joe Pavel:

"I am away from the office. Joe, can you please direct Lars to the information we have on the website about this? Thanks, Michelle."

A few days later I received this message from Mr. Pavel:

"Mr. Schall, Unfortunately we're not going to be able to add to the information you already have. Most of your questions should be answered by the documents related to the court case you have referenced (Gold Anti-Trust Action Committee, Inc. v. Board of Governors of the Federal Reserve System) which are publicly available from the federal courts. In particular, you may find the affidavit from Timothy Fogarty of the Federal Reserve Bank of New York helpful. I have attached that document for your convenience.

"Best, Joe."

The declaration by Timothy Fogarty is here available as a PDF:

I wrote back to Mr. Pavel and Ms. Smith:

"Dear Joe:

"I don't want to be unpleasant with you, but I am afraid that this isn't responsive at all. The gold swap documents cited in Warsh's letter are not available from the federal courts. The court in the GATA case allowed the Fed to withhold those documents. May I ask you to confirm on the record that the Fed will not make available to me or the public the gold swap documents cited in the Warsh letter and the documents the court declined to order the Fed to disclose to GATA?

"Best regards, Lars."

I have received no reply.

As you can see, my specific questions were treated in the most general way.

Former Fed Board of Governors member Kevin M. Warsh

On the same day when I wrote to the Fed I tried to establish contact with the media and public affairs department of Stanford University in California, where Warsh is a visiting fellow at the Hoover Institution and a lecturer at the Stanford Graduate School of Business. My email received no reply. So I tried again a few days later with a different person at the press department of Stanford University. From there my request was forwarded to the Hoover Institution media office. The head of the office, Eryn M. Witcher, wrote me and asked about my specific request. Here is what I wrote on September 13, by adding the correspondence with the Fed (see above):

"Hi, Eryn: Thank you very much for responding. Here are the questions for Mr. Warsh. Please note also the correspondence with the press department of the Fed. I think this could be of interest to Mr. Warsh. Related to the latter, I would like to ask him if I misunderstand the whole thing.

"Dear Mr. Warsh:

"I would like to ask you the following questions:

"1) In your commentary in The Wall Street Journal on December 6, 2011, you wrote that 'policy makers are finding it tempting to pursue 'financial repression' -- suppressing market prices that they don't like.' You added, 'Efforts to manage and manipulate asset prices are not new.'"

"Which prices did you mean as being subject to 'financial repression'?

"2) Which previous 'efforts to manage and manipulate asset prices' did you mean?

"3) Did you learn about 'financial repression' during and because of your service at the Fed?

"Thank you for your attention.

"Best regards, Lars Schall."

To this date I haven’t received a response from Witcher or Warsh.

U.S. Treasury Department and its Exchange Stabilization Fund

On August 27 I wrote the following e-mail to the press department of the U.S. Treasury and spokesperson of its Exchange Stabilization Fund (ESF), Kara Alaimo:

"Dear Ladies and Gentlemen:

"My name is Lars Schall. I am a freelance journalist from Germany (for example, Asia Times Online). I would like to forward the following questions to you regarding the U.S. Treasury Department:

"1) In the last 20 years has the U.S. government tried to influence the price of gold, openly or surreptitiously, directly or through intermediaries? If so, when, how, and for what purpose?

"2) Has the Treasury Department or any other agency of the U.S. government, including the Exchange Stabalization Fund, undertaken gold swaps or gold swap arrangements or other gold transactions in the last 20 years?

"3) Are the gold-related records of the U.S. government, including those of the Treasury Department and the Exchange Stabilization Fund, fully available to the public? If not, why?

"Thank you for your attention.

"Best regards, Lars Schall."

On August 30 Kara Alaimo answered by giving me a bit of information. I am not allowed to quote from her e-mail. But I will quote from the e-mail I sent back to her.

"Dear Ms. Alaimo:

"Thank you for the fast reply, even if it seems to be evasive. May I ask for clarification in regard to all three points?

"1) Of course the statement by a Treasury Department official who cannot be identified that he / she is 'not aware' of gold transactions is not responsive. Therefore, who, speaking on the record for the department, can say dispositively whether the Treasury has been involved in the gold market in any way?

"2) The second answer speaks for the ESF but not for the whole Treasury Department itself. What about the whole department?

"3) Same in regard to the third answer. It speaks for the ESF but not the whole department.

"Best regards, Lars Schall."

After a few seconds, this came back automatically:

"Out of office. I am working from Russia (EDT + 8 hours). I'll respond as soon as possible, but if you require immediate assistance please call the Treasury press office."

I haven’t received any message from Ms. Alaimo since then. And the U.S. Treasury itself did not respond to this day to my questions at all.

Bank of England and United Kingdom Treasury

On August 27 I also wrote to the Bank of England and the U.K. Treasury.

"Dear Ladies and Gentlemen:

"My name is Lars Schall. I am a freelance journalist from Germany (for example, Asia Times Online). I would like to forward the following questions to you regarding the Bank of England and the U.K. Treasury:

"1) In December 2011 the Bank of England acknowledged that it had been active surreptitiously in the gold market prior to 2007 and did not want its gold transactions known to the market generally:

"With whom were these transactions undertaken and what were their purposes?

"2) Will the Bank of England and the U.K. Treasury fully disclose their gold-related records? If not, why?

"Thank you for your attention.

"Best regards, Lars Schall."

I soon received a reply, which said that I could expect a full response to my question. Two weeks and some more emails later, I received at last the full response. However, it said at the beginning: "Not for attribution or quotation." So I am not in the position to state what the press department wrote to me. (The UK Treasury hasn’t replied anything to this date). But again, here’s my reply:

"Dear Rosey:

"Thank you. However, don't you think it's a bit strange how I contact the press office of the Bank of England as a journalist and you reply with 'Not for Attribution or Quotation'? Why bother having a press office at all? I consider this to be a refusal to comment. Is this how the bank wants to be presented in my story?

"Also, the time period being questioned was 2007 to the present. You respond by saying that 'there were no trades in the year 2010/11.' That’s a partial reply only. What about the other years?

"You say 'it is unreasonable for any such inferences to be drawn from the letter of 24 October from Ms. Keating to Mr. Bern. ...'

"The statement above references in my understanding a direct quote from the Bank of England's Keating to Bern. Keating wrote that information about the Bank of England's gold swaps and leases, undertaken through the British government's Exchange Equalization Account (EEA), is'"market sensitive' and its disclosure 'would allow enquirers to find out what gold transactions have been taking place.'


"The statement 'is' what it is -- an admission that information about gold transactions are market sensitive and regarded as privileged trade secrets. To my mind it is obfuscation and even hubris to claim that it is unreasonable to infer anything from this statement of fact. Facts are de-facto evidence, and evidence is what prosecutors and defense attorneys -- and, may I add, good investigative journalists -- build their cases and stories on.

"If the bank wants to be presented as somewhat more accountable, may I ask you to characterize the gold transactions the bank undertakes when it undertakes them -- for whom are they done and why?

"Best regards, Lars."

The email I received afterwards was the same old evasion. They wouldn't answer my questions plainly.

International Monetary Fund

On August 27 the following email went out to publicaffairs@imf.organd

"Dear Ladies and Gentlemen, my name is Lars Schall. I am a freelance journalist from Germany (for example, Asia Times Online). I would like to forward the following questions
to you in regard to the IMF:

"1) Where is the IMF's gold kept? Is it kept in the IMF's own vaults, in the vaults of IMF member nations, or elsewhere?

"2) Is the IMF's gold actually in the IMF's possession or is it essentially just a claim on the gold reserves of its member nations?

"3) When during the last 20 years the IMF said it was selling gold, did any gold actually leave any vault? If so, how much, and from which vaults did it leave and to which vaults was it delivered?

"4) Will the IMF make its gold records fully available for public inspection? If not, why?

"Thank you for your attention."

After a few days I tried to establish contact with the IMF press office in Washington via phone. But I ended up being connected with an answering machine. So I sent the IMF press office my questions two times again via email. Still no response.

So I talked with GATA's Chris Powell about it, who, as managing editor of the Journal Inquirer, a daily newspaper in Manchester, Connecticut, sent on September 28 an email to the press department of the IMF, asking them to reply to me. On the same day I received a reply from Bill Murray, chief of media relations at the IMF. He asked me to forward my request again. That’s what I did.

On September 28, I received this message from Mr. Murray:

"Got it, Lars. I’ve answered below. Also, I assume you’ve also looked at this gold fact sheet we have. It’s a good resource on IMF gold issues:

"1) Where is the IMF's gold kept? Is it kept in the IMF's own vaults, in the vaults of IMF member nations, or elsewhere?

"The gold is secured in various central bank vaults around the world, including the New York Federal Reserve, the Bank of England, and the Reserve Bank of India.

"2) Is the IMF's gold actually in the IMF's possession or is it essentially just a claim on the gold reserves of its member nations?

"The gold is ours and not a claim. You should also look at Pamphlet 45, which has a section that explains how the IMF built its gold reserves:

"3) When during the last 20 years the IMF said it was selling gold, did any gold actually leave any vault? If so, how much, and from which vaults did it leave and to which vaults was it delivered?

"You'll see from the gold fact sheet I mentioned above that there were a few limited on-market sales of gold over the years. So I assume some volumes have left vaults. I don’t have any specific details to offer beyond that. But overall our sales are pretty limited.

"4) Will the IMF make its gold records fully available for public inspection? If not, why?

"Our accounts are audited and reviewed by our member countries via their Executive Board to the IMF. The audited statements are published on"

The next day, I sent this email to Mr. Murray:

"Dear Bill, thank you for your answers. However, here is another question that I have now after I took a look at the fact sheet:

"Please note that when this question is answered fully that I will probably get back to you with more questions.

"Your info on gold dated 24 August, 2012, states,

“'The IMF held 90.5 million ounces (2,814.1 metric tons) of gold at designated depositories at mid-August 2012.'”

"If the depositories are 'designated,' you must know their physical location(s), right? So can you tell me specifically where these designated depositories are located and how much bullion is stored in each one?"

A few hours later, Mr. Murray answered:

"In addition to what I already mentioned, add the Deutsche Bundesbank vaults."

I replied:

"Dear Bill, could it be that you simply mixed up the Bundesbank with France? IMF gold is stored in U.S., .U.K., France, and India according to:

"See Footnote 16. Otherwise your information will most likely lead to some questions for the Bundesbank.

"Moreover, could you be more specific, please, as I have asked you: Can you tell me specifically where these designated depositories are located and how much bullion is stored in each one?"

Mr. Murray answered: "I don't recall Banque de France as a repository. But I'll double check. In any case, this is about all I have to offer. Not sure what the point of these questions are. Our gold is safe and secure. If you have information otherwise you might alert the proper authorities."

I replied: "Dear Bill, thank you for checking it. And thank you even much more for sharing some time with Chris and me on those issues on a Saturday. As far as your question is concerned where I am heading to with my inquiry – well, by your own admission, the IMF clearly states that its gold is held in designated depositories. But if the IMF will not tell me explicitly which depositories these are (where they are located, that is), I’m afraid further questions from my side would be futile.

"Please consider this excerpt from

"The industry buzzed for days. The paper, written by Blanchard's director of economic research, Neal Ryan, provides exhaustive research analysis of how central bank transactions could affect the gold market if loan information was made in an accurate and timely fashion. While some misconstrued the information as research on market manipulation, the
paper is instead specific to one issue -- IMF gold accounting procedures for central banks as being the most important component of gold market transparency.

"'This is a wonderful development for the gold market because of the additional transparency that is created by the changes in IMF accounting regulations,'" Ryan said. 'This is an issue that changes the entire landscape of the gold market for the betterment of all participants, because there is now data available that had never previously been published. A transparent market is a healthy market, and the gold market just got a lot healthier.'

"'Ryan says it will take the IMF some time to institute the new accounting procedures, but the outlook for the gold market is a rosy one moving forward.'

"This stands as evidence that central banks have had “issues” in properly accounting for their bullion -- with specific reference made to 'double counting.' While I acknowledge the IMF published a piece saying that “double counting” is bad form, I find it incumbent upon me to verify what the IMF is saying is in fact reflected in the agency's practices.

"It appears to me that the IMF is telling me (and the public): 'We don’t play games with gold – but just don’t ask us to give you any details as to where we keep our stash."

On October 2, Mr. Murray let me know: "Our finance guys confirm the repositories are: New York Fed, Bank of England, Bank of France, and Reserve Bank of India vaults."

Bank for International Settlements

On August 27 I wrote to an email that didn’t receive any kind of reaction at first. So I telephoned and send an e-mail to BIS headquarters in Basel, Switzerland:

"Dear Ladies and Gentlemen:

"I have just talked to a representative of the BIS press department on the phone. I was asked to send again my questions from Monday, August 27, because they were somehow lost. It would be great if those questions could be answered by someone who is actually connected to the gold and currency operations of the BIS. "Here is my inquiry:

"1) What is the 'gold pool' cited by BIS board member and Bundesbank President Karl Otto Pohl in his interview with the financial journalist Edward Jay Epstein published in the November 1983 edition of Harper's magazine?

"2) Exactly how and why does the BIS trade in gold on its own behalf or on behalf of its members? Is information about this trading fully available to the public? If not, why?

"3) A presentation made by the BIS to prospective central bank members at a meeting at BIS headquarters in Basel, Switzerland, in June 2008 --

-- includes, among a list of BIS services, interventions in the gold market. What are these interventions and their purposes and exactly how are they undertaken? Are they public or secret? If they are secret, why?

"4) In a speech delivered at a conference at BIS headquarters in Basel in June 2005 --

-- William S. White, head of the BIS' Monetary and Economic Department, said that among the major purposes of international central bank cooperation is 'the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful.' In the last 20 years what efforts has the BIS made or assisted to influence asset prices, particularly gold prices? Of which such efforts is the BIS aware?

"5) Did the BIS undertake any gold transactions simultaneous with the devaluation of the Swiss franc in September 2011?"

Here’s the reply from the BIS:

"Many thanks for your phone call and e-mail enquiry below. Apologies for the delay in getting back to you.

"Concerning your questions on gold, please take a look at several sources. At there is a wealth of information on this topic, with details on the nature of our banking services and more. Use our website search facilities in the top right-hand corner of the homepage and add: 'gold.' Redefine your search to see more detailed material. You will find historical information as well as more up-to-date details on this topic.

"-- A detailed history of the Gold Pool, which operated between 1961 and 1968, can be found in Toniolo, Gianni (2005), 'Central Bank Cooperation at the Bank for International Settlements,' Cambridge: Cambridge University Press, pp. 375-81 and 410-23. This book should be available from most academic libraries covering finance and economics.

"-- On the BIS's current banking operations, including gold transactions, a general description of the BIS's financial services is given in Lefort, Daniel (2009), 'Bank for International Settlements, Basel, Switzerland,' Blanpain, R. and M. Colucci (eds.), International Encyclopaedia of Laws, Alphen aan den Rijn: Wolters Kluwer, pp. 61-65.

"Please refer also to the ' Financial services of the Bank' section of our latest annual report. This link should lead you to the right page.

"Beyond this, the BIS does not communicate particulars on its current trading activities undertaken on its own behalf or on behalf of its customers (being the central bank community).

"We trust the above information is of help and thank you for your interest.

"With kind regards, Communications, Bank for International Settlements, 4002 Basel, Switzerland."

Here's my answer:

"Thank you for your response. However, it seems that you have not answered my question as to the 'gold pool' that Mr. Pohl cited in his interview with Edward Jay Epstein. That interview took place many years after the London Gold Pool disbanded and it must have been the BIS' own gold pool.

"Therefore, once again: what is the 'gold pool' that Mr. Pohl was talking about in 1983?

"Certainly the reference works the BIS cites here are worth checking, but I think it is not too much to seek a simple answer to a simple question without having to do research: Does the BIS offer its members the service of interventions in the gold market? Yes or no?

"At least you have admitted that the BIS trades in the gold market for itself and its central bank members and doesn't want to explain the purposes of that trading. That's a pretty good admission, as far as I can see it. Do I understand this correctly?"

This was the reaction of the BIS on September 10:

"Dear Mr Schall,

"After further in-house research the following can be said about references to the 'Gold Pool':

"The 'Gold Pool' Mr Pohl referred to in the 1983 interview is clearly a bit of a misnomer. The (London) 'Gold Pool' as such -- i.e., as a mechanism to intervene actively in the gold market by buying and selling gold on behalf of the central banks -- operated only between 1961 and 1968. Out of the regular meetings of central bank gold and foreign exchange experts organized at the BIS between 1961 and 1968 to discuss the operations of the London Gold Pool grew the so-called G10 Group of Gold and Foreign Exchange Experts, which continued their regular meetings at the BIS after the London Gold Pool had been abandoned. But for quite some time after 1968 this group was still being referred to by some as the 'Gold Pool,' although it didn't have the operational role the London Gold Pool had. This forum still exists today -- it was re-named the Markets Committee in 1999.

"Thus, it should be clear that after 1968 the mandate of this Gold and Foreign Exchange Committee was no longer to discuss and agree on direct interventions on the gold market, but simply to monitor and discuss developments on the financial markets generally. This is the 'Gold Pool' Mr Pohl refers to in his 1983 interview.

"You will find in the German version of the latest annual report details of our Financial Services on Page 135.

"We trust the above information is of help to you.

"With kind regards, Communications, Bank for International Settlements, 4002 Basel, Switzerland."

The BIS' answer here is valuable for showing the intense interest of the BIS and its members in the gold price. It can be considered also as a quite helpful and even defusing information – if there would not be that cut in the year 1999, especially as Gordon Brown's UK Treasury began to frantically demonetize gold.

In any case, the key question for the BIS and its members remains unanswered: Exactly why and for what purposes does the BIS trade gold, and why secretly?

I also tried to get further clarification from former BIS President Karl Otto Pohl himself. So I wrote two organizations associated with him: the private bank of Sal. Oppenheim in Zurich and the Carlyle Group in Washington. While the Carlyle Group did not reply, I received a response from Sal. Oppenheim, which said that Pohl "is for health and age reasons no longer answering questions or giving interviews."

JPMorganChase & Co.

It was especially difficult to get any kind of answer from JPMorganChase & Co. Finally I was able to talk on the phone with Sarah Stipicevic from the investment bank media relations office. Stipicevic connected me with Jennifer R. Zuccarelli. On September 14 I wrote her:

"Dear Ms. Zuccarelli,

"I was asked by Sarah Stipicevic of investment bank media relations to get in touch with you related to some questions I have. I am a freelance journalist for finance from Germany (for example, Asia Times Online).

"The basic question that I have is this: Are the enormous interest rate derivatives positions and the monetary metals positions on the bank's books the positions of JPMorganChase & Co. itself or are they essentially the positions of the U.S. government or other governments? See:

"To give you an example: Back in Q3 2007, the less-than-1-year component of JPM's derivatives book grew by $7.5 trillion in notional value only to contract by roughly the same amount in Q4 2007. Given that the only OTC swap product that allows an institution to make this kind of notional value appear in one quarter and completely disappear the next is a short-dated forward rate agreement, my question is: With whom did JPM trade $7.5 trillion worth of short dated FRAs with? It is unfathomable that the global banking community has credit lines for Morgan sufficient to conduct this trade. Given the way short-term rates plunged over this period, it is also unfathomable that this volume of trade could have been consummated in the interbank market. So, specifically, was the other side of these trades -- which were most assuredly brokered by the New York Fed -- the U.S. Treasury or the Exchange Stabilization Fund?"

When I received no reply from Ms. Zuccarelli, I wrote back to Sarah Stipicevic:

"Hi Sarah,

"Could you do me a favor by connecting me with someone else at your firm, please? Ms. Zuccarelli prefers to be silent. I would prefer to talk with Blythe Masters because I think she would be most capable of explaining to me the difference, for example, between Bear
Stearns' long position in silver before the takeover by your firm in contrast to JPM's short position in silver. That JPM is short in silver because it inherited the -- supposedly short -- silver position of Bear Stearns is pretty much a myth. Maybe Ms. Masters would be interested to see why I don't accept that myth.

"Please note that the results of my research will be presented through an intermediary at the New Orleans Investment Conference from October 24-27. So that's the deadline for my story."

I have received no reply.

* * *

So what do we learn from all this?

First, that Western central banks and their agents are hiding immense secrets involving gold.

And second, that there is plenty of opportunity here for investigative financial journalism.


Lars Schall is a freelance journalist in Germany who undertook this research on GATA's behalf.


[1] Lars Schall: The "Road To Recovery" Is A Dead End, Interview with Marshall Auerback, May 22, 2011,

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