WHERE IS THE GOLD

26 February 2025

WHERE IS THE GOLD?

Where is australia's gold

We all remember when Germany asked for its gold back, in 2013, and was told delivery would take seven years. 

Are the countries asking for repatriation of their gold from the LBMA being told the same thing? 

And if LBMA runs out of gold and goes bankrupt, what happens to the owners of ETFs with unallocated gold? Eg SGLN? SGLN is backed by physical gold, valued at spot prices, held in LBMA and certified by  Blackrock. It is the most convenient and least risky ETF.... But what happens if the LBMA vault turns out to be empty. And it goes bust?

In fact, this hypothecation and rehypothecation is how governments manipulate the price of gold.The paper gold market (COMEX, LBMA) trades maybe 20 times more contracts than there is actual gold. It is done on futures contracts. Means banks can massively short-sell gold futures, artificially suppressing spot prices.

Why do banks do this?

The truth is that their currencies are devaluing all the time. A fiat currency is a currency that is not tied to the value of any asset. So governments* can just borrow all they want, they can print as much as the desire. They can have these mad spending programmes where there's no proper fiscal control, i.e, spend more than they tax. The States is doing two trillion of extra debt every year.

* with their own currency.

So why do these fiat currencies devalue all the time? 

Devalue means that they buy less and less of what people want in the real world. And this is because the governments are constantly expanding the money supply, so more and more money is available for the same amount of goods, which inflates the currency.... more and more currency is needed to buy the same thing.

Fiat currencies are not tied to an asset in the real world, this is the trouble and the blessing, but gold is. If central banks didn't keep shorting the price of gold, then gold would rise in value according to the inflation in the money supply and be worth an absolute bomb, and people would see gold as a reliable store of value - as it has been since the time of stonehenge - and put their money into gold and not into government issue treasuries, which are promises to pay, packed solely on the credibility of the government..

So if gold was only traded in physical form - ie if you buy at the spot price and take delivery of the physical gold itself - prices would without doubt be much higher. And when the day of reckoning comes, this is the day where the government can no longer borrow enough to meet its obligations, which in includes paying interest on it's treasuries, then we'd expect gold to rise to its real price, while paper assets burn.