the keys to the gold vaults at the new york fed coin bars melts and the bundesbank

8/9/2019 The Keys to the Gold Vaults at the New York Fed Coin Bars Melts and the Bundesbank

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The Keys To The Gold Vaults At The New York Fed Coin Bars Melts And The Bundesbank

By Tyler Durden

The Keys to the Gold Vaults at the New York Fed – Part 3: ‘Coin Bars’, ‘Melts’ andthe Bundesbank

Part 1 [31] of this series reviewed Federal Reserve Bank of New York (FRBNY)publications that cover the Fed’s gold storage vaults in Manhattan, and illustrated howthe information in these publications has been watered down over time. Part 1 alsoshowed that the number of foreign central bank customers storing gold with the FRBNYhas fallen substantially since the late 1990s.

Part 2 [32] covered the Fed’s rarely discussed ‘Auxiliary Vault’ and suggested that thisauxiliary vault of the Fed is probably located in the neighbouring Chase ManhattanPlaza vault facility, now run by JP Morgan.

Part 3 now looks at ‘Coin Bars’, another rarely discussed topic which is relevant to thegold at the New York Fed and that may well explain why the Deutsche Bundesbank needed to melt down the majority of the gold that it has so far repatriated from NewYork.

‘Coin bars’ is a bullion industry term referring to bars that were made by melting goldcoins in a process that did not refine the gold nor remove the other metals or metalalloys that were in the coins. The molten metal was just recast directly into bar form.

Because it’s a concept critical to the FRBNY stored gold, the concept of US AssayOffice / Mint gold bar ‘Melts’ is also highlighted below. Melts are batches of gold bars,usually between 18 and 22 bars, that when produced, were stamped with a meltnumber and a fineness, but were weight-listed as one unit. The US Assay Officeproduced both 0.995 fine gold bars and coin bars as Melts. The gold bars in a Melt areusually stored together unless that melt has been ‘broken’.

New York Fed – Coin Bars ‘?’ Us

I think it’s critical to note that a reference to low-grade ‘coin bars’ in the 1991 versionof the Fed’s ‘Key to the Gold Vault’ (KTTGV) has been omitted in subsequent

additions of KTTGV.

The text in this 1991 ‘Key to the Gold Vault’ is based on older versions of the samepublication that go back to the original version written by Charles Parnow in 1973. SeePart 1 for discussion of Charles Parnow and the editions of the KTTGV and the ‘ A Dayat the Fed [33]‘ publications.

The reference to coin bars in the 1991 version of KTTGV is as follows:

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“The butter yellow bars in the vault are nearly 100 percent pure and are usually made ofnewly mined gold.

Reddish bars contain copper and other impurities and generally consist of melted goldcoins and jewellery containing alloys. Since 1968, a number of these “coin” bars,

dating back to the early 1900s, have been stored in the Bank’ s vaul t .

Silver and platinum impurities make gold white; iron produce shades of green .” (KTTGV1991)

In comparison, the 1998 and later versions of KTTGV have omitted the reference to‘coin bars’, and the discussion about gold bars and other metals has been shortened asfollows:

“Traces of silver and platinum give the gold a whitish shade, copper is most often foundin reddish bars, and iron produces a greenish hue.

The butter-yellow bars in the vault are made of newly mined gold. ” (KTTGV 1991, 2004,2008)

There is also no mention of coin bars on thecurrent NY Fed gold information page here [34]. Thisis despite the fact that there are still coin bars heldin the Fed’s New York gold vaults, as illustrated bythe US Treasury’s gold bar inventory weight lists atthe FRBNY. See below.

What exactly are Coin Bars?

In the early 20th century, a lot of countries were ona gold standard and gold coins circulated as part ofthe money supply, for example in Germany, theUS, France and Britain. When countries went offthe gold standard (or went off a circulating goldstandard), some of these gold coins were melteddown into bars in the 1920s and early 1930s.

Historically, gold coins that circulated as moneywere not made of pure gold since other metals (about 10%) were added to the gold toimprove the coin’s strength and durability. So if a batch of coins contained 90% goldand 10% of other metals, the bars made by melting these coins would contain 90% goldand 10% other metals, since no refining of the gold was undertaken after the coins weremelted.

http://www.newyorkfed.org/aboutthefed/goldvault.htmlhttp://www.newyorkfed.org/aboutthefed/goldvault.html


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Because coin bars were being made in the early 1930s, the London Gold Market (aprecursor of the London Bullion Market Association (LBMA)) included an exact definitionfor coin bars in its 1934 London Good Delivery List, in addition to gold bars of 995 (orabove) fineness.

“1934 LONDON GOOD DELIVERY LIST

Specification of bars acceptable on the London Gold Market

1. Gold bars conforming to the following specification are Good Delivery in the Londonmarket:

(a) Fine bars, i.e. bars assaying 995 per mille or over and containing between 350 and430 ounces of fine gold;

(b) Coin bars, i.e. bars ass aying 899 to 901 per mil le o r 915 1/2 to 917 per m il le

and co ntaining between 350 and 420 ounces of f ine gold; provided that they bearthe stamp of the following:”

(Source: The London Good Delivery List – Building a Global Brand 1750 – 2010)

The 1934 definition specified that if a coin bar was produced by one of nineteenEuropean mints or the United States Assay Office, then it was considered a ‘gooddelivery’ gold bar at that time. The European mints spanned Britain, France, Germany,Belgium, Holland, Sweden and Switzerland.

The specification of coin bars with a gold content (or fineness) of between 899 to 901 in

the definition allowed the inclusion of gold coins from Continental Europe such asFrench Napoleon coins which had this particular gold content. The gold content of someUS gold coins also fell within this range since they were made of 0.899 or 0.9 gold.

The 915 ½ to 917 range was included in the definition since 22 carat gold is 22/24 or0.91667. This 22 carat gold, known as crown gold, was used in various gold coins suchas British Sovereigns, and also some US gold coins.

But coin bars were in some ways a historical anomaly or a product of their time. Even atlaunch in 1919, the London gold fixing was a price quotation for 400 oz bars of 995fineness. As gold expert Timothy Green said in the book “The London Good Delivery

List – Building a Global Brand 1750 – 2010? about the 1919 gold fixing launch:

“the (fixing) price was now quoted for 400-ounce / 995 Good Delivery bars, rather thanthe traditional 916 standard coin bars which rapidly became ext inct as mint ing ofcoin vir tual ly ceased .”

In the 19th century and very early 20th century, some refineries used to specificallyproduce ‘916 standard’ coin bars back that were used as a source to make gold coins.


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But the now famous 400 oz fine gold bars had been accepted by the Bank of Englandsince 1871 when Sir Anthony de Rothschild convinced the Bank of England to acceptthem. The Bank of England had also begun to accept US Assay Office 400 oz bars of995 fineness (fine bars) in 1919.

There do not appear to have been that many coin bars made in the early 1930s whenmints melted down gold coins. In his book, Green cites a 1930 example of the RoyalMint in London embarking on a 2 year programme to melt down 90 million BritishSovereigns (916.7 fine gold coins) into 52,000 bars each weighing 450 ozs. This isabout 650 – 700 tonnes of gold. Each of these bars was stamped with the stamp of theRoyal Mint as well as the fineness and a serial number on each bar.

Green also explains that although in 1936 the London Gold Market produced anupdated good delivery list that added some additional refineries and mints to the 1934list, there did not seem to be a lot of coin bars produced. Green says:

“The inclusion of mints (in the 1936 list) is interesting, suggesting that some like theRoyal Mint in London, were melting coin, but there is l i t t le evidence of any p roduc ingsignificant quantities of bars.”

By the late 1920s, gold bar demand had shifted to central banks who wanted fine goldbars for their vaults. Green says that by 1929, 90 per cent of ‘monetary’ gold resided inthese central bank vaults.

(Source: “The London Good Delivery List – Building a Global Brand 1750 – 2010. Authors: Timothy Green (Part I) and Stewart Murray (Part II). Published by the LBMA,2010)

Roosevelt’s Coin Bars

Apart from melted coins from Europe, there is another significant source of coin bars,namely the coin bars produced from US gold coins that were melted down during theUS gold confiscation period circa 1933-1934.

Some of the US Treasury’s coin bars originated from this gold coin confiscation andmelting period, and these coin bars were then shipped to the US Mint’s Fort Knoxfacility in Kentucky when it opened in 1937.

The authoritative source for information on the different producers of gold bars

worldwide is a company called Grendon International who have a web site calledhttp://www.goldbarsworldwide.com [35]. This web site produces guides explaining thewhole spectrum of gold bar varieties. In its US Assay Office gold bar guide [36], Grendonstates:

“It is understood that the bars (produced by the US Mint / AssayOffices) had a minimum purity of 995+ parts gold in 1,000 parts, with the exception of those 400 oz bars thatcontained “Coin Gold”.

http://www.goldbarsworldwide.com/http://www.goldbarsworldwide.com/PDF/HB_5_UnitedStatesMint.pdfhttp://www.goldbarsworldwide.com/PDF/HB_5_UnitedStatesMint.pdfhttp://www.goldbarsworldwide.com/


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“Coin Gold” 400 oz bars were manufactured by melting down and then casting into barsgold coins that had been withdrawn from public circulation, mainly as a resul t of theproh ibi t ion in 1933 of pr ivate gold own ership in the Uni ted States . The gold purityof these bars reflected the purity of U.S. gold coins, usu al ly 900 or 916 parts go ld in a1,000 parts.

In an article about the US confiscation andthe US coins that were actually melted,lawyer and coin expert David Ganzdemonstrates that there were not a largeamount of US gold coins melted by the USauthorities in the 1930s.

In his article, Ganz has a table showing thetotal number of gold coins minted and

melted over the 1930s, classified by coindenomination up to the $20 coin. Given that the $20 coin has 0.9675 ounces, and the$10 has 0.48375 ounces etc, you can work out the total number of millions of ouncesthat were produced from melted coins. Ganz says:

“Product of gold confiscation was gold melting; the coins were melted into bricks thatultimately found their way to Fort Knox. Although the Mint had a program from the mid-1860’s until about 1950 to melt or re-coin copper, silver and gold coinage, the majorityof gold coins were taken in and destroyed in a Seven year period (1932-1939)“.

Ganz’ statistics come directly from the annual reports of the Treasury’s Director of the

Mint. Ganz says “ All told, over 124 million coins were melted through the years (102million gold coins were melted as a result of government assistance from 1933- 1939).”

However when you calculate the amount of gold in these 124 million coins, it only worksout at about 85.6 million fine ounces, which is 2,662 tonnes of gold.

Some of the European coin bars made it across the Atlantic circa 1934 when the USraised the price of gold to $35 per ounce and the US Treasury offered to buy all gold atthis price, including coin bars from the London Gold Market.

All gold arriving into the US Treasury’s assay offices was apparently remelted into US

Assay Office bars but statistics on how many European coin bars entered the USmarket at that time do not seem to be available.

Since there were not that many European coin bars made by European mints in the1930s (for example, the Royal Mint 1930 programme made only 650-700 tonnes of coinbars), then there cannot have been more than a few thousand tonnes of European coinbars entering the US at that time.


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Coin Bars ceased to be ‘Good Delivery’ bars in 1954

During World War II the London Gold Market essentially closed

down and really only re-opened in March 1954 when the GoldFixing restarted. When the London Gold Market re-opened, a new1954 London Good Delivery List for gold was published. This listonly included gold bars of 0.995 fineness or higher, and coin barsceased to be London good delivery standard. As Stewart Murray,former LBMA CEO says: “The new List published in 1954 onlyallowed fine bars of 995+.” (page 40, “Good Delivery Accreditation –

A Short History”).

It’s therefore very strange that the Fed’s 1991 ‘Key to the Gold Vault’ publication statesthat it was only “since 1968? that “a number of these ‘coin bars’, dating back to the

early 1900s, have been stored in the Bank’s vault.” This implies that coin bars werenot at the New York Fed gold vaults immediately prior to 1968.

Why would these coin bars suddenly appear at the FRBNY vault in 1968? Toanswer this question, its important to recall that 1968 was the year in which the LondonGold Pool collapsed (March 1968).

Since coin bars have not been good delivery bars since 1954, US Treasury coin barsappear to have begun to turn up in the New York gold vaults in 1968 because there wasa shortage of good delivery US Assay Office gold bars to satisfy foreign central bankgold transaction settlements.

Scraping the barrel – March 1968

That the US Treasury and Federal Reserve had a major shortage of good delivery goldin March 1968 is illustrated by a Bank of England memo from 14th March 1968, whichhighlights that the London Gold Pool collapsed because the US monetary authoritieswere unable to find any good delivery gold in their own stocks, and were confronted withthe prospect of having to supply their Fort Knox low-grade ‘coin bars’ to the market.

The Bank of England memo, titled ‘Gold Bars for Delivery in the London Market‘ waswritten by George Preston (LTGP) and addressed to the Deputy Governor MauriceParsons and the Chief Cashier John Fforde. It discussed the ramifications of delivering

coin bars to the London Gold Market. The memo is referenced as entry ’49’ from fileC43/323 i.e. C43/323/49 [37].

Points 1 and 2 in the memo described what was good delivery at that time in 1968, andare included here to illustrate that coin bars were not even being countenanced as gooddelivery back in 1968. No one had even thought about coin bars since the 1930s.

However, Point 3 is the critical point. A short quote from the memo:

http://www.bankofengland.co.uk/CalmView/Record.aspx?src=CalmView.Catalog&id=C43%2f323&pos=1http://www.bankofengland.co.uk/CalmView/Record.aspx?src=CalmView.Catalog&id=C43%2f323&pos=1


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“ 1. The current specification of bars which are good delivery in the London marketrequires that they shall be of a minimum fineness of .995 and shall have a minimumgold content of 350 fine ounces and a maximum of 430 fine ounces.”

“2. In the 1930s when the Bank were delivering bars to the market to satisfy French

demands for gold, they had to deliver coin bars and the specification in the 1930’sincluded bars not only .995 fine but coin bars assaying between .899 and .901 and also.915 1/2 to .917. Bars of both varieties had to contain between 350 and 430 ounces offine gold.”

“3. I t has emerged in co nversat ions w ith the Federal Reserve Bank that themajor i ty of the gold held at Fort Knox is in the form o f coin bars, and that in

cer tain cases these bars have a gold content of less than 350 f ine oun ces. If thedrain on U.S. stocks continues it is inevitable that the Federal Reserve Bank will beforced to deliver what bars they have.

Capacity to further refine coin bars to the current minimum fineness of .995 in theUnited States is entirely inadequate to cope with conversion on the scale that would berequired if the Americans wished to continue to deliver bars assaying .995 or better.Equally the capacity in the U.K. is inadequate for this task.”

The Fed asked the Bank of England to discuss the situation with Rothschilds (the chairof the gold market) at partner level. The memo then covers some discussion with MrBucks and Mr Hawes of Rothschilds about the acceptability of delivering coin bars tothe London Gold Market. Supplying the market with coin bars was thought by the Bankand Rothschilds to be problematic, and the memo concluded, somewhat ominously:

“ i t would app ear that the circum stances might w el l be such that very few bars ofthe current acceptable f ineness could b e found ” (by the Americans)

Ominously, because, as some readers will be aware, the London Gold Pool collapsedthat evening, Thursday 14th March 1968. On the following day, 15th March 1968, anemergency bank holiday was called for British financial markets, the London goldmarket remained closed (and stayed close for the next two weeks), and the gold pricebegan to float for non-official transactions.

Migration of Coin Bars from FRBNY to the Bank of England

That foreign central banks were provided with coin bars at the New York Fed is a fact,

as illustrated by the following.

In 2004, speaking at a conference of the American Institute for Economic Research(AIER), (AIER Conference May 2004 Gold Standard [38]), H. David Willey, formerly ofthe Federal Reserve Bank of New York,

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“Gold held by foreign authorities under earmark at the Federal Reserve Bank of NewYork may be in the form of coin bars only approximating 400 ounces and with a muchlesser purity.”

“In the last decades, there has been a gradual migrat ion of central bank coin b ars

from the New York Federal Reserve vaul ts to the B ank of En gland. These barshave been first re-refined into London good delivery form. Once at the Bank of England,the bars can readily be used for gold loans or sales.”

H. David Willey was “formerly Vice President of the Federal Reserve Bank of New Yorkin charge of the discount window, and later responsible for oversight of the FederalReserve’s accounts (including gold) with foreign central banks (1964-82); advisor toMorgan Stanley’s gold and fixed -income business (1982-2000).”

(Source: Page 62:https://www.aier.org/sites/default/files/publications/GC%20%2704%20-%20Text.pdf [39])

A central bank would only be confronted with a need to convert its FRBNY coin barholdings to good delivery gold and move them to London if it didn’t have any 995 finegold at the FRBNY. As to how many banks engaged in this activity and sent their coinbars to the refineries is unclear.

US Treasury coin bars

While some foreign central banks seem to have tried to get rid of their non-gooddelivery coin bars over the years by having them melted down, there are still coin barsheld in the New York Fed vault(s).

The US Treasury claims to hold gold at four locations, namely Fort Knox in Kentucky,Denver in Colorado, West Point in up-state New York, and at the Federal Reserve Bankof New York in Manhattan, NY.

According to the US Treasury’s own full gold inventory schedule (which have neverbeen independently and physically audited), over 80% of the US Treasury gold barslisted are not good delivery bars and are in the form of coin bars and other low finenessgold bars. See pdf here [40] for a detailed list of the gold the US Treasury claims to holdat Fort Knox, Denver and West Point. An excel version of the US Treasury list is here inxls [41].

There is a neat table summarising the weight and purity of the US Treasury’s gold bar‘lists’ here [42], taken from the goldchat blog [43] site.

There has been very little gold bar activity in or out of Fort Knox since 1968. If there wasnothing, or next to nothing, except coin bars at Fort Knox in March 1968 (as the FRBtold the Bank of England in March 1968), then how could there now be over 147 millionozs of gold (over 4,500 tonnes) at Fort Knox if its all or nearly all in the form of coinbars? The numbers don’t add up.

https://www.aier.org/sites/default/files/publications/GC%20%2704%20-%20Text.pdfhttp://financialservices.house.gov/uploadedfiles/attachment_4_mints_schedule_of_inventory_of_deep_storage_gold_reserves.pdfhttp://financialservices.house.gov/uploadedfiles/mints_schedule_of_inventory_of_deep_storage_gold_reserves.xlshttp://financialservices.house.gov/uploadedfiles/mints_schedule_of_inventory_of_deep_storage_gold_reserves.xlshttp://4.bp.blogspot.com/-5V1d3iCueWQ/Uxb1aJlf_FI/AAAAAAAAAM4/GxDJ2Qp57H4/s1600/usdeep.pnghttp://4.bp.blogspot.com/-5V1d3iCueWQ/Uxb1aJlf_FI/AAAAAAAAAM4/GxDJ2Qp57H4/s1600/usdeep.pnghttp://goldchat.blogspot.ie/2014/03/us-deep-storage-gold-reserves-bar-list.htmlhttp://goldchat.blogspot.ie/2014/03/us-deep-storage-gold-reserves-bar-list.htmlhttp://4.bp.blogspot.com/-5V1d3iCueWQ/Uxb1aJlf_FI/AAAAAAAAAM4/GxDJ2Qp57H4/s1600/usdeep.pnghttp://financialservices.house.gov/uploadedfiles/mints_schedule_of_inventory_of_deep_storage_gold_reserves.xlshttp://financialservices.house.gov/uploadedfiles/mints_schedule_of_inventory_of_deep_storage_gold_reserves.xlshttp://financialservices.house.gov/uploadedfiles/attachment_4_mints_schedule_of_inventory_of_deep_storage_gold_reserves.pdfhttps://www.aier.org/sites/default/files/publications/GC%20%2704%20-%20Text.pdf


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Said another way, if the US melted around 2,600 tonnes of US gold coins in the 1930sinto coin bars, and if some European coin bars were converted into US Assay Officecoin bars (also in the 1930s), how could this add up to even 4,500 tonnes, let alone addup to all the coin bar gold that the US Treasury claims to hold at Fort Knox, Denver andWest Point combined, and all the coin bars held by foreign central banks at the

FRBNY?

US Treasury coin bars at the FRBNY

Surprisingly, the US Treasury lists how many coins bars itholds at the FRBNY. According to its custodial inventorystatement, about 5% of the US Treasury’s gold is held atthe FRBNY in the form of 31,204 bars stored in 11compartments (listed as compartments A – K).

The US Treasury gold claimed to be stored at the FRBNYis listed in weight lists here [44], starting on page 132 of thepdf (or page 128 of file).

Of the US Treasury’s eleven compartments listed at theFRBNY, coin bars are listed as being held in four of thesecompartments, namely compartments H, J, K and E.

Compartment H of the US Treasury’s gold at the FRBNY contains coin bars producedby the US Assay Office. These bars are listed in ‘melts’, with more than 60 melts listed,each with about 20+ bars. This would be in excess of 12-13 tonnes. See the following

screenshots as examples.

All the bars listed in the Treasury’s Compartment J are US Assay Office coin bars,listed in melts. This amounts to 968,000 fine ounces, or about 30 tonnes. See thefollowing two screenshots.

Compartment K also contains about 5 tonnes of coin bars belonging to the USTreasury. Screenshot not shown for brevity.

Additionally, Compartment E contains approximately 1 tonne of coin bars that are notUS Assay Office coin bars. These coin bars are listed as being produced by refiners

such as Marret-Bonnin, Rothschild, Comptoir-Lyon and the Royal Canadian Mint. Allfour of these refiners were listed on the 1934 Good Delivery List of refiners of coin bars.

Source: http://financialservices.house.gov/uploadedfiles/112-41.pdf [44]

Overall, a quick calculation of the above weight lists suggests that the US Treasuryholds about 50 tonnes of coin bars at the New York Fed. Interestingly, this is roughly the

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same amount of gold that the Bundesbank says that it melted/smelted in 2014 afterrepatriating it from the New York Fed.

US Assay Office 0.995 fine bars vs US Assay Office coin bars

Its important to understand the differencebetween good delivery US Assay Office goldbars and US Assay Office coin bars (circa 0.90fine). US Assay Office gold bars that have agold content of 0.995 fine or higher are still gooddelivery in the London Gold Market and ininternational transactions because US AssayOffice 0.995 bars are still on the ‘former’ Londongood delivery list.

The LBMA’s London Good Delivery List is a listof refineries worldwide whose gold bars are acceptable by the London Gold Market.This list contains two parts, a current list and a former list . The former list includesrefineries whose gold bars are still accepted by the London Gold Market but who nolonger produce these gold bars.

In September 1997, the LBMA transferred ‘US Assay Office’ gold bars to the former listbecause they were no longer produced by the US Assay Office after this date. Theseare bars that were produced by the New York Assay Office and the San Francisco andDenver Mints.

Gold bars that are on the former list are still accepted as London Good Delivery as longas they have been produced prior to the date of transfer to the former list, and as longas the bars meet the London Good Delivery standards.

Therefore, US Assay Office gold bars (995 fine) are still accepted as London gooddelivery bars. Just look at the bar list for the SPDR Gold Trust (GLD) and you will seeplenty of US Assay Office gold bars listed. These bars have appeared at various timesrecently with a variety of descriptions such as ‘US ASSAY OFFICE NY’, ‘U.S AssayOffice’, ‘United States Assay Offices & Mints’, ‘US ASSAY OFFICE NEW YORK’,‘UNITED STATES ASSAY OFFICE’ etc etc.

US Assay Office gold bar MELTS

Its important to grasp what a MELT is as applied to US Assay Office Gold because itapplies to a lot of the gold held at the FRBNY vaults. Non US refineries and mints alsoproduced gold bars in batches but they didn’t make use of a melt numbering syst em insuch an obvious way as the US Assay Office.

Here’s the Federal Reserve Board explaining 0.995 Melts:


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“US Assay Office bars, like bars in other countries, are produced in melts or a series ofbars, numbered in succession. For instan ce, melt No. I contains 20 bars. Hence, thebars are stamped 1-1, 1-2, etc… , 1-20.”

“US Assay Office bars are gold bars that are originally issued by the US Assay Office

and that have not been mutilated and which, if originally issued in the form of a melt, arere-deposited as a complete melt. These bars are not melted and assayed. They weighappro xim ately 400 troy oun ces, the fineness of their gold c on tent is .995 (99.5%

pur i ty o r better), and they c ome in c omp lete melts.

“When an US Assay Office bar is removed from a melt, it is referred to as a muti latedUS Assay Off ice bar .”

Source: ‘Final report of the gold team’, draft June 30th, 2000. Page 13 of document:(http://www.clintonlibrary.gov/assets/storage/Research-Digital-Library/ho... [53])

Here’s a very good description of Melts from none other than the International MonetaryFund. This description comes from an IMF document in 1976 when they were preparingtheir gold auctions and restitutions:

“..most of the gold of the Fund (IMF) is not in the form of indiv idual ly stamped andweighed bars but consists, with the exception of the gold held in depositories in theUnited Kingdom and India, of melts , com pr is ing 18-22 indiv idual bars, which wi l lf i rs t need to be ident i f ied, weighed, and s elected b efore they can b e del ivered . 1/ “

Footnote 1/ on the same IMF page describes ‘Melts’ as:

“1/ A melt is an original cast of a number of bars, usually between 18 and 22. The barsof an unbroken melt are stamped with the melt number and f ineness but weight- l is ted as one uni t ; when a melt is broken, individual bars must be weighed andstamped for identification. I t is the pract ice in New York and Paris to keep meltsintact .”

The Swiss National Bank (SNB) admits that it too has held non-good delivery gold, andhas sought, over a 30 year period from 1977-2007, to get it refined to good deliverystatus:

“The National Bank has commission ed numerou s ref ining operat ions du r ing the

last thi r ty years in order to obtain the ‘good delivery’ quality label for its entiregold hold ings .

Swiss gold refining firms were prepared to undertake these operations free of charge,as the SNB provided them, in return, with a ‘working capital’ of several tonnes – morethan was strictly necessary for their activity on behalf of the central bank.

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This mutually profitable arrangement was challenged in 1982, when the SNB’s legalservices concluded that it raised a number of problems, in particular that it effectivelyconstituted an unsecured advance, similar to a gold loan. The National Bank’s depositswith refining firms were therefore liquidated in the same year, and subsequently, thecost o f ref ining o perations w as invoiced direct ly to the SNB.“

(page 433, section 8.2 The National Bank’s gold operations, from the 800+ pagepublication “The Swiss National Bank 1907 – 2007 [54]” (large file: 800+ pages.)

The SNB had a lot of gold at the FRBNY up until at least the mid to late 1990s (sincethere are large FRBNY gold outflows during that period), and the Swiss gold salesappear to have targeted this New York gold, however, the Swiss gold sales settled outof London so it looks like Swiss gold may have been on the move in the late 1990s,even before the SNB had got the go-ahead to engage in gold sales over the 2000-2004period. Perhaps the SNB’s Swiss refinery operations cited above involved some of theSNB’s New York gold as it stopped off in Switzerland on its way to London?

The Curious Case of the German Bundesbank

There has been widespread coverage of the Deutsche Bundesbank’s attempts torepatriate some of its gold reserves from New York and Paris back to Frankfurt. A lot ofthis coverage is, in my view, failing to ask the right questions about the fineness of thegold bars repatriated.

In January 2014, the Bundesbank announced that it had repatriated a paltry 5 tonnes ofgold from the New York Federal Reserve Bank during 2013.

The Bundesbank press release [55] from 20th January 2014, quoted Bundesbank

Executive Board member Carl-Ludwig Thiele as follows:

‘”We had bars of gold which did not meet the ‘London Good Delivery’ general marketstandard melted down and recast. We are cooperating with gold sm elters in Europe,”Thiele continued. The smelt ing process is being observed by independent experts. Itis set up in such a manner that the Bundesbank’s gold cannot be commingled withforeign g old at any time.’

Since the Bundesbank is fond of using the term ‘smelting‘ and ‘smelters‘ in their goldbar discussions, what exactly does ‘smelting’ mean?

SMELT dictionary definition: Smelt (verb):

1. to fuse or melt (ore) in order to separate the metal contained

2. to obtain or refine (metal) in this way.

To me, it appears that the Bundesbank melted down and refined coin bars into LondonGood Delivery bars, otherwise why else would they need to bring gold up to good

http://www.snb.ch/en/mmr/reference/hist_fest_snb_2007/source/hist_fest_snb_2007.en.pdfhttp://www.snb.ch/en/mmr/reference/hist_fest_snb_2007/source/hist_fest_snb_2007.en.pdfhttp://www.snb.ch/en/mmr/reference/hist_fest_snb_2007/source/hist_fest_snb_2007.en.pdfhttp://www.snb.ch/en/mmr/reference/hist_fest_snb_2007/source/hist_fest_snb_2007.en.pdfhttp://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2014/2014_01_21_gold_en.htmlhttp://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2014/2014_01_21_gold_en.htmlhttp://www.snb.ch/en/mmr/reference/hist_fest_snb_2007/source/hist_fest_snb_2007.en.pdf


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delivery standard? After all, normal US Assay Office gold bars of 0.995 fineness arealready good delivery. So I emailed the Bundesbank at that time (January 2014) andasked them straight out:

“How many tonnes of coin bars does the Bundesbank hold at the Federal Reserve in

New York in addition to the 5 tonnes of coin bar gold recently remelted? And will all thegold (circa 300 tonnes) that is planned to be brought back from New York be in the formof coin bars? Regards,“

The Bundesbank replied, directing me back to their press release:

“in the Link attached you will find more information about you r matter . http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2014/2014_01_21_g old_en.html Yours sincerely, DEUTSCHE BUNDESBANK “

Since I had asked about ‘coin bars’ and the Bundesbank had sent me a link to the pressrelease about smelting, could the Bundesbank have been conceding that the smeltingwas of coin bars? Quite Possibly.

On 19th February 2014, Carl-Ludwig Thiele popped up again referring to the ‘smelting’operation in an interview [56]conducted with German newspaper Handelsblatt:

“ Some of the bars in our stoc ks in New York were produced before the SecondWorld War .”

“Our internal audit team was present last year during the on-site removal of gold bars

and closely monitored everything. The smelt ing p rocess is also being monitored byindependent experts.”

“The very same gold arrived at the European gold smelters that we hadcommissioned.”

“The gold was removed from the vault in the presence of the internal audit team andtransported to Europe. Only once the gold had arrived in Europe was it mel ted downand brou ght to the current bar standard .”

The frequent use of the words ‘smelting’ and ‘smelters’, in my opinion, suggests that not

only were the Bundesbank’s gold bars melted and reformed into fresh bars, but that thegold was smelted and refined from a lessor purity to a ‘good delivery’ purity. This is whythe opaque manoeuvres of the Bundesbank suggest ‘coin bars’.

Thiele’s reference to “some of the bars in our stocks in New York were producedbefore the Second World War” is again hinting at the 1930s, and to me is clearlysuggesting ‘Coin Bars’.

http://www.bundesbank.de/Redaktion/EN/Interviews/2014_02_19_thiele_handelsblatt.htmlhttp://www.bundesbank.de/Redaktion/EN/Interviews/2014_02_19_thiele_handelsblatt.htmlhttp://www.bundesbank.de/Redaktion/EN/Interviews/2014_02_19_thiele_handelsblatt.html


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The 2013 five tonne smelting mystery was merely a prelude to much more of the samein 2014, because in January 2015, the Bundesbank issued a press release [57] in whichit claimed to have repatriated 85 tonnes of gold from the FRB in New York, of whichapproximately 50 tonnes was melted and recast.

Smelting/Melting expert Carl-Ludwig Thiele was again on hand to explain:

“The Bundesbank took advantage of the transfer from New York to have roughly 50tonnes of go ld melted down and recast accord ing to the Lond on Goo d Delivery

standard, today’s internationally recognised standard.”

I then emailed the Bundesbank and asked:

“The Bundesbank press release from yesterday (see link below) refers to the fact that50 tonnes of gold that was repatriated from the Federal Reserve in New York wasrecast / remelted before being received by the Bundesbank.

Can you clarify what the gold f ineness (parts per thous and of g old in the bars) ofthese 50 tonnes o f bars was b efore they were recast / remelted ?

http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2015/2015_01_19_c ontinues_transfers_of_gold.html”

The Bundesbank replied to my email:

“Please understand that we do not provide any information on the physical details ofsingle gold bars owned by Deutsche Bundesbank. Nevertheless, we would like to draw

your attention on the fact that no irregularities where found concerning the gold melteddown and recast according to the London Good Delivery standard. Please take intoaccoun t that this standard asks i .a. for a minim um fineness of 995 parts per

thousand.“

(i.a.= inter alia = among other things)

Notwithstanding that I didn’t ask about single gold bars, its very interesting that theBundesbank mentions 995. Why mention the fineness of 995? If the bars were already995, why melt them down in the first place?

I then sent the Bundesbank a follow-up email:

“Thanks for the reply but I wasn’t asking about the details of single gold bars.

My question is what was the average fineness of the 50 tonnes of gold bars that theBundesbank had remelted in 2014. That’s the average fineness on approximately 4,000bars.

http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2015/2015_01_19_continues_transfers_of_gold.htmlhttp://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2015/2015_01_19_continues_transfers_of_gold.html


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The Bundesbank replied:

“Please understand that we do not provide any further information on the details of specific gold bars or a speci f ic amou nt of gold b ars owned by Deutsche Bundesbank.”

In my view, the Bundesbank’s complete secrecy on this smelting issue speaks volumes. And you also see now that the Bundesbank cannot give a straight answer when askedsimple questions about its gold.

In both January 2014 and January 2015, the Bundesbank claims that the Bank forInternational Settlements (BIS) was in some way involved in the Bundesbank’s goldsmelting shenanigans. This makes little or no sense unless their was some type oflocation swap involved or the BIS has some deal with a refinery such as Metalor inNeuchâtel.

In January 2014 Thiele said:

“The Bundesbank has repatriated the gold from New York City in close cooperation withthe Bank for International Settlements. “The Bank for International Settlements is arepository of expertise in the repatriation of gold. It is a very trustworthy institution.”

In January 2015 Thiele said:

“We also called on the expertise of the Bank for International Settlements for the spotchecks that had to be carried out. As expected, there were no irregularities.”

The BIS trades gold ‘loco Berne’ [58] using its account at the Swiss National bank (SNB)vaults, and the BIS maintains safekeeping and settlements facilities that are “availableloco London, Berne or New York.”

Bundesbank gold looks like it left the FRBNY vaults during 2013 and 2014 in batches of5.16 tonnes. See the Fed’s foreign earmarked gold statistics here [59]. But on a net basisthere is a shortfall of about 32 tonnes in 2014 between the amount of gold that left theFRBNY vaults and the amount of gold that the Bundesbank and De NederlandscheBank combined claim that they repatriated from the FRBNY during 2014.

Therefore, there may have been a gold location swap involved somewhere along the

line. For some of the Bundesbank’s melting operations, gold may not have movedphysically from the FRBNY at all. A gold location swap could have been done betweena BIS FRBNY gold account and a BIS SNB gold account. Since the gold needed to beremelted / recast (to bring it to good delivery status), that would mean there were coinbars at the SNB.

The Metalor gold refinery (one of the 4 big gold refineries in Switzerland and one of the6 biggest in the world) is very near the SNB’s Berne vault. Its located at Neuchâtel,

http://www.bis.org/banking/finserv.htmhttp://www.bis.org/banking/finserv.htmhttp://www.bis.org/banking/finserv.htmhttp://www.federalreserve.gov/econresdata/releases/intlsumm/forassets20150131.htmhttp://www.federalreserve.gov/econresdata/releases/intlsumm/forassets20150131.htmhttp://www.federalreserve.gov/econresdata/releases/intlsumm/forassets20150131.htmhttp://www.bis.org/banking/finserv.htm


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The Bundesbank gives some details of a gold swap with the FRB [67] back in 1968, andclaim that a portion of the gold returned to the Bundesbank (the return leg of the goldswap) was gold of a lessor quality than good delivery. They say “ the remaining bars witha countervalue of $750 million were of a different quality”. This is absolutely not correct.

All of the gold bars returned to the Bundesbank in that potion of the swap were good

delivery US Assay Office bars and a lot of it came from Ottawa where the Fed hadsourced some bars from the Canadians.

I have the details on that swap from Bank of England gold ledgers and the 1,200 goldbars (sent to Johnson Matthey) out of over 50,000 bars shipped to London were merelybeing ‘adjusted’ into good delivery bars, and were supposed to be good delivery bars,hence the need to remelt and recast. I will cover this Bundesbank gold swap in a futurearticle. The Bundesbank seems to be using this gold swap as as some sort ofambiguous evidence of why they are melting down 55 tonnes of gold but it is misleadingto do so.

So, in conclusion, I would lean towards the probability that the Federal Reserve Bank ofNew York has given the Deutsche Bundesbank tonnes of coin bars and the smeltingoperations have been bringing this gold up to London Good delivery purity levels. Thisbegs the question, where did all the other Bundesbank gold bars stored at the New YorkFed disappear to?

The alternative to the coin bar thesis, that the Bundesbank does not trust the gold purityof supposedly 995 fine US Assay Office bars, is probably more concerning since itundermines confidence in the purity levels of all US Assay Office fine gold Melts.
http://www.bundesbank.de/Redaktion/EN/Standardartikel/Topics/2013_01_18_gold_swaps.htmlhttp://www.bundesbank.de/Redaktion/EN/Standardartikel/Topics/2013_01_18_gold_swaps.html

the keys to the gold vaults at the new york fed coin bars melts and the bundesbank

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