I have watched with amusement… and have to call cow pies on the entire German repatriation “show.” I can only wonder how long it takes before the market itself comes to the same conclusion. Because 32 tons per year is such an insignificant amount of Gold, why was this move even announced? We are talking about 1 million ounces per year, this amount barely even registers on the radar screen and could probably all be carried on one transport plane. This weight is the equivalent to roughly 50 1,200 lb horses, do you not think there would still be space available for more on a heavy transport plane? How do we get so many armored tanks etc. from here to there? In transport planes with huge payload capacities! Surely “weight” is not the problem. They are also moving 450 tons back from Paris in one single move. Are they moving the French custodial Gold because it was this not already rehypothecated and really does exist? Please understand that this really is HUGE news because the 2nd largest holder of Gold on the planet is mobilizing their “money.” The status quo is being shaken. Why and how we don’t know for sure but we will find out and please understand that this move can ONLY be bullish for metals priced in fiat terms.
Oh, yes I forgot, CNBC resident goat head Simon Hobbs said yesterday that the French have been charging 500,000 Euros per year to store that German Gold to be repatriated. I don’t know if this figure is correct or not but it IS the figure he used… and said “it’s A LOT of money you know for storage.” How stupid! And in Dollars? 32 tons is only $1.7 billion! I know that we don’t (sarcasm) have any inflation but $1.7 billion doesn’t buy what it used to. Why didn’t the Germans just cut a deal and tell the Treasury to wire them some $20 billion and be done with it? Why not ask for $100 billion and tell the Treasury they could just keep what’s in the vault and use the money to buy 1,500 tons of Gold? THAT’S WHY! “I’m SURE (in my cousin Vinny’s voice) they have all sorts of written receipts to show ownership, what else could they possibly need?” As a child would say… “because.” Because Gold IS money and the Germans know that Dollars are not any longer, Dollars are merely a currency. Because $100 billion cannot buy the 1,500 tons of Gold in the open market. $100 billion would blow the entire market wide open and make $3,000 Gold look laughably cheap.
I received all sorts of replies yesterday and theories as to why this was done, many sent links to Jim Sinclair’s thoughts that this was a shot at outgoing Treasury secretary Tim Geithner for bashing Gold prices:
I’m not so sure I buy it 100% but it does make sense. Because the amount of Gold is just so insignificant why bother at all? It does make sense that Germany wants higher rather than lower Gold prices and they have watched over the last 4 months (15 years) as Gold was put in “lockdown” and mauled when bullish news would surface. Even though Europe has had its financial problems I do believe that they still have “reserve currency” aspirations. I’m not so sure that this will happen and think that Germany may break from the zone itself or with others and form a more stable “northern” Euro. Were The Netherlands to announce a repatriation it would add support to this theory. A northern Euro with a Gold cover clause could be quite viable with a huge markup in the Gold price and would be looked upon very seriously. In any case, Gold is coming IN to the system not away from it.
Occam’s razor says that the most likely and obvious solution IS the solution. My thought is that Germany knows full well that much of their Gold is gone. I believe they are claiming it back and have structured a deal to get it back. The laughable “8 years” allows time for this Gold to be mined. Do you remember early in the last decade when James Turk found the term “deep storage” while digging through Treasury reports of Gold? Do you remember that the year or two prior that the Gold was titled “custodial Gold?” If you put on your 3rd grader thinking cap, what does “deep storage” Gold now mean to you? Especially since Germany is requesting their Gold back but giving 8 years time to do so? Maybe it was just a slap in the face to put pressure on the U.S. and make it harder to run the Gold market around? Maybe this was just to show that they do have the power to stop the U.S. Treasury (ESF) shenanigans in the Gold market? My personal opinion is that IF the U.S. had 8,000+ tons of Gold, the easiest way to reliquify the system and “distance” us from the rest of the world financially would be to revalue Gold higher. We would already see $10,000 or even $20,000 Gold. A markup would make too much sense and since there has been no huge markup (other than what the market has already done), it tells me exactly “where” all this “deep storage Gold” is!