Reserve Bank of Australia admits to holding only Unallocated Gold

This is a criticism of for the Reserve Bank of Australia (RBA) for their sloppy handling of Australia's gold reserves, lest they think they are somehow immune to scrutiny. During 2014, Bullion Baron (B.B.) has been on the case, pushing several freedom of information (FOI) requests in an effort to obtain some visibility - no less than three detailed articles HERE, HERE and recently, HERE.

Digging into the matter ourselves, Screwtape Files has hacked into their systems been fortunate enough to obtain a record of a phone conversation which took place between an RBA official and the Bank of England (Boe). The individuals remain unidentified but language pattern analysis indicates the conversation is authentic. For those of you without audio, I've taken the time to loosely transcribe the conversation (below).

(note: if the soundcloud applet above doesn't work, please use this link)

BoE: Good morning, a colleage informs me you have requested extra detail about Australia's gold held with us.

RBA: Gudday {unintelligible}, yeah that's right - we got a second freedom of information request recently for details about the recent audit and {inaudible} we realized we can't prove the audit actually happened without documentation.

BoE: Supplying the actual details is a bit inconvenient. You can't possibly need that - after all you saw the gold and held one of the bars, right? Remember how we took your team to 'The Ivy' afterwards?

RBA: Best night I've had in years! Well mate anyway, we're in a pickle. This guy called 'Bullion Baron' ... bit of a gold nutter, {not printable} he's really persistent.

BoE: Have you deployed all the standard run-around methods?

RBA: Yep. Followed procedure to the letter. Blimey - we're stuck because now he's requested information about the previous request, which isn't covered in the manual.

BoE: This is a problem for us - we cannot send you the bar numbers, that would cause an international incident.

RBA: A wot??

BoE: Just take our word for it! Look, we'll send a spreadsheet, just be aware we won't include any information which would allow any indepenent researchers to identify the bars as being part of our standard working inventory.

RBA: Your wot? { some self-righteous rant about ethics }

BoE: Never mind. Please don't ask questions - you're just a colony.

It's fair to say the RBA is the submissive partner in this relationship. But while B.B. is satisfied the audit documents demonstrate Australia has allocated gold, I contend the opposite - that the strategic omission of key identifying information is a confirmation that the gold is unallocated. You see, I finally did do some analysis on matches involving only Refiner, Assay and Weight. This of course is not a true signature however out of the 6,313 bars 'held' by RBA, 2,618 of the RBA bars have a 'doppelganger' out there in the known universe of bars - with approximately 17,000 ETF bars known to have the same partial signature. Without the Serial Number to distinguish, it can't be proven some of those are the same bars - yet supplying the serial number could have proven conclusively that they are not, so why hide the information unless there is something to hide? For the scientific minded out there, apologies I have no idea how to express the probabilities involved > there are 33 different refiners in the Australian bars mix, additionally the partial signature has 4 digits for Assay, plus 7 significant figures for Weight, which (naturally) tends to be concentrated around the 400oz mark as you can see in the histogram below.

Histogram showing the 240,000 bars we have on record.

The released emails relating to the audit don't give much encouragement for the idea of being 'allocated'.

"Each bar is marked with a unique BoE number"

Maybe that was what BoE & RBA got confused with and why they didn't supply the serial numbers. If that were the case then the mixup would be gross incompetence in the whole matter. Definitely the BoE should not disclose their own internal tracking number since it would reveal detail about how the bank functions.

"it will be opportune for the gold safe custody arrangements between the RBA and the BoE to be formally clarified, including the frequency of any future gold verification checks." & "As a first time review of the Bank’s gold holdings " & "it would be beneficial during the visit to obtain a high level understanding of the relevant safe custody, security and stocktake processes at the Bank"

WTF, OK most of the time the gold was leased but recently they have had a lot of physical stored with BoE and RBA didn't bother to enter into any formal storage agreement and audit checks? A trusting bunch, these central banker mates.

"we will now allow inspections of a suitable random sample of your bars" & "... would remind you that the bars will need to be chosen from similar areas to the bars we will already be working with"

OK I get it they are a working vault facilitating clearing between LBMA members and having to have clients pop in all the time auditing hampers operations, but this is interesting in that for a vault which only serves LBMA and central banks, they are so busy they previously did not have the time to allow this - either there is a lot of internal movements and shipments in/out, or perhaps it just reflects bureaucratic inefficiency. But honestly, why the restrictions on bar selection? Auditing best practice is to do a random sample from a list and then check, here they seem to be restricting the list from which to do a sample. This seems indicative of bars being all over the vault (not in a single stack - BoE from their pics do not run caged/physically segregated storage).

Last page: Matthew Carter | Manager, Currencies & Gold cannot "give you a definitive answer to your question about detailed inventories of the Bank’s gold bars" because they "receive a monthly gold balance registry from the Bank of England" ie just a total number! "any detailed inventories of gold bars we may have would be provided by the Bank of England" in other words as the RBA reduced its gold loan book from 78t in 2004 to 4t in 2009 they never got any bar list!!! Did the BoE actually allocate bars to RBA or was the RBA running an unallocated account?


Warren James said...

Victor the Cleaner (VtC) correctly points out via twitter that the amount of gold we are haggling about here is very small (in the grand scheme of things), and that Australia does have a lot of in-ground gold which can be taken by force if required. It's quite true, our rich mineral deposits will most likely buffet us in an event like a global financial reset. I haven't heard of the law he mentioned but it sounds right.

It doesn't change my view of central banks whose basic mode of operation is to enrich one party at the expense of another.

Bullion Baron said...

That transcription closely resembles the phone manner I've experienced when engaging with the RBA, which adds further weight to it's authenticity ;)

I like to think central bank officials might obfuscate, misdirect, confuse, withhold information or jawbone when communicating with the public, but not outright lie to them (which I think providing a bar list would be if the Gold is held in unallocated form).

I've just emailed the RBA again today to see if I can get it confirmed that the unique BoE bar number is different to the refiner bar number (and if so why can't the refiner bar number be released). Hopefully they will be able to answer promptly as a general Q&A rather than resorting to the usual drawn out FOI process.

jdsquicktrader said...

Dude. I love this site. Nice work.

As for the probability question can't you just use a simple formula like 2,618/6,313 = 41.47% doppleganger ratio.

Then take a random sample of bars (6,313 of them) "in the know universe" and see how many have a doppleganger and give us the percentage.

What am I missing

Warren James said...

@jdsquicktrader, you're right > that's a good forumla. Applying the same to the known universe of gold bars gives a figure not supporting my argument:

i.e. of ~241,000 gold bar signatures, 37,979 share have a partial signature overlap (which together make up ~168,000), suggesting a doppelganger ratio of 70%.

The inverse may be a clearer way of expressing it > we can say the Australian sample has 58.53% unique partial signatures when compared with the known universe, which in turn has a 30% unique partial signatures when compared with itself.

There are a also whole stack of variables involved which can completely skew these comparisons - e.g. the variety or uniformity of bar pours between different refiners or the fact that the Bank of England gold bars universe is somewhere in excess of 450,000 gold bars (nearly double our database figures) .. my main point is that the (omission of) Serial Number is the critical difference. I would have preferred to write an article which stated proudly 'I verified the australian gold holdings are not represented in any ETF that we have records for', but the fact they involve themselves in such jiggery-pokery when it seems completely unecessary, stinks to high heaven.

jdsquicktrader said...

isn't 37,979/241,000 = 15.76% doppleganger rate

or even if you adjust for the duplicate signatures

37,979/(241,000-37,979) = 18.7%

Seems to me the RBA/BOE rate is why high compared to your data. Unless I'm miss understanding your definitions.

Warren James said...

Ah, yes @jdsquicktrader you're right -- If you only took unique partial-signatures in the universe then you get 111,566 bars .. and then you can say that 37,979 of those are known to have at least one other partial-signature doppelganger, that gives a 34% rate for the universe (compared with itself), compared with a 41.47% ganger rate for the RBA/BOE bars.

Not sure if it helps, here's a little more background for the math part to demonstrate the complexity and show there are a few different ways to present the same data: Because of some uniformity with a single 'pour' from a refiner there are actually quite a few bars from the full set of 241,000 which all match on Refiner, Weight and Fineness (but obviously differ on serial number). The record is held by 'Metalor USA Refining Corporation' which has 3,164 bars which all have a fineness of .9999 and a gross weight of 400.075 oz. The next highest is 'Johnson Matthey Hong Kong Limited' with 1,054 bars all fineness .9999 and weight 402.550 oz, and so on (a good example of why presenting a bar list without Serial Number is just playing silly-buggers).

Motley Fool said...

Are you seriously considering this audio to be authentic?

Warren James said...

@Motley, this material is of course presented with more tongue-in-cheek than a french kissing contest at an undergrad campus. Best fun I've had in years. (er, the article I mean, just to be clear).

The opinions and data is real though. To err is human, but to screw things up really badly you need a Central Bank - SNB recent activity shining example of some of the comments expressed in this thread.

Gary said...

I'm sure the RBA are merely confused, just like poor old Costata. Here's a link to a recent tweet of his:

and his abbreviated copied snippet from the Kitco article re the Swiss Franc:

'"overvalued..appreciation..likely 2 be fully, or even largely, reversed.”

Here's the Kitco article link (from the tweet):

Here are their words (which they quote from UK-based research firm, the Peterson Institute of International Economics):

'“Our view is that even if the franc now appears overvalued on some metrics, its appreciation is unlikely to be fully, or even largely, reversed.”

Seems that we have a missing 'un'.

Which makes one wonder, is that just careless typing again by Uncle C, or a lack of understanding (reading Kitco for news/views is evidence of being somewhat desperate I think), or just plain old lost-in-the-dark confusion?

Irrelevant really, but I hope his next post here is proof-read by the staff, to ensure STFU's high standards are maintained.

Great to see gold, and the miners up, and GLD refilling as demand in the West picks up again. Everything is changing, yet some things remain the same.

Gary said...

In the fine tradition of STFU, I'll highlight another gold 'expert', who just makes it up as he goes along.

Just a few short months ago he was (like many others of his ilk) predicting gold prices would follow oil down, and that the paper gold market would implode blah blah blah.

Now he's sounding all experty on why the gold/oil ratio has expanded to 25, with gold and oil moving in opposite directions. A very fluid view for sure, much like that Bo Polny bloke.

So many charlatans around. At least he's not selling anything, just his credibility, which diminishes by the day.

AdvocatusDiaboli said...

Hi Gary,

"who just makes it up as he goes along."

jep, ECB is different and will be buying gold, right?
Let's face it: The Euro is such a fucked up currency, right now it is even losing against the Ukraine Hrywna since the great Super Mario did it again.
Greets, AD

Gary said...

Hello AD.

No doubt you were pleased to see the value of your yellow rocks (in Euro terms) rising in the past few months?

You have your Euro prejudices, and I understand that this QE plan will disappoint many, me included, as it is a pointless exercise.

But the lack of risk sharing means that national central banks will end up footing the bill in the case of defaults.

I can see that being politically very difficult, imagine the reaction to gold/other reserves being transferred to the ECB from the NCBs in the case of sovereign defaults. Potentially revolutionary?

I still expect a QE bid for gold eventually by the way, maybe in a couple of years: the final option to recapitalise the world.

AdvocatusDiaboli said...

Hi Garry,

Yes, my useless yellow rocks did in fact rock. Also my german stocks did rally. Problem with that is, socialist Europe taxes my nominal stock gains by ~28% on liquidation. So if the € drops 3% and my € nominated stocks rise by 3%, I lost on holding stocks ~1% in terms of purchasing power although can enjoy the money illusion.
So I rather have my €s rally than equity. Okay, I am lucky at least not being taxed on gold.
So should I say obidiently "thank you" to the etatist cleptocrats for that one I might keep?

Looking at what's going on, I say the term "saving all debts, even buying it outright with cash" fits Europe perfectly.

Wanna read an amusing interview with an econimically illitrate dumbass friend of Bernanke&Krugman?
Greets, AD

Gary said...

I'd already read the Draghi interview AD, he's not so bad.

You are hedged against all eventualities it would appear, so sit back and enjoy life. The financial mess the world is in is going to rumble on for decades, hopefully the world will eventually turn away from socialism, but no guarantees, we're a stupid species.

costata said...


All the best for 2015!

Bob Moriarty maintains that the US dollar chart is displaying a parabolic blow-off top (here):

Does any of your TA agree with this assessment?

(FWIW I'm interpreting this rise as a USD short squeeze in the carry trade and Eurodollar shadow banking credit market - compounded by profound mistrust of the Euro at present.)


AdvocatusDiaboli said...

Hi Gary,

yes, probably you are right, shouldnt bother and enjoy life.
I just get really upset, if somebody pisses on ones head and tells you that it's raining, and Draghi is one of those. I guess maybe I should be happy in case he is just a big fat liar&actor, but maybe he is really that stupid (probably, looking at the dudes he hang out at the MIT), oh boy than we are in some real mess.
Greets, AD

Gary said...


Time to build an Ark!

Good luck to us all.

GM Jenkins said...

Thanks costata! Happy 2015 to you as well, and all Screwtape readers. I've been on sabbatical from STFU, as I have a PhD defense approaching at another institution and haven't had time to finish posts I've been working on. I'll be back soon.

Warren James said...

@GM, good to hear from you :)

For those still dwelling on this article, got a small update from Bullion Baron - which I hope I can break here although it's his research - he did a follow-through on the RBA to ask which 'identifying number' was used in the data - i.e. the question of whether the serial number got confused with the internal number. It turns out the RBA never received 'serial number' information.

What a joke! So the industry standard for LBMA good delivery is Serial+Refiner+Weight+Assay, and the BoE leave out the serial number. Not only that, but the RBA don't question the omission. Without that key bit of differentiating information it isn't possible to track or trace the bars in any meaningful way. This appears to be the intent of BoE. Big discussion with Bullion Baron about this and debate whether the BoE actually tracks serial number as part of their data.

Definitely they store the information > Serial Number is always present in any other industry 'weight list'. Makes you wonder about the quality of the audit which was conducted - open for abuse since the key information is controlled by Bank Of England.

'He who has the gold, makes the rules'. Lest we ever forget our position as the muggles of the financial world.

... also the larger question - if an entity claims to have allocated gold but lacks one important detail which would show that it is indeed fully allocated, then is it actually allocated?

Gary said...


I reckon your gold price predictor ( 10 year USTs yield/silver) actually hit the upper line a little while ago, or got close enough to it, and that signalled the low in the gold price.

The ratio has been under 100 recently, now at 111.

Look forward to an update of the chart, perhaps you could make it available as a public chart on Stockcharts for platinum subscribers like me?