On and off for over five years now, I’ve been reporting on the existence or otherwise of (1) the gold the US Federal Treasury claims to have stored securely at various points across America and (2) a fix/manipulation scam on the price of gold per se. When I first raised these points (along with thousands of other sites) in late 2006, we were all of us consigned by the commentariat of the day to those Outer Limits reserved for The Loonies.
Since that time, we have seen the mysteriously dramatic rise in the level of Chinese gold reserves, the admission by several central banks that they’ve been buying and selling the stuff below the radar, and the scandals involving manipulation of the Libor and Eubor rates which, on their own, make the claims of gold jiggery-pokery look considerably more credible.
During 2009, I reported a couple of times about major gold investors known to me personally who were having trouble persuading Swiss storage facilities to cough up the shiny metal, once those gold-bugs decided they’d like to shift it to somewhere less remote than Cuckoo-clock land. Over the last few weeks, we have seen various sovereign States (led by Germany) saying they’d variously like to audit and/or shift their gold reserves nearer to home. The US Federal Reserve’s delay in obliging its clients with sight and shipping of said stocks has gone from being mildly amusing via odd to alarming.
But now a new fraud has entered the frame.
For those who don’t already know this, tungsten has very nearly the same density as refined gold. Gold sells today at around $1740 an ounce, and Tungsten at $10 a pound. With a bit of judicious disguise, putting tungsten inside a gold bar can even fool an X-ray machine under certain circumstances. A Slog source in Austria is now alleging that Deutsche Bank ‘fulfilled’ one gold repatriation in recent years with the help of Tungsten. He further claims that some of this has now turned up in Asia.
However, here’s the killer: since hearing this rumour (actually, it’s rather more than that, but I have a source to protect here) I’ve made a couple of calls and read some well-argued websites on the subject of tungsten issues. One consistent feedback concerns the Chinese opinion on these bars.
Their origin is thought by Beijing to be the United States of America.
Forbes rubbished the tungsten-in-gold story last March, but from a commonsense viewpoint I was struck by the article’s (a) apparent inability to see beyond drilling and infilling as the method, and (b) the author’s unwillingness to see the problem as only likely to occur in smallish shipments. Late last September, however, Zero Hedge ran a Tyler Durden piece confirming that several smaller retail gold bars sold in Manhattan had been found to have tungsten innards. The ZH take on this event was that it might be part of yet another Fed Reserve attempt to impugn gold’s validity, and thus keep investors locked into the stock market, bonds and property.
But the thing I’m hearing about in this instance – while it could have the same Fed/Central Bank motive – is on an entirely different scale. Here we are talking about an Establishment eurobank alleged to have been caught short on a fulfilment order, and using the tungsten scam to fill the gap.
This is an entirely different criminal intent: not the somewhat crude attempt to con a retail greenhorn, but rather an well-planned and sophisticated ‘salting’ of the gold bars by a major bank….designed to fool even an expert engaged in approving the purchase for a large sovereign client. Here, using perhaps as little as 25% tungsten would be enough to make up the embarrassing shortfall.
There is no reason at all for anyone to see this as far-fetched. The SME scams pulled by RBS, and Libor manipulations carried out across the piece of Establishment banking, have been solid evidence in recent times of desperation on the part of those suddenly faced with a brave new world where Berlin wants all its gold back….but the gold isn’t there any more.
The ramifications of this go far beyond a pro-am retail fraud. First off, ultimate discovery of the scam is a certainty: so you’d have to be pretty damned desperate to try it on. And second, I do find it intriguing that these reports have popped out of the woodwork just when the ECB is thought to be planning some form of gold-backing for any eventual eurobond issues – should the eurozone survive. Trust me, if Mario Draghi is capable of pulling the stunts he’s been at vis-a-vis Greek bailout ‘money’, Bank of Greece money-printing, and bondholder subordination, then like most Goldman Sachs graduates, he’s capable of anything.
As I write, gold is trading at the upper end of $1746-1751 per oz.