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China Surreptitiously Acquiring Gold Via The Perth Mint?

<div dir="rtl" style="text-align: right;" trbidi="on"><div style="text-align: justify;">I've got a post up on the corporate blog addressing a comment by Jim Rickards in a recent Financial Sense interview where he said that on the dip in the gold price to $1,200 China bought 600 tonnes from The Perth Mint.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Also, a couple of weeks ago I did a corporate post answering this question from a reader, for those interested:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"If there is an event (why I would be buying precious metals as insurance for) that sky rockets the price of the metals what is the chance that I will be "paid" in fiat currencies rather than in the actual metals? Especially when the currencies are plummeting and the PMs are skyrocketing. If gold will be paid in paper isn't it paper gold?"</i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Apologies for the lack of posts on this blog, have been busy with work. There are a number of draft posts in the works that have been nagging me to finish.</div></div>

I've got a post up on the corporate blog addressing a comment by Jim Rickards in a recent Financial Sense interview where he said that o...

PM Bug forum comments on backwardation

<div style="text-align: justify;">Those who are not bored to death with the backwardation/gold bank run narrative may find my comments on this <a href="http://www.pmbug.com/forum/f2/there-gold-backwardation-not-2620/">PM Bug forum thread</a> of interest, which was in response to <a href="http://goldchat.blogspot.com.au/2013/07/shortodile-golddee-thats-not.html">this post</a> of mine. I've cut and past some of them below for the lazy readers, but to get the correct context of Mr/Ms Unbeatable's probing questions you need to read the thread. I'm working on some posts on GOFO/backwardation to further expand on my comments in <a href="http://goldchat.blogspot.com.au/2013/07/norcini-gold-is-not-in-backwardation.html">this post</a>.</div><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Hmm.... When he sees 400oz bars attracting a 'special premium' he  will let us know?The two biggest gold consumers India & China are paying a  $30+ premium an ounce over spot, a 600%+ increase over what they paid in  previous years!? </td></tr></tbody></table></div>The premium in India and China  is not for 400oz bars, but for smaller forms and particularly in India there are  import duties and other taxes that go into the premium. The demand in India and  China is high, but it is not translating into premiums for the raw wholesale  form (400oz bars).<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Hmm... When he sees bullion banks desperately bidding on Perth Mint's  refining output he'll let us know? </td></tr></tbody></table></div>My statement  was about bullion banks and 400oz bars. Your quote is referring to demand for  coins, two different markets. You are missing the whole point of my comment,  which is that retail level demand, premiums do not reflect a shortage of gold at  the wholesale level and a run on the fractional reserve bullion banking  system.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Hmm.. When he sees restrictions on how much gold can be bough he will  let us know? 'the Reserve Bank of India banned import of gold by domestic  consumers through bank credit' ' Gold coin and bar sales stopped in India'  'Pakistan temporarily bans gold imports' </td></tr></tbody></table></div>You are  misquoting again. The restrictions I was talking about was restrictions by  GoldMoney and Bullion Vault, not any restriction in any market. I picked GM and  BV because they buy 400oz bars for their pooled storage products. If there was a  shortage/run on the wholesale gold banking system then GM and BV would have  problems sourcing 400oz bars. They are not.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">But to be blunt (And as I think you know full well yourself), the  idea that you'll see the overt stress indicators that you suggest coming from  the bullion banks actions themselves is quite frankly absurd because the day  they show provable supply side issues is the day they default.  </td></tr></tbody></table></div>Nope, it is not a sudden event, it will build up  over time and signals will be given, see <a href="http://www.goldchat.blogspot.com/2010/07/degrees-of-distrust.html‎" target="_blank">http://www.goldchat.blogspot.com/201...strust.html‎</a> (that does  need some refinement but the basic idea is there). Bullion banks, just like any  bank, will do everything they can to drag out and avoid a run, they aren't just  going to throw their hands up at the first sign of trouble. Those "do  everything" will be gradual at first and will be visible to us in the wholesale  market who know what to look for.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Which is why I showed how each of the indicators are already clearly  manifesting themselves in the gold market. (& though you repeatedly try to  pretend that there is this massive separation between stresses in demand in the  retail and wholesale market, they are in fact completely interlinked.)  </td></tr></tbody></table></div>There is separation between retail and  wholesale. Most of the retail problems/premiums are driven by production  capacity shortages rather than shortages of raw gold or silver. For example,  during the 2008 financial crisis the blogosphere was going crazy about shortages  of silvers, particularly, yet the Perth Mint was shipping in 20 tonnes of silver  each week from London for about 20 weeks on end. Go and have a look at my blog  around that time.<br /><br />The indicators you mention are just indicators of  strong end user demand, not a run on the bullion banks nor any stress at that  end. India premiums reflect the restrictions the Govt has put on, something they  have been ratching up for a long time well before this talk of a run/stress and  driven by a CAD problem. It hasn't affect demand much at all - instead of the  shipments of gold we sell going to India they have suddenly started going  (demand coming from) dubai and thailand, funny that.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">1. In times of demand stress the bullion banks are the ones supplying  many mints with additional refining input never mind bidding on the output? </td></tr></tbody></table></div>Nope, got that wrong. US Mint, yes needs to get  metal from the market but the two other big ones - Canadian Mint and Perth Mint  - are refineries so they source their own metal and in fact have excess left  over after coining needs. Perth Mint refines around 6 tonnes a week and we use  10%, maybe up to 20% if lucky, for coin production. The rest we turn mostly into  kilo bars and then sell it to the highest bullion bank bidder - it is that  premium on kilo bars that tells us how desperate they are, in addition to where  it is going and what form, gives a lot of info.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">2. I'd imagine the bullion banks have preferential contracts in place  and ones that prohibit you, a Perth Mint employee from disclosing market  sensitive information, so I take your 'I will let you know' with a pinch of  salt. </td></tr></td></tr></tbody></table></div>We work with a range of bullion banks and  have no exclusive supply arrangements. While we have customer privacy  requirements, that does not stop us from making general statements about what we  are seeing. And there is no such thing as market sensitive information in  bullion - it isn't an equity.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">3. If the bullion banks were having issues, instead of people like  Perth Mint employees letting the public know about it, I'd expect them to go out  and try to convince people of the opposite - 'Don't worry there are not  wholesale supply issues' & shi*, look, here you are...  </td></tr></tbody></table></div>Actually, it would be more logical for us to  hype up shortages so that we could increase coin and kilo bar premiums and make  more profit. I've rarely seen any market comment coming out of the major  refiners talking about how crap demand is. Shortage hype is used by coin dealers  to 1. get people to buy now 2. pay excessive premiums. Perth Mint has a bit more  integrity and we stick to the facts. Why do you think Perth Mint and I get so  much crap on the gold blogosphere - because we are wrecking their sales  patter.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">So rather if I was looking for supply problems in the 400oz wholesale  market, I'd look for signs of additional central bank leasing, particularly the  Bank of England who are a key source of supply in times of stress. & shi*  look a story just in the last two weeks that the BOE may have leased up to 1300  tons in the 400oz wholesale market in the first half of the year  </td></tr></tbody></table></div>You are on the right track here, a run is about  liquidity, so the first action of a bullion bank experiencing a run will be to  lease/borrow gold (not buy), which should show up in increasing lease rates  (which has the effect of decreasing GOFO) - although lease rates are still quite  low compared to stress periods in the past but trending up.<br /><br />The 1300t  story is another beat up, see here <a href="http://www.screwtapefiles.blogspot.com.au/2013/07/bank-of-england-vault-floor-layout.html" target="_blank">http://www.screwtapefiles.blogspot.c...or-layout.html</a> the BoE  said that the figure that Alasdair relies on for his whole thesis cannot be  relied upon.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Or I'd look for signs that Bullion Banks are running short of supply  and/or are being forced to help one another out. & shi* look at how much of  JPM's inventory has been removed this year and also this story from just  yesterday </td></tr></tbody></table></div>Those sort of inter-bank transfers are  standard part of market clearing <a href="http://lpmcl.com/" target="_blank">http://lpmcl.com/</a><br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">But as these don't constitute hard evidence, & people like  Potemkin would say 'Rumours, words, stories...' I chose to bring up provable  supply side shortages &/or unprecedented demand in the gold market which is  of course what creates the wholesale market problems you are witnessing above.  </td></tr></tbody></table></div>Signs of increased demand and just signs of  demand, not a bank run and does not cause a bank run as the bullion banks just  act as a broker between buyer and seller and let price manage it. It is only  unallocated holders taking delivery that creates a run and possibility of  default. That shows up in lease rates and the futures/forward market  first.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Really!? How many hours do you think it will take from the time they  announce purchasing restrictions to Gold Money to the time they default? I think  you know that this is the very last thing they will do, if they don't actually  just default first. </td></tr></tbody></table></div>First sign will be premium  increases, that is the key signal. And it won't be explicit purchase  restrictions, more like delays due to "transport issues" etc.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">If there are demand stresses for gold, I think it's (painfully)  obvious that they would rather do their best to try cut demand from the biggest  gold consumer, India. (EDIT: Which is obviously why I brought up the  restrictions in India and outright temporary import ban in Pakistan as being  very indicative of shortages in the wholesale market.) As this would ideally  (For the bullion banks) have the effect of decreasing demand for their good  delivery bars in that market and also freeing up mint output sourced from the  mines & scrap, so that it could then be used to refine new 400oz delivery  bars for the bullion banks as opposed to coins and smaller bars for retail.  </td></tr></tbody></table></div>See my earlier comment on India. The Indian  restrictions aren't doing anything to stop demand, it is just being smuggled.  The Indian Govt actions are just about making their CAD figure look better to  financial markets.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>PMBug</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Bronsucheki, are you able to confirm or deny this claim (at least as  it pertains to the Perth Mint) from Bill Haynes?  </td></tr></tbody></table></div>No can't confirm it directly as we aren't being  given any 100oz (ex Comex) or 400oz (ex London ETFs) bars by bullion banks to  melt and recast into kilo bars. However, we are seeing good demand for our  refining output into kilo bars for shipment into China, Dubai and Thailand, so  the Bill and Tekoa reports fit in with that.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Hi Bronsucheki, thanks for taking the time to give such a detailed response and  for doing it in a pretty reasonable tone despite how confrontational mine was.  Also especially considering that you work & have considerable knowledge in  that area vs. me who doesn't.  </td></tr></tbody></table></div>No problem, don't mind being challenged. This time is different to 2008 and  certainly more stress, I'm just not sure there is a run on yet, but it is finely  balanced I think. We are seeing very high premiums on kilo bars, premiums we  haven't seen for a very long time.<br /><br />In addition, we did hear that 99.99%  purity 400oz bars were attracting a premium in London (but the normal 99.5%  purity wasn't). Mostly likely explanation for that was that 99.99% purity 400oz  bars could just be melted and recast into kilo bars (which are generally  preferred to be 99.99% purity in Asia/India) without needing refining.  Screwtapefiles blog did some good analysis on the number of 99.99% vs 99.50%  purity and what was being withdrawn from GLD, but nothing conclusive  yet.<br /><br />So certainly this is all very unusual and you're right to be  cautious.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">So I'm surprised during the period of unprecedented demand this year  that you didn't have to source any additional supply from the <acronym title="London Bullion Market Association">LBMA</acronym> in London again?  </td></tr></tbody></table></div>Perth Mint is primarily a gold refiner and we  get silver as a by-product of that gold refining. Normally the silver was enough  for our coining needs but in 2008 the demand was so high we had to source silver  externally. Since then we have picked up some more silver refining so have  enough silver now, even with higher demand.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">You also say the majority of your non coin production is being made  into Kilo bars for the highest bullion bank bidder. But I was under the  impression that the bullion banks dealt in the larger 100 & 400oz bars &  that the 1 kilo bars would be more for the retail investment market?  </td></tr></tbody></table></div>1kg = $40,000, not exactly "retail" by most  definitions! Bullion banks deal in any size - they cover all markets. 100oz gold  bars are primarily a US market size. 400oz bars are usually used for investment,  bulk long term storage, they are not really convenient for use in  industry/jewellery/mint as you need a big caster to melt 400oz, plus 400oz is  99.5%. So, particularly in Asia, the smaller 1kg in 99.99% purity is preferred  by jewellers. Plus when I talk about kilo bars wholesale, that is selling in  half or one tonne lots, eg $20m to $40m deal size.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">But the import taxes/duties in India are 8% that would be $104 an  ounce, far higher than the $30 premium the media is using. Doesn't this mean  that the $30 premium is the premium they're paying prior to import duties/taxes  being applied? </td></tr></tbody></table></div>Yes correct, the $30 would not  include that import tax, but I believe there are some other duties/fees and  often bullion banks selling into distributors in India include shipment and  finance deals in the price, so I'm not sure the $30 is the full premium. However  there is still a large premium in that market reflecting the restrictions and  driving the smuggling, so I probably pushed my point too hard there. The premium  is also highly volatile as the Indians are very price sensitive.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">this is perhaps the first time we have seen this happen laterally  between two vaults </td></tr></tbody></table></div>Has ZH been following these  comex reports for the past ten years? I doubt it. I am sure if I had the time  and went through all the reports I would be able to find this happening many  times. One also needs to consider that if a BB is doing other  movements/transfers as well as to another BB's vault, that is not going to be  visible as the aggregate number would combine both. So one cannot say this is  unusual.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Today I see another negligible 4k ounces went from Scotia to JPM and  JPM converted a massive 70k ounces from there 360k registered total and moved it  onto their 100k eligible total. </td></tr></tbody></table></div>The transfer  from registered to eligible is why one needs to add both stocks together and  compare that to open interest, which is what I did in <a href="http://www.goldchat.blogspot.com.au/2013/04/comex-stock-drawdown-single-most.html" target="_blank">this post</a>. The current coverage ratio for gold is 17.7% and  silver 24.5%. Looks like plenty of metal for redemptions.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">Personally I think at the very least a Bullion Bank run is in  progress at JPM and I think even though the writing is on the wall, the others  are just trying to help JPM make it to some pre-determined end date.  </td></tr></tbody></table></div>How long do you think banks runs last for? I  note no commentator is really putting a date out there, except <a href="http://www.jsmineset.com/2013/07/22/comex-must-change-its-delivery-mechanism-soon/" target="_blank">Jim Sinclair</a> "because of the continued fall in gold inventory  that within in 90 days or sooner the Comex must change its delivery mechanism".  Personally I think by mid-Oct Comex will still be going on as per normal and the  BBs will still be around.<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">My question to you is, having seen how these unusual transfers have  continued since my original post do you still think  </td></tr></tbody></table></div>As noted above about ZH, I question whether  there is any proof these are "unusual transfers".<br /><br /><div style="margin: 5px 20px 20px;"><div class="smallfont" style="margin-bottom: 2px;">Originally Posted by  <strong>Unbeatable</strong>:</div><table border="0" cellpadding="6" cellspacing="0" style="width: 100%px;"><tbody><tr> <td class="alt2" style="background-color: white; border: 1px solid rgb(0, 0, 0);">My question to you is would you agree that the banning of buying gold  on consignment did have the effect of considerably decreasing India's overall  physical gold demand for 1-2 months (incl. smuggling)?  </td></tr></tbody></table></div>Yes, as India had a relatively open gold import  system the sudden rule changes crimped legitimate imports but the smuggling  network was not in place to take up the slack so that would have had the net  impact of restricting demand. We have recently seen a pick up in demand from  other countries which tells us smuggling has started back up.<br /><br />I disagree  with Eric Sprott that western central bankers "called up" India and asked/told  them to do these import restrictions to help them out. I agree more with <a href="http://www.livemint.com/Companies/pqNgQUDoOPsQCli4EgZLMM/Jim-Rogers-Why-Im-shorting-India.html" target="_blank">Jim Rogers</a> on this "Indian politicians who suddenly blamed  their problems on gold. The three largest imports to India are crude oil, gold  and cooking oil. Since they can’t do anything about crude and vegetable oil, the  politicians said India’s problems were because of gold, which, in my view, is  totally outrageous. But like all politicians across the world, the Indians too  needed a scapegoat."

Those who are not bored to death with the backwardation/gold bank run narrative may find my comments on this PM Bug forum thread of interes...

Can US Govt seize Perth Mint client gold?

<div style="text-align: justify;">You may be interested in <a href="http://gyroscopicinvesting.com/forum/index.php?topic=3173.msg43451#msg43451">my response</a> to this comment left in the <a href="http://gyroscopicinvesting.com/forum/index.php?topic=3173.0">Permanent Portfolio Discussion Forum</a>:</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><i>"Perth is good, but I trust Australia less than Uncle Sam. ... If I put my assets in Australia, I not only need to worry about Australia's government seizing my assets in times of their need... but I also have to worry about the US State Departments ability to basically extradite the assets back (and me personally) to the United States under the guise of fraudulent transfer or tax evasion when Uncle Sam is in need."</i></div><div style="text-align: justify;"> </div><div style="text-align: justify;">It in I discuss the one occurance we have had of a request by US authorities for a client's gold to be handed over to a US court.</div><div style="text-align: justify;"> </div><div style="text-align: justify;">Unrelated - this is my new favourite blog <a href="http://www.papermoneyshield.com/">Paper Money Shield</a> who's mission is <i>"Defending paper money from the rigorous attacks of precious metal advocates."</i></div>

You may be interested in my response to this comment left in the Permanent Portfolio Discussion Forum : "Perth is good, but I trust Au...

Shortage followup questions

<div style="text-align: justify;">Some good questions from a <a href="http://forums.silverstackers.com/topic-28902-expect-precious-metals-shortages-during-the-next-crisis-page-1.html">thread</a> on my shortage interview at silverstackers.com forum, cut and paste below:<br /><br />Bron<br /><br />In that interview I was sort of covering the material in <a href="http://forums.silverstackers.com/topic-16585-perth-mint-10oz-and-1kg-bars-not-available-page-4.html">this discussion</a>.<br /><br />The summary text "invest large amounts of capital towards ramping up production" I think got mixed up, what I was saying was WHILE production has been expanded, it is not enough.<br /><br />When push comes to shove, Depository clients will get preferential supply for collection requests as we have a legal obligation to make delivery whereas we don't have a legal obligation to sell coins to someone off the street, so to speak.<br /><br />Gino<br /><br />And yet, even though there were two month delivery lead times, it didn't move the price of silver at all in 2008/09. there was no price spike to reflect the demand pressures in the investment market and the apparently constrained supply. It was very interesting as an investor participating and not at all what one would expect. But then the reason was it wasn't the raw material that was in short supply, only the blanks for coins. Although I recall delays on bars as well.<br /><br />So is the point here that there may be physical delays, but don't necessarily interpret that as a resource availability issue? But if the price does move, what would it mean? Does the price just come down to the paper markets and the manipulations of it by TPTB?<br /><br />Bron<br /><br />The thing about rationing or high premiums is that it takes pressure off the underlying wholesale market. For example if people are paying 40% premiums for silver coins when the normal is 10% premium, then $30 out of every $140 spent is going to retailers/mints as extra profits rather than buying more silver. If mints were able to keep up then of that $140, $130 would be going to buying (or bidding up the price) of silver.<br /><br />Excess premiums, whether it is in coins or say PSLV, just means less ounces are being bought. That is why I don't think high premiums are anything to celebrate.<br /><br />The price is driven by both the physical market and paper market, which is more dominant changes over time.<br /><br />southerncross<br /><br />Would you not agree tho that paper is the dominant market?  Say for example just as a thought exercise that just silver alone was for some unexpected reason deemed only acceptable in it's physical form as a means of trade and that all the phantom paper Silver disappeared overnight due to some sort of black swan event.<br /><br />People who have an PMDS for example cant just pick up the phone and buy X amount instantly and those sorts with unallocated accounts etc cant just use their phone to "say" they actually own it, they have to physically produce it.<br /><br />Bron<br /><br />Certainly paper often has the upper hand, but many desk-based commentators who aren't in the markets don't realise how much physical is also traded. Blogger FOFOA has a theory that since bullion bank unallocated accounts are fractionally backed bullion bankers are particularly concerned when the physical market starts to suck out metal, draining their reserves (which if left unchecked could take too much physical and result in a bullion bank run). His theory is they push the price UP (not down) as that means the same dollars buy LESS ounces, taking pressure off their reserves. I hope this gives one example of how complex the physical vs paper dynamics can be.<br /><br />Not sure I understand your point about PMDS. If we went to a physical only market then we would only sell to a PMDS client if we could get/had physical silver.<br /><br />southerncross<br /><br />Now I know it's a far flung what if and an extreme example, and I am not by any means saying that the Perth Mint itself is selling more Silver on paper than what it physically holds, but there are many examples around the world of paper precious metals magically teleporting from or too certain vaults with nothing more than the push of a keyboard and a few typed lines of evidence to say that they actually exist. Literally millions of ounces that would need a convoy of armoured car's and associated security personnel to transport that don't actually happen in the real physical world.<br /><br />Bron<br /><br />It is a common misunderstanding that the ETF allocations involve physical movement. As most of them store their metal in London, all that is happening is that silver already in the vault (which belonged to someone else who sold it to a bullion bank) is just sold to the ETF authorised participant and they just change a computer record saying that bar in the vault now belongs to the ETF AP (who then transfers title to the ETF trust).<br /><br />southerncross<br /><br />Q: Would you as a personal investor in precious metals trust anyone else apart from the Perth Mint if you invested solely in paper or unallocated  Precious Metals ?<br /><br />Bron<br /><br />It all comes down to the custodian. You either trust them or not. If you don't then not even allocated will be safe. Regarding unallocated, I don't think apart from ourselves and Kitco that there are many who explicitly state that their unallocated is 100% backed, and that is really only possible for businesses which have physical as part of their business. If you are buying unallocated from a bank, then very high chance it is being lent in some form as that is what banks do.<br /><br />southerncross<br /><br />Sorry Bron two questions actually, And this one go's back to the statement I quoted of yours above. Q: Do you think the paper market is manipulated by able bodied self interested parties? Again I ask this with no reflection on the Perth Mint as they are not a Bank or associated with the rise and fall of the stock market etc just on your statement on the physical and paper market.<br /><br />Bron<br /><br />I would not be surprised if the metals markets are manipulated, but as we are not traders in the big paper markets (eg COMEX) we don't have any evidence one way or the other. However I don't believe the metals markets are suppressed, which I distinguish from manipulation (which is short term). Suppressed means the price is kept lower over a number of years. Those who think this way don't appreciate (or is that respect) the power of the physical market, by which I mean to suppress you ultimately have to supply physical to the market and there is only so much above ground in the hands of the central bankers.<br /><br />Black_Sun<br /><br />Yes, all metal is NOT held physically at PM... all explained in goldchat.<br /><br />Bron<br /><br />To clarify, unallocated is backed by physical in our operations in Perth, but also by some physical in transit and temporarily sitting in overseas warehouses on its way to distributors, and by a bit of unallocated held with bullion banks (which is converted to physical on a regular basis). If you're not comfortable with the unallocated business model then go with allocated. 85% of Depository clients (by ounces) hold unallocated, the rest allocated.<br /><br />Matthew 26:14<br /><br />"Bron Suchecki, who's in charge of strategy for the famed Perth Mint, is warning all precious metals investors that the next crisis will lead to heightened precious metals demand so expect shortages and mint rationing. This is exactly what happened in 2008, and the next crisis could very well be worse." Curious statement.  In 2008 the ass fell out of silver while there was a supposed physical shortage? Defies logic and economic norms.<br /><br />Bron<br /><br />You're confused because you're not using precise terminology. Restated: "In 2008 the ass fell out of silver due to selling by leveraged paper players needing cash to pay for other losses, while there was a physical shortage of RETAIL sized coins and bars." In fact, the leveraged paper selling, because of arbitrage, would have resulted in associated physical wholesale sized silver (ie 1000oz) bars coming into the market. This is why we didn't have any problem getting hold of 1000oz bars out of London during 2008 even while we were maxed out in the factory making coins.</div>

Some good questions from a thread on my shortage interview at silverstackers.com forum, cut and paste below: Bron In that interview I was s...

Financial Survival Network

Been a busy boy this week, click here for my interview with Kerry Lutz. Starts off with questions about the Perth Mint and the Certificate P...

Has Gold's Uptrend Been Broken?

I have a post up on the corporate blog featuring a Sharelynx log chart of the gold price. There is also a very good video of why gold was ...

One Tonne Coin

<div style="text-align: justify;">It has been killing me having to keep this under wraps <a href="http://www.1tonnegoldcoin.com/">www.1tonnegoldcoin.com</a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The idea was conceived by Acumen Design as part of their pitch to win the contract to renovate our shop and exhibition. I ran that project until recently and I loved the idea but it was considered impossible (maybe because I wanted it to be 3 tonnes, which would have given it about 1.5m or 5ft diameter). It was our CEO, Ed Harbuz who really got behind it and challenged our guys to work out how to do it, saying that if the Egyptians could make <a href="http://www.akhet.co.uk/tuttreas.htm">Tutankhamun's gold coffin</a> then surely we could do the same with modern technology.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A few trial runs were made in smaller sizes to get the right mold material and to solve problems dealing with that much molten metal, eg thermal shock. My favorite part of the making video is using a router to cut in the milled edge serrations - if you ever want to "work" pure gold apparently normal wood router bits work just fine.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A silly indulgence to out do the Canadian Mint? Probably, but it will generate some nice publicity and draw tourists to our exhibition and shop so we'll recover the cost of fabrication in time.</div>

It has been killing me having to keep this under wraps www.1tonnegoldcoin.com The idea was conceived by Acumen Design as part of their pitch...

Closing Unallocated

<div align="justify">In the entire time I have worked in the Depository business (since 1998) through the many times I have explained our unallocated "business model", the one thing that has surprised me is no one asked a very simple question, a question that cuts to the core and would reveal whether the Perth Mint had any integrity and whether we were lying about unallocated:<br /><br /><em>"So if it is funding working inventory, you will have to close it at some point, yes?"</em> <br /><br />That point has been reached with silver as announced on the <a href="http://www.perthmintbullion.com/blog/blog/11-03-30/New_Pool_Allocated_Silver_Storage_To_Replace_Unallocated.aspx">corporate blog</a>. Gold will follow in due course, possibly quite quickly once people realise the best storage deal in the world cannot continue forever.<br /><br />You would not be surprised to know that our Certificate Approved Dealers were not overly happy about it - which business wants to stop selling its best product line - but it could not go on forever.<br /><br />Of course the move has raised questions, and I'm currently managing four discussions on it (<a href="http://www.caseyresearch.com/gsd/edition/gold-now-thats-track-record">Ed Steer</a>, <a href="https://www.kitcomm.com/showthread.php?t=79045&page=3">Kitco</a>, <a href="http://goldismoney2.com/showthread.php?15614-Perth-Mint-to-End-Free-Silver-Storage">Gold is Money</a>, <a href="http://forums.silverstackers.com/topic-7531-perth-mint-to-close-unallocated-silver.html">SilverStackers</a>).<br /><br />This move should now raise another important question, but I'm not going to wait in case no one asks it:<br /><br /><em>"So if the West Australian Government is on the hook for the Perth Mint, surely there is a limit to how much they can guarantee, so therefore a limit to Depository?"</em><br /><br />Answer is yes, at some point Depository will also close Pool Allocated and Allocated. When is an open question depending on how fast metal flows in and what happens to the gold price. But the day will come. The Government does not have the financial capacity or willingness to guarantee massive precious metal liabilities.<br /><br />This suits me fine and should suit our clients, as the bigger you are the bigger the target - theft and political.<br /><br />Many people just don't get this about the Perth Mint. It is not some money hungry management team looking to take on leverage and grow for the sake of growing and bonuses. It is conservative and about looking out for the interests of its clients. When we end up closing the whole Depository business to new clients, maybe the message will get through. Problem is it will be too late for some.<br /><br />PS - an excellent <a href="http://www.howtovanish.com/2011/03/liberty-dollar-trial-and-coin-values">analysis</a> and history of the Liberty dollar case.</div>

In the entire time I have worked in the Depository business (since 1998) through the many times I have explained our unallocated "busin...

Coin & bar sizes

Below is a doc with actual (approximate) sizes of the Perth Mint's coins and bars. Consider that these coins and bars, which fit on an A3 page, are worth over $200,000. A great example of the "value density" of gold.<br /><br /><a href="http://www.scribd.com/doc/34411510/Perth-Mint-coin-bar-sizes" style="margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block; text-decoration: underline;" title="View Perth Mint coin/bar sizes on Scribd">Perth Mint coin/bar sizes</a> <object data="http://d1.scribdassets.com/ScribdViewer.swf" height="500" id="doc_661199145496932" name="doc_661199145496932" rel="media:presentation" resource="http://d1.scribdassets.com/ScribdViewer.swf?document_id=34411510&access_key=key-zh59t264inlk70pix1z&page=1&viewMode=list" style="outline:none;" type="application/x-shockwave-flash" width="100%" xmlns:dc="http://purl.org/dc/terms/" xmlns:media="http://search.yahoo.com/searchmonkey/media/"> <param name="movie" value="http://d1.scribdassets.com/ScribdViewer.swf"> <param name="wmode" value="opaque"> <param name="bgcolor" value="#ffffff"> <param name="allowFullScreen" value="true"> <param name="allowScriptAccess" value="always"> <param name="FlashVars" value="document_id=34411510&access_key=key-zh59t264inlk70pix1z&page=1&viewMode=list"> <embed id="doc_661199145496932" name="doc_661199145496932" src="http://d1.scribdassets.com/ScribdViewer.swf?document_id=34411510&access_key=key-zh59t264inlk70pix1z&page=1&viewMode=list" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="500" width="100%" wmode="opaque" bgcolor="#ffffff"></embed> </object>

Below is a doc with actual (approximate) sizes of the Perth Mint's coins and bars. Consider that these coins and bars, which fit on an A...

What happens if Perth Mint becomes insolvent?

<div align="justify">Perth Mint Depository was recently asked the question below and I thought you may find my answer of interest.<br /><br /><i>“Should Perth Mint become insolvent, for whatever reason, do clients receive gold or cash? Also, what is their seniority in terms of the Mint's liabilities?”</i><br /><br />The usual definition of <a href="http://en.wikipedia.org/wiki/Insolvent">insolvency</a> means cash flow insolvency, that is, unable to pay debts as they fall due. In that sense the Perth Mint itself can never be insolvent, because it can always borrow funds from its 100% shareholder, the Government of Western Australia. When one asks what happens if the Perth Mint is insolvent, one is really asking what happens when the Government is insolvent, which is really another question.<br /><br />As Wikipedia says, <i>“a government cannot be insolvent in the normal sense of the word. Generally, a government's debt is not secured by the assets of the government, but by its ability to levy taxes.”</i> The question the client asked was flawed in the sense that it was trying to analyse/assess the Perth Mint as if it was a distinct corporate entity standing on its own. While it is a commercially focused entity, it is nonetheless an extension of the Government and as section 4(3) of the <a href="http://www.slp.wa.gov.au/pco/prod/FileStore.nsf/Documents/MRDocument:15504H/$FILE/GoldCorpAct1987_04-b0-01.html?OpenElement">Gold Corporation Act 1987</a> says <i>“is an agent of the Crown in right of the State and enjoys the status, immunities and privileges of the Crown, except as otherwise prescribed.”</i><br /><br />Having dealt with the cash flow issue, there is still the case of a balance sheet insolvency, a nice way of saying the Mint has lost the gold “for whatever reason”. Now the reason is important because if it is theft, then the Mint will first go to Lloyds to claim on its insurance policy. Only if they fail to pay does the Mint have a problem.<br /><br />An alternative reason is that unknown to Government, the Mint never bought gold with the money clients gave it, in other words went short the gold price. In this case we are talking about fraud as that is contra to what <a href="http://www.perthmint.com.au/investment_invest_in_gold_storage_options.aspx">they say they do</a> <i>"The Mint purchases an ounce of precious metal from the spot market for every unallocated ounce it sells to clients. Accordingly every unallocated ounce is 100% backed"</i>. The idea the Mint would want to keep client cash and not buy gold is one I consider lacking in any commonsense, as discussed in <a href="http://goldchat.blogspot.com/2008/12/mint-has-no-gold-again.html">this blog</a>.<br /><br />Anyway, lets assume a shortfall in gold to back Depository liabilities. If the loss is small, the Mint would book the loss and if larger than cash reserves, would borrow the necessary remaining money from the Government to buy the replacement gold.<br /><br />However, if we were talking about a huge loss, say $500 million, then one isn't going to be able to sneak through a loan from the West Australian Treasury. In that case <a href="http://www.perthmint.com.au/investment_invest_in_gold_government_guarantee.aspx">Clause 22(1)</a> of the Gold Corporation Act 1987 is invoked, which states that <i>"The payment of the cash equivalent of gold due, payable and deliverable by Gold Corporation, the Mint or GoldCorp under this Act and all moneys due and payable by Gold Corporation ...  is guaranteed by the Treasurer, in the name and on behalf of the Crown in right of the State."</i> This put the Government on the hook for any loss at the Mint.<br /><br />Now the interesting wording is "cash equivalent", which gets to the rub of the client's question. This wording, I guess, was put in because a government's power to tax can only be in terms of money, therefore its obligations have to be expressed in monetary terms.<br /><br />In practice what would occur is that the Mint would, as soon as it knew about the loss, work out the market value of the lost gold, request that "cash equivalent" from the Government, and immediately buy the replacement gold. The end effect is that the client would receive gold, not cash.<br /><br />As to whether the Mint would be able to obtain sufficient gold, consider that it refines around 300 tonnes per year, say $13 billion. Total Depository liabilities are a bit over $2 billion (which is not all gold). Either way no problem getting hold of physical.<br /><br />Ultimately, when you deal with the Perth Mint, you are taking an exposure to the Government of Western Australia. One may then ask can the Government handle a large gold loss. Again, consider the $13b worth of metal refined each year. All the Government has to do it apply a special "Perth Mint stuff up royalty" on gold production.<br /><br />Consider also that it is near impossible for there to be a loss of the entire $2b, either as theft or fraud. With theft they would have to clean out the entire operation at both city and airport sites, including semi-finished product and dissolved gold in chemical solution mid-refining, for example. I can't see how even Hollywood could come up with a plausible plot for that gold heist. Plus we have to have the insurers renege as well, remember.<br /><br />In the case of fraud the management simply cannot not have bought no metal with client funds, as that would mean there was not one ounce of physical gold in the mint or refinery. Just a little suspicious wouldn't you think and not what you want if you are trying to pull off a fraud.<br /><br />So lets assume half of it is lost, $1b. Government could fund that with a five year 1.5% "Perth Mint stuff up royalty" on annual gold production. That isn't unrealistic considering that the current royalty is 2.5%.<br /><br />I think the question is not what would happen if there was insolvency, but whether insolvency is even realistic, considering a) the likely probability of loss, b) the realistic maximum loss, and c) the capability of the Government to fund a loss.</div>

Perth Mint Depository was recently asked the question below and I thought you may find my answer of interest. “Should Perth Mint become inso...

New Perth Mint LBMA Bar Mark

The new Perth Mint bar mark as registered with the LBMA. Smaller bars will have the same swan mark but words around it in a circle. The bar pictured is a 400oz bar, 9960 being the purity (99.6%) and the year and bar number (see <a href="http://www.lbma.org.uk/delivery/definitn">Good Delivery rules</a>). Weight is specified on a bar listing as per <a href="http://www.lbma.org.uk/docs/gdlvarious/GD_Rules_20100420.pdf">LBMA rules page 9</a>:<br /><br />"It is strongly recommended that weights should not be stamped on Good Delivery bars. The reason for this is that when bars are weighed in London by an LBMA approved weigher their weights, which may be different, will prevail, and also any adjustment to the weight of a bar caused by future handling or sampling would necessitate alteration to the mark. If bars are so stamped, the unit of weight must be shown."<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTLkfXgLw7NCssrOp5P8WzSQuHZFDDmnxLWL8YErG2WeHNibX-_aSNT9S8euakXc4M4FsNpt4fgmx6iKjsZ7gxED-zD4SSiyVz5ttTza6uaMSdhZ2BqnnZ2IyNIEupL5BRl0D0n43BaUwd/s1600/06_W.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5466880397232716194" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTLkfXgLw7NCssrOp5P8WzSQuHZFDDmnxLWL8YErG2WeHNibX-_aSNT9S8euakXc4M4FsNpt4fgmx6iKjsZ7gxED-zD4SSiyVz5ttTza6uaMSdhZ2BqnnZ2IyNIEupL5BRl0D0n43BaUwd/s400/06_W.jpg" style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 206px;" /></a><br /><br />Below is picture of a bar stack for you to drool over.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj45pkC5Bk3UsdI-Vtaa29lSpDb_5_hVzoqKiGykJet5H0FykLpkqHihNwDBZuTFWwi-Tv3CgR4RlUe5lM1di48NnqWqMAVCTJ_f8_ygec5RvP7WEtyITkBNzcW083jSb9sPA08Ct-F2ML3/s1600/09.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5466980591458000114" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj45pkC5Bk3UsdI-Vtaa29lSpDb_5_hVzoqKiGykJet5H0FykLpkqHihNwDBZuTFWwi-Tv3CgR4RlUe5lM1di48NnqWqMAVCTJ_f8_ygec5RvP7WEtyITkBNzcW083jSb9sPA08Ct-F2ML3/s400/09.jpg" style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 266px;" /></a>

The new Perth Mint bar mark as registered with the LBMA. Smaller bars will have the same swan mark but words around it in a circle. The bar ...

King World News & Scotia Certificates

*Updated table on 14 Feb 2012 with 2011 figures*<br /><br />In <a href="http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/7_Andrew_Maguire_%26_Adrian_Douglas.html">this interview</a>, Lenny Organ (son of Harvey Organ who was at CFTC hearing) recounts how at a recent visit to the vaults of <a href="http://www.scotiabank.com">ScotiaBank</a> they saw little physical precious metals and had to go to some trouble to get physical.<br /><br />I analysed Scotia's annual report back in <a href="http://goldchat.blogspot.com/2009/09/scotiabank-certificates.html">September 2009</a> after seeing a blog by <a href="http://ispeakofpeak.blogspot.com/2009/06/scotiabank-and-real-silver.html">ispeakofpeak</a> on the issue. At that time the annual report revealed that Scotia only had 43% of its gold and silver certificate liabilities backed by physical metal. The table below updates that post with the most recent report (note: Scotia's financial year end is 31 Oct, figures in millions of dollars).<br /><br /><span style="font-family:courier new;font-size:85%;">Year</span><br /><span style="font-family:courier new;font-size:85%;">Ending Liabilities Assets Physical cover<br />Oct 11 3,931 9,249 100%<br />Oct 10 5,153 6,497 100%<br />Oct 09 3,856 5,580 100%<br />Oct 08 5,619 2,426 43%<br />Oct 07 5,986 4,046 68%<br />Oct 06 3,434 3,362 98%<br />Oct 05 2,711 2,822 100%<br />Oct 04 2,018 2,302 100%<br /></span><br />It appears that the physical backing was running down from 2006 but is now back to 100%+, with $5.58 billion of physical. This contrasts with Lenny Organ statement. Either Scotia have run down a lot of physical in 6 months or it is stored elsewhere.<br /><br />I do find it interesting that the gold and silver certificate liability has declined from $5.619b to $3.856b in the past year, a year when most ETFs, GoldMoney and BullionVault and Perth Mint have shown increasing amounts of metal held.<br /><br />I agree with Adrian Douglas' statement in the interview that many storage providers "are very vague about what is backing their paper certificates and if they are vague I think you should not give them the benefit of the doubt". Contrast this <a href="http://www.scotiamocatta.com/products/faq.htm">statement</a> from Scotia about their unallocated:<br /><br /><em>"Scotiabank gold certificates are backed by the assets of The Bank of Nova Scotia. Unallocated gold is a claim on The Bank of Nova Scotia for the ounces entitlement to a specific quantity of gold bullion."</em><br /><br />with the <a href="http://www.perthmint.com.au/investment_invest_in_gold_storage_options.aspx">Perth Mint's</a>:<br /><br /><em>"With unallocated storage, also known as a metal account, clients purchase an interest in a pool of precious metal held by The Perth Mint. The Mint purchases an ounce of precious metal from the spot market for every unallocated ounce it sells to clients. Accordingly every unallocated ounce is 100% backed. ... The Perth Mint is not a bullion bank and does not provide project financing or bullion lending/derivative services to mining companies or other entities. It does not lend client's unallocated metal to support short selling transactions or other derivative activities. The unallocated metal is utilised solely to fund the Mint's operations."</em><br /><br />You should always read the fine print.

*Updated table on 14 Feb 2012 with 2011 figures* In this interview , Lenny Organ (son of Harvey Organ who was at CFTC hearing) recounts how ...

Perth Mint to acquire full ownership of AGR Matthey

<div align="justify">Last week the three partners in AGR Matthey decided to dissolve their partnership. The Perth Mint will acquire full ownership of the gold and silver refining business in Perth and Johnson Matthey will acquire full ownership of the platinum and silver brazing alloys business in Melbourne. Newmont will exit from these businesses entirely but will continue to have its Australian-mined gold refined at the Perth refinery. There are still some conditions precedent that need to be met before the deal is concluded, but the partners see no reason why these will not occur.<br /><br />It is a move I am very excited about as it gives the Mint direct control over the refinery’s output, which is typically between 300 to 400 tonnes of gold a year. I’m reminded of the old adage, "He who owns the gold, makes the rules", but of course the Mint doesn’t own the gold, its clients do.<br /><br />The substantial physical inventories needed to support this throughput, and the Mint’s own stock, have been backing Depository client metal for many years. All this acquisition will do is change the refinery’s inventory from being listed as a metal receivable in the Mint’s financials to being a directly owned asset. This should increase the comfort factor for many Depository clients even though it doesn’t really change the fact that their holdings have been, and always will be, backed by physical.<br /><br />I will be interested to see how the Mint’s critics and competitors try to spin this news against us. It does make it hard to argue that a business that refines 300 tonnes of gold a year “doesn’t have any gold”.<br /><br />Maybe they’ll argue that we had to get the refinery to plug the imagined short position that they think we have. Apart from exposing their woeful ignorance of how our operations and a refinery’s work, the logical conclusion of such a position would be that the supposed short position is now plugged, making the Depository a totally safe facility!<br /><br />For those not aware, the AGR refinery operations were originally established by the Perth Mint in 1899 when it was founded as the Perth branch of the British Royal Mint. In 1998 the refinery was combined with the refinery operations of Golden West to form the AGR Joint Venture and then subsequently merged with Johnson Matthey’s Melbourne refinery in 2002. So in a way the refinery business is just coming back to its home.</div>

Last week the three partners in AGR Matthey decided to dissolve their partnership. The Perth Mint will acquire full ownership of the gold an...

Fat Prophets

<div align="justify">Fat Prophets have been gold bulls for a long time and I give them kudos for that. However, in a recent article <a href="http://www.articlesbase.com/investing-articles/the-silent-gold-rush-is-on-666548.html">The Silent Gold Rush Is On</a> they make the following faulty analysis:<br /><br /><em>The Australian newspaper reported over the weekend that the Perth Mint is not taking any more orders for gold until January. Our guess is that the Mint does not want to expose itself to higher future prices given that it does not have the inventory to meet the demand for bullion.</em><br /><br />I sent the response below to them a couple of weeks ago, no response as yet:<br /><br />Your guess that we do not want to be exposed to higher future prices is incorrect and is based on a misunderstanding of how the gold markets work. If we take an order and fix a metal price (it is also possible to take an order and agree to fix a price at the time the bullion is ready for delivery) then we immediately buy the raw gold that will be used to make the bars/coins for the client. There is therefore never any exposure the future prices. I discuss this is more detail in my blog on the <a href="http://goldchat.blogspot.com/2008/06/gold-value-chain-part-iii-manufacturing.html">value chain</a>.<br /><br />I really wish commentators would just call us up and ask us questions, rather than just guessing or making stuff up.</div>

Fat Prophets have been gold bulls for a long time and I give them kudos for that. However, in a recent article The Silent Gold Rush Is On t...

AWOL

<div align="justify">Yes I am still alive. My break from blogging started with a trip to Canberra for the <a href="http://www.goldstandardinstitute.com/">http://www.goldstandardinstitute.com/</a> conference. It was great to catch up with the attendees from last year and meet some new gold investors. The weekend after it was a short drive up to the Southern Highlands of New South Wales for the Highland Fling - a 100km mountain bike race. Six plus hours is physically tough, but it was harder mentally.<br /><br />The plan was to get back to blogging on my return but the new Treasury system project I've been working on (in addition to the revamp of the Perth Mint's retail shop) kicked in with at lot of work required to meet deadlines. The new system will give us some efficiencies and thus help with customer service but we have decided to NOT go online for trading.<br /><br />It is a bit old school, but the Treasury system will be standalone from our other computer systems and with no online ability means your account is just not hackable. I'm interested in any feedback on that decision - we feel if you want the ease of online then you can trade our ASX product (code ZAUWBA) or GoldMoney or BullionVault.<br /><br />This Treasury system is going to take up some time so my blogging will be less frequent over the next few months but I'll keep any eye on any big issues that come up.</div>

Yes I am still alive. My break from blogging started with a trip to Canberra for the http://www.goldstandardinstitute.com/ conference. It w...

AUSTRAC Identification Rules

Further to my post on AUSTRAC rules on identification for bullion transactions, I can report that the Perth Mint has just received an appro...