Bank of England's Empty Vaults

The Bank of England recently denied Venezuela access to its own gold. The request was for 14 tonnes to be delivered, hardly an astronomic amount considering the thousands of tonnes supposedly held in the vaults of Bank of England. However, all sorts of excuses were fabricated to deny the Venezuelan government the delivery.

The immediate implication of this is that no nation can expect to get their gold delivered on request. Gold held in the vaults of the Bank of England may not be delivered, and it will certainly not be delivered in the event of a crisis, which is the exact moment gold comes in as the ultimate store of value.

The rational response to this by any government holding gold in these vaults is to get it out as soon as possible. However, if the vaults are empty, and this is the real reason Venezuela was denied access to their gold, then any request will be met with resistance and delays.

Asking for a mere 300 tonnes of gold held in the US, the German government had to wait several years for delivery. This happened some years ago, and was the first clear sign that gold held in safe keeping in the US and the UK is not in fact held in their vaults. The gold bars delivered to Germany were not the ones they had once delivered for safe keeping. The gold had been sourced from the open market.

There is no reason to believe that gold held in the UK is any more safe than gold held in the US. More likely than not, the gold has been leased out or sold. Deliveries will therefore take a lot of time, considering that it has to be bought off the open market.

The best way for foreign governments to get their gold back may therefore be to take care of the open market purchases themselves. They can ask the Bank of England to sell their gold into the open market. If this is announced ahead of time, gold prices may fall initially as speculators panic. The money received from the Bank of England can then be used to buy the gold.

The Bank of England will of course not sell any physical gold that it does not hold. They will issue paper gold contracts and ETFs. How long they will be able to keep this going is anyone's guess, but one thing is certain. The sooner a government takes action to repatriate its gold, the more likely it is to get most or all of it back. The latecomers are in serious danger of not getting anything. Since everybody involved now know this to be a fact, a run on gold seems imminent. Expect a short-lived  downward manipulation of the gold price before physical gold disappears from the market.

When the manipulation and deception is clear to all, no-one will part with their gold before some sort of new world order is established. The opening price, after the reset will be much higher than the price is today.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link