beefsteak
26th March 2012, 10:23 AM
From September 29, 2007
All that glisters may not be gold
Patrick Hosking, Banking Editor
It has long been the plaything of kings, the spoil of conquerors and supposedly the safest investment that money can buy. But for the people of Britain, our national nest-egg may not quite be what it appears.
Hidden away in vaults under the City of London, Britain’s hoard of gold bullion, regarded as the best insurance against any turmoil in global money markets, is beginning to crumble. The deterioration, some experts claim, may suggest that it is not pure gold.
The Bank of England, guardian of the 320-tonne stash under Threadneedle Street, admitted yesterday that cracks and fissures had appeared in some of its gold.
Questions put to the Bank, made under the Freedom of Information Act, revealed that this deterioration would temporarily reduce the gold’s £4 billion value and make it more difficult to sell.
The discovery is a further embarrasment for the beleaguered Bank, coming only days after it was blamed in part for the Northern Rock crisis. But it said that most of the hoard remained in mint condition. It denied suggestions by some experts that the deterioration was evidence that the gold may have been adulterated with base metal.
“This is not about purity, this is about physical appearance,” the Bank insisted, saying that its bars were 99.9 per cent pure gold. The problem was due to the age of the bars, many of which were imported from the US in the 1930s and 1940s.
Although the gold carries assay marks, a guarantee from the refiner of its purity, there are no accompanying assay certificates, now regarded as essential by gold traders.
The Bank holds the gold on behalf of the Treasury, mainly in bars, but also in ingots and coins. Most of the hoard is thought to be stored in bars weighing between 10.9kg (24lb) and 13.4kg, and each worth between $258,000 (£123,000) and $317,000. (2007 values)
Revelations about its physical deterioration were secured by the trade journal Metal Bulletin, which has been trying to ascertain the truth since May. Rumours that the Bank’s gold was not in tiptop condition have circulated in the gold market for years, but Stuart Allen, the Bank’s deputy secretary, has now confirmed there is an issue.
To be traded, gold bars have to meet so-called London Good Delivery (LGD) standards, as laid down by the London Bullion Market Association.
Mr Allen wrote to the journal: “There is some uncertainty about the status of LGD standards in respect of certain categories of gold bars that have been held in deep storage for many years.”
The Bank was in discussions with the association to clarify how much of its gold was in sub-standard condition, Mr Allen added.
A Bank spokesman insisted it was not a big problem. The gold could easily be sent off to a refiner to be melted down and turned into new bars, he said. According to market observers questioned by Metal Bulletin, cracks and fissures suggested that the bars may not be pure gold. The gold in coin form may also be contaminated with base metal.
If 100 per cent pure, the gold would be worth just over £4 billion at the current price of $738 an ounce.
The Government keeps reserves of gold and foreign currency to use to prop up sterling in times of adversity. In theory, in times of war, reserves could be used to finance emergency imports.
....
Analysts suggested that the Bank, which declined to say how much tonnage was affected, would not be alone with its deteriorating bars. Many other central banks with reserves going back centuries could face similar problems.
...
The miracle metal
— India is the biggest consumer of gold, accounting for half of all mined output. Jewellery, coins and ingots are favourite wedding gifts and dowries
— Despite its reputation as a store of value, gold priced today at about $738 (£361) an ounce is still lower than its record peak of $850, reached during the inflation scare in 1980
— 9Kt gold, which is used in much [sic UK] jewellery, contains only 37.5 per cent gold
— Gold is used in air-bag technology, mobile phones, laptop computers and in devices to remove mercury from coal-fired power station emissions
— Almost 60 tonnes of gold went into teeth [in 2006],
56 tonnes were used for coins and medals and
2,267 tonnes for jewellery
— A Japanese store sells chopsticks designed to produce a shower of edible gold flakes onto plates. Products from schnapps to marmalade have had gold added
— John Maynard Keynes denigrated the gold standard, the old financial system that pegged currencies to the price of the metal, as “a barbarous relic”
=========
excerpted blast from the past brought to you by.......;D
beefsteak
All that glisters may not be gold
Patrick Hosking, Banking Editor
It has long been the plaything of kings, the spoil of conquerors and supposedly the safest investment that money can buy. But for the people of Britain, our national nest-egg may not quite be what it appears.
Hidden away in vaults under the City of London, Britain’s hoard of gold bullion, regarded as the best insurance against any turmoil in global money markets, is beginning to crumble. The deterioration, some experts claim, may suggest that it is not pure gold.
The Bank of England, guardian of the 320-tonne stash under Threadneedle Street, admitted yesterday that cracks and fissures had appeared in some of its gold.
Questions put to the Bank, made under the Freedom of Information Act, revealed that this deterioration would temporarily reduce the gold’s £4 billion value and make it more difficult to sell.
The discovery is a further embarrasment for the beleaguered Bank, coming only days after it was blamed in part for the Northern Rock crisis. But it said that most of the hoard remained in mint condition. It denied suggestions by some experts that the deterioration was evidence that the gold may have been adulterated with base metal.
“This is not about purity, this is about physical appearance,” the Bank insisted, saying that its bars were 99.9 per cent pure gold. The problem was due to the age of the bars, many of which were imported from the US in the 1930s and 1940s.
Although the gold carries assay marks, a guarantee from the refiner of its purity, there are no accompanying assay certificates, now regarded as essential by gold traders.
The Bank holds the gold on behalf of the Treasury, mainly in bars, but also in ingots and coins. Most of the hoard is thought to be stored in bars weighing between 10.9kg (24lb) and 13.4kg, and each worth between $258,000 (£123,000) and $317,000. (2007 values)
Revelations about its physical deterioration were secured by the trade journal Metal Bulletin, which has been trying to ascertain the truth since May. Rumours that the Bank’s gold was not in tiptop condition have circulated in the gold market for years, but Stuart Allen, the Bank’s deputy secretary, has now confirmed there is an issue.
To be traded, gold bars have to meet so-called London Good Delivery (LGD) standards, as laid down by the London Bullion Market Association.
Mr Allen wrote to the journal: “There is some uncertainty about the status of LGD standards in respect of certain categories of gold bars that have been held in deep storage for many years.”
The Bank was in discussions with the association to clarify how much of its gold was in sub-standard condition, Mr Allen added.
A Bank spokesman insisted it was not a big problem. The gold could easily be sent off to a refiner to be melted down and turned into new bars, he said. According to market observers questioned by Metal Bulletin, cracks and fissures suggested that the bars may not be pure gold. The gold in coin form may also be contaminated with base metal.
If 100 per cent pure, the gold would be worth just over £4 billion at the current price of $738 an ounce.
The Government keeps reserves of gold and foreign currency to use to prop up sterling in times of adversity. In theory, in times of war, reserves could be used to finance emergency imports.
....
Analysts suggested that the Bank, which declined to say how much tonnage was affected, would not be alone with its deteriorating bars. Many other central banks with reserves going back centuries could face similar problems.
...
The miracle metal
— India is the biggest consumer of gold, accounting for half of all mined output. Jewellery, coins and ingots are favourite wedding gifts and dowries
— Despite its reputation as a store of value, gold priced today at about $738 (£361) an ounce is still lower than its record peak of $850, reached during the inflation scare in 1980
— 9Kt gold, which is used in much [sic UK] jewellery, contains only 37.5 per cent gold
— Gold is used in air-bag technology, mobile phones, laptop computers and in devices to remove mercury from coal-fired power station emissions
— Almost 60 tonnes of gold went into teeth [in 2006],
56 tonnes were used for coins and medals and
2,267 tonnes for jewellery
— A Japanese store sells chopsticks designed to produce a shower of edible gold flakes onto plates. Products from schnapps to marmalade have had gold added
— John Maynard Keynes denigrated the gold standard, the old financial system that pegged currencies to the price of the metal, as “a barbarous relic”
=========
excerpted blast from the past brought to you by.......;D
beefsteak